Facts of the Case

The assessee filed the return of income declaring business income and claiming deductions. The assessee was engaged as a commission agent and received commission income reflected in Form 26AS.

While processing the return under Section 143(1), the Centralized Processing Centre (CPC) made an adjustment by adding the entire commission amount appearing in Form 26AS, alleging that it was not properly disclosed.

The assessee had already declared income from the commission under presumptive taxation provisions but had filed the return in an incorrect ITR form. The adjustment resulted in double addition of income.

Issues Involved

  1. Whether CPC can make adjustment under Section 143(1) for Form 26AS mismatch when the income is already disclosed in the return.
  2. Whether adding the entire gross receipt instead of profit element results in double taxation.
  3. Scope and limits of powers under Section 143(1)(a).

Petitioner’s (Assessee’s) Arguments

  • The assessee contended that commission income was already disclosed in the return.
  • Income was offered under presumptive provisions though the wrong ITR form was used.
  • CPC incorrectly added the entire gross commission instead of profit element.
  • Adjustment beyond permissible scope of Section 143(1)(a) was illegal.
  • The system did not allow correction through revised return due to technical constraints.

Respondent’s (Revenue’s) Arguments

  • The Revenue relied on the discrepancy between Form 26AS and the return.
  • It was argued that CPC correctly made adjustment based on reported information.
  • Failure to revise the return justified confirmation of addition.

Court Order / ITAT Findings

  • The commission income appearing in Form 26AS had already been considered while computing income.
  • CPC added the entire gross commission, resulting in duplication.
  • Adjustment under Section 143(1) is limited to apparent errors and cannot substitute detailed scrutiny.

The ITAT held that once income is disclosed, addition of the entire receipt merely due to mismatch or incorrect form filing is not justified.

Accordingly, the adjustment made by CPC and confirmed by CIT(A) was set aside, granting relief to the assessee.

Important Clarification by ITAT

Processing under Section 143(1) is not meant for making debatable additions or recomputing income. Adjustments must be confined to prima facie errors and cannot lead to double taxation of already disclosed income.

Link to download the order -  https://itat.gov.in/public/files/upload/1662716776-12Alld2022.pdf

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