The Madras High Court quashed the income tax addition as a wrongful deduction u/s 194-IB rather than Section 194C of the Income Tax Act, 1961. Three additions have been offered by the respondents to the income shown, however, the additions were dismissed without enough reasoning.
The assessment proceedings started following the applicant’s ITR filing for the AY 2017-18 on August 11, 2017. Answering a notice issued u/s 148 of the IT Act, 1961, the respondents have proposed three additions to the shown income. The first addition related to the difference between the purchase cost and the guideline value of an immovable property obtained by the applicant.
The second is pertinent to the rent obtained from M/s Sriprop Structures P Limited, while the third concerns a contractual receipt. For each of these proposed additions, the applicant in response has furnished dated November 25, 2023.
For the first additions, the applicant said that the case had been directed to the valuation officer of the income tax department dated February 24, 2023, and claimed that no additions must be incurred till the valuation report was obtained. Likewise, the explanations for the second and third additions were furnished, arguing that they were unwarranted.
A.S.Sriraman the applicants’ counsel claimed that the assessment order was unsustainable, stressing that the respondents had 4 months left to finish the assessment, yet proceeded without awaiting the report of the valuation officer. Also, the applicant’s explanation for the second and third additions was not considered in the final assessment order.
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Mrs. Premalatha, the counsel on behalf of the respondents said that the applicant has an available appellate remedy and approached the court without depleting it. Also, she mentioned that the applicant’s answer has been regarded but discovered unsatisfactory.
The applicant in the case of the rent receipts said that the rent was from a residential property and has been duly revealed. It was indeed remarked by the applicant that the tax has been deducted mistakenly u/s 194IB instead of Section 194C, and the same error must not prejudice the assessment. For the third addition, it was mentioned by the applicant that a contractual receipt of Rs 12, 94,735 had been shown as business income. Without sufficient reasoning, these explanations were dismissed.
After determining that the assessment order was flawed, the court invalidated it and referred the case back to the Assessing Officer (AO), directing that the officer should hold off on any actions until the valuation report is received. The writ petition was resolved without any order regarding costs, and the related miscellaneous petitions were additionally concluded.
| Case Title | Manjula Jaganathan Hariprasad Vs. The Assessment Unit & Income Tax Officer |
| Citation | W.P.No.258 of 2023 & WMP Nos.314 to 317 of 2024 |
| Date | 01.02.2024 |
| For Petitioner | Mr.A.S.Sriraman |
| For Respondents | Mrs.S.Premalatha |
| Madrash High Court | Read Order |
