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Processing of Income Tax Return by CPC Bangalore

CA Mehul Thakker 
on 31 October 2020

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Dear Students/Readers,

Where a return has been filed under section 139, or in response to a notice under section 142(1), such return shall be processed by Central Processing Centre (CPC) in the following manner:

(a) Determination of total income or loss of the assessee after making the following five adjustments:

1) any arithmetical error in the return or

2) any incorrect claim, if such incorrect claim is apparent from any information in the return;

3) disallowance of loss claimed, if the return is of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;

4) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return;

5) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID, or section 80-IE, if the return is furnished beyond the due date specified under section 139(1).

Processing of Income Tax Return by CPC Bangalore

Meaning of incorrect claim

It means such a claim on the basis of an entry, in the return-

(i) of an item, which is inconsistent with another entry of the same or some other item in such return;

(ii) in respect of which, information required to be furnished to substantiate such entry has not been furnished;

(iii) in respect of a deduction, where such deduction exceeds specified statutory limits which may have been expressed as monetary amount or percentage or ratio or fraction.

(b) Intimation to the assessee before making any of the above adjustments:

Before making any of the above adjustments mentioned at point no (a) above, an intimation is given to the assessee of such adjustments by the CPC either in writing or in electronic mode.

(c) Effect of response from the assessee

The response received from the assessee, if any, shall be considered by CPC before making any of the adjustments mentioned at (a) above.

In a case where no response is received from the assessee within thirty days of the issue of such intimation, such adjustments shall be made by CPC.

(d) Determination of tax payable or amount refundable to the assessee

 

Thereafter, CPC shall determine tax payable or amount refundable to the assessee on the basis of the total income computed under clause (a) above. While determining such tax payable or amount refundable, due consideration shall be given to pre-paid taxes in the form of self-assessment tax, advance tax, TDS, TCS, or any other relief eligible under the Income Tax Act. Apart from that, CPC shall also calculate interest and late fee, if any, payable under the Income Tax Act.

(e) Intimation to the assessee

Intimation of the tax payable or amount refundable shall be sent to the assessee. The maximum time limit for sending such intimation is one year from the end of the financial year in which the return was submitted by the assessee.

 

Consider following small practical scenario

The assessee submitted the income tax return for A.Y. 2019-20 declaring total income at Rs. 8,02,000. This return was submitted under section 139(4) of the Act. The CPC, Bangalore, while processing the said return found the following issues:

Sr. No.

Particulars

(a)

While computing income under head 'PGBP', interest income of Rs. 33,000 was reduced declaring that it shall be offered under the head 'IFOS', however, the assessee failed to include such income under the head 'IFOS'.

(b)

Depreciation on computers was claimed at 60% instead of 40%. Depreciation claimed on computers was Rs. 30,000.

(c)

Claimed set off of business loss brought forward Rs. 1,02,000 pertaining to A.Y. 2018-19. The income tax return for the said A.Y. was submitted under section 139(4) of the Act.

(d)

His case was subject to audit under section 44AB(a). The auditor, in the tax audit report, has made a remark that cash payment of Rs. 34,000 has been made for repairing machines on a single day to Brahmani Engineering. However, the assessee failed to add back while computing income under the head 'PGBP'

(e)

Claimed deduction of Rs. 13,05,000 under section 80-IAC of the Act

(f)

Bank interest income of Rs. 88,000 appearing in Form no. 26AS on which tax has been deducted but assessee failed to include the same in the income tax return.

You are required to determine the total income processed by CPC- Bangalore.

The solution to the above practical scenario
Kindly post your answers in the comment box.

You can listen to me to verify your computation

Happy Learning,
All the best.

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