No adjustment can be made by CPC u/s 143(1)(a) of Income Tax on ground involving question of fact: ITAT

The Income Tax Appellate Tribunal (ITAT) in the case of Anita Seth Vs. DCIT, CPC, Bangalore held that the CPC cannot make any adjustment or addition u/s 143(1)(a) of the Income Tax Act, 1961 (The Act) on grounds involving the question of fact.

In this matter, the assessee had two types of business: (i) Business of Confectionary (ii) Man Power Supply Business.

The total turnover of Rs. 52.81 lakhs comprised of the turnover of the said two businesses for the assessment year 2017-18 as – Rs. 21.60 lakhs for the business of confectionary and Rs. 31.21 lakhs for the business of manpower supply.

The assessee in the return of income opted for the presumptive taxation scheme u/s 44AD of the Act and disclosed a net income @ 18.40% on Rs. 52.81 Lakh turnover and disclosed a business income at Rs.9,72,735, for both the businesses taken together.

However, CPC while processing the return u/s 143(1) of the Act, determined the total income at Rs. 25,33,319/- by making an adjustment of adding 50% presumptive income u/s 44ADA on manpower supply turnover of Rs. 31.21 lakhs.

Ld. AR in its appeal before ITAt stated that the business of manpower supply is not a profession within the meaning of Section 44AA of the Act read with all notifications issued by the CBDT in this regard. According to the Ld. AR, though the nature of service provided is nothing but labor supply, the clients deducted the TDS u/s 194J of the Act, over which assessee had no control and this resulted in the reflection of the same in Form 26AS statement. It was stated by Ld. AR that by making the adjustment while processing the return u/s 143(1), CPC erroneously taxed the income on manpower turnover twice by taking note of Form 26AS.

According to the Ld. AR, this was an issue, which raises a question of fact and can be done only on scrutiny assessment u/s. 143(3) of the Act or by re-opening of assessment u/s. 147 of the Act. Ld. AR also contended that classification of income is a complex & debatable issue and therefore in absence of detailed scrutiny and examination of records, facts and details as it is done u/s 143(2) or 148 of the Act, it is not possible either on the part of the assessee nor by the department to adjudicate the issue in a fair, transparent & judicious manner.

On the other hand, Ld. DR contended that when in Form 26AS, there had been deduction made by the payer, which bears the character of professional receipt (section 194J deduction) and there was no corresponding income shown under the head ‘profession’. Therefore, the CPC had rightly made the addition.

ITAT was of the view that the CPC could not have made the adjustment since the question of fact arises on the factual matrix of this case as noted above. ITAT was satisfied with the contention of the assessee and held that the CPC had no jurisdiction to make the adjustment within the meaning of section 143(1)(a). Accordingly, the adjustment made by CPC stands deleted.

To Read Judgment Download PDF Given Below: