What cannot be done u/s. 154 on the ground of debatability cannot be done u/s. 143(1) of the Act: ITAT Mumbai




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What cannot be done u/s. 154 on the ground of debatability cannot be done u/s. 143(1) of the Act: ITAT Mumbai

 

There are various cases wherein the disallowance is done by the CPC Bangalore while processing the return.

The question arises whether it is legally permissible or not?

Here is one case with a similar issue. The case detail is as under:

 

ITAT MUMBAI

 

CHETAS GULABBHAI DESAI

VERSUS

THE DY. COMMISSIONER OF INCOME TAX, CENTRAL PROCESSING CENTRE, BANGALORE

 

ITA NO.1934/MUM/2021

 The case was on disallowance of expenditure while processing the return u/s 143(1) by the CPC.

In this case, the return of income was processed u/s. 143(1) and Expenditure incurred towards club membership, entrance fee and subscription fee disallowed.

 No opportunity was granted to the assessee to put forth his stand.

The assessee filed a rectification petition u/s. 154 of the Act before the CPC & the CPC rejected assessee’ s petition for rectification.

On appeal, ITAT held as under:

In the instant case since return of the assessee was processed u/s. 143(1) of the Act, no opportunity was granted to the assessee to put forth his stand before disallowing the expenditure.

In the First Appellate proceedings, the CIT(A) dismissed the appeal of assessee against the order passed u/s. 154 of the Act on the ground that the issue raised is debatable. If that be so, the CPC has erred in disallowing the assessee’s claim of expenditure while processing the return of income u/s. 143(1).

Revenue cannot in unilateral proceedings disallow expenditure without affording an opportunity to the assessee. What cannot be done u/s. 154 on the ground of debatability cannot be done u/s. 143(1) of the Act to the assessee’s claim on which two views are possible.

A debatable issue cannot be a subject matter of adjustment u/s. 143(1) of the Act.

In the case of Bajaj Auto Finance Ltd. vs. CIT [2018 (2) TMI 1716 – BOMBAY HIGH COURT] has held that debatable claim cannot be disallowed by way of an intimation u/s 143(1).

Thus we find that the authorities below have erred in disallowing assessee’s claim of expenditure in proceedings u/s. 143(1) of the Act and thereafter, rejecting assessee’s application u/s. 154 of the Act.

Ergo, the impugned order is set-aside and appeal by the assessee is allowed.




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