2025 (11) TMI 1611 - AT - Income Tax

Addition of Rs.44,00,000 under Section 143(1) deleted due to CPC totalling error on Sections 11, 10(23C)

ITAT Ahmedabad allowed the assessee's appeal and deleted the addition of Rs. 44,00,000/- made u/s 143(1). The Tribunal held that all deductions claimed ... Addition u/s 143(1) - Mistake by CPC in procession the return - short allowance of deduction towards application/accumulation of income under Sections 11 and 10(23C) - HELD THAT:- All the deductions as claimed by the assessee were duly accepted by the CPC while processing the return. However, there was a totalling mistake made by the CPC and the total of Rs. 7,96,41,565/- of the deductions was wrongly taken at Rs. 7,52,41,564/- by the CPC. Addition of income chargeable u/s 11(1B) of the Act, there is no difference in the figure of the assessee and the figure as computed by the CPC, as the amount of Rs. 44,00,000/- is appearing in both the columns. It is thus apparent that the CPC had wrongly computed the gross income of Rs. 44,00,000/- which was due to wrong totalling of the four deductions claimed by the assessee and allowed while processing the return. Considering the fact that income of Rs. 44,00,000/- was wrongly computed by the CPC, which was due to arithmetical mistake in totalling the deductions as mentioned at S. No.4 of the intimation, the addition of Rs. 44,00,000/- made u/s 143(1) of the Act is deleted. Assessee appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the first appellate authority was justified in dismissing the appeal ex parte without affording adequate opportunity of hearing to the assessee. 1.2 Whether the adjustment of Rs. 44,00,000/- made in the intimation under Section 143(1) on account of alleged short allowance of deduction towards application/accumulation of income under Sections 11 and 10(23C), and income chargeable under Section 11(1B), was legally sustainable. 2. ISSUE-WISE DETAILED ANALYSIS 2.1 Ex parte dismissal by the first appellate authority 2.1.1 Interpretation and reasoning The Tribunal noted from the order of the first appellate authority that no opportunity was afforded to the assessee and the appeal was dismissed ex parte. The Tribunal held that such disposal, without giving an opportunity to the assessee, 'cannot be held as correct'. 2.1.2 Conclusions The ex parte approach of the first appellate authority in dismissing the appeal without granting opportunity to the assessee was held to be improper and not sustainable. 2.2 Validity of adjustment of Rs. 44,00,000/- in intimation under Section 143(1) 2.2.1 Legal framework (as discussed) The Tribunal considered the intimation issued under Section 143(1) and the manner in which the Centralized Processing Centre (CPC) made an adjustment leading to an addition of Rs. 44,00,000/-, on the basis of deductions relating to Sections 11, 12 and 10(23C), including income chargeable under Section 11(1B). 2.2.2 Interpretation and reasoning (a) The Tribunal examined the return of income and the intimation under Section 143(1), specifically the schedule of 'DEDUCTIONS' (Item 4) relating to application/accumulation of income under Sections 11 and 10(23C). (b) It found that, item-wise, all individual deduction figures claimed by the assessee were fully accepted and mirrored by the CPC in the intimation, namely: - Amount applied during the previous year - revenue account; - Amount applied during the previous year - capital account (excluding borrowed funds); - Amount deemed during the previous year as per clause (2) of Explanation to Section 11(1); - Amount accumulated or set apart to the extent of 15% of income under Section 11(1)(a)/11(1)(b) / third proviso to Section 10(23C); and that no amount was claimed or allowed under Section 11(2) (item VII) or Section 11(1)(c) (item VIII). (c) The aggregate 'TOTAL [4I+4II+4III+4IV+4V+4VI+4VII+4VIII]' of such deductions was shown as Rs. 7,96,41,565/- in the return. However, in the intimation under Section 143(1), while all the underlying figures were identically accepted, the total was erroneously taken as Rs. 7,52,41,564/-. (d) The Tribunal held that this discrepancy arose from a pure 'totalling mistake' by the CPC and not from any disallowance or recomputation of specific deduction items. (e) As regards income chargeable under Section 11(1B), the Tribunal recorded that there was no difference between the amount shown by the assessee and the amount computed by the CPC; the figure of Rs. 44,00,000/- appeared in both columns. The CPC's computation of additional income of Rs. 44,00,000/- resulted only from the erroneous reduction of the aggregate of deductions by the same amount due to the incorrect total. 2.2.3 Conclusions (a) The Tribunal concluded that the addition of Rs. 44,00,000/- in the intimation under Section 143(1) was solely the result of an arithmetical error in totalling the deductions at Item 4, despite all individual deduction claims having been accepted. (b) The resulting computation of extra income of Rs. 44,00,000/- was therefore incorrect and unsustainable. (c) The adjustment of Rs. 44,00,000/- made under Section 143(1) was deleted, and the assessee's appeal was allowed.