CIT(A) should decide the issue on merit rather than suggesting remedial action
In a recent judgment, the ITAT Ahmedabad has stated that CIT(A) should decide the issue on merit rather than suggesting remedial action as the powers of CIT(A) are co-terminus with that of the Assessing Officer.
ABCAUS Case Law Citation:
ABCAUS 4081 (2024) (06) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A), National Faceless Appeal Centre (NFAC) confirming the order of CPC Bangalore u/s 154 of the Income Tax Act, 1961 (the Act).
The assessee filed its return of income and claimed exemption under section 10(23C)(vi) of the Act. However, due to a clerical error, the income was disclosed under the column for “Income from Other Sources” instead of the appropriate section in the return of income in form ITR 7.
The CPC processed the return of income u/s 143(1) of the Act disallowing the exemption u/s.10(23C)(vi) of the Act. The assessee filed rectification application u/s.154 of the Act with CPC and CPC processed the same without taking into consideration the reason for which application was made and passed an order under section 154 of the Act disallowing the exemption claimed by the assessee, without providing an opportunity of being heard to the assessee.
The CIT(A) dismissed the appeal without examining the merits of the case, focusing solely on procedural aspects.
The Tribunal observed that the CIT(A) in his order had commented on the procedural part of the processing of the return by CPC. The CIT(A) stated that ITR forms from 1 to 7 have been prescribed for various users and instructions are also given by CBDT to guide the assessees for filing their tax returns. It is being provided to facilitate the assessees to file a correct return and to assist CPC to process crores of returns in a systematic manner. It is an automated machine-driven system and the person filing the return has to follow those instructions scrupulously. The appellant cannot expect CPC to grant relief or exemption or deduction, even though the appellant themselves offered income in the return as income from other sources. In the present case, the appellant ought to have corrected his return instead of filing rectification application before CPC or filing appeal before CIT(A) on that rectification order.
The Tribunal expressed serious concern about the way, the CIT(A) at NFAC decides the issue being first appellate authority. The Tribunal underlined that it is the settled legal proposition that the powers of CIT(A) are co-terminus with that of the Assessing Officer. Therefore, CIT(A) can decide the issue on merit rather than suggesting remedial action.
Accordingly, the Tribunal opined that the CIT(A) should have adjudicated the appeal on its merits. Therefore, the Tribunal set aside the order of the CIT(A) and restored the matter back to the file of the CIT(A) for fresh adjudication. The CIT(A) was directed to verify the exemption claimed by the assessee under section 10(23C)(vi) of the Act and to grant appropriate relief if the claim is found to be correct.
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