CREDITACCESS GRAMEEN LIMITED,BENGALURU vs. PRINCIPAL COMMISSIONER OF INCOME TAX - BENGALURU 2, BENGALURU

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No. 341/Bang/2026 Assessment Year : 2022-23

M/s. Credit Access Grameen Limited, No. 49, Old No. 725, The Principal Commissioner of 46th Cross, Next to Rajalakshmi Income Tax, Kalyana Mantap, 8th Block, Vs. Bengaluru – 2. Jayanagar, Bengaluru – 560 070. PAN: AAECS7201G APPELLANT RESPONDENT : Smt. Sudha Ashok & Assessee by Sri Anirudh R, CA : SriShivanad Kalakeri – CIT DR Revenue by

Date of Hearing : 21-04-2026 Date of Pronouncement : 07-07-2026

ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT 1. This appeal has been filed by the assessee, M/s. Credit Access Grameen Limited, [ the Appellant] against the revisionary order dated 17/11/2025 passed under section 263 of the Income-tax Act, 1961 [the Act] by the Principal Commissioner of Income Tax, Bengaluru-2 [the ld. PCIT], holding that the assessment order dated 18/03/2024 passed under section 143(3) read with section 144B was erroneous and prejudicial to the interests of the Revenue.

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ITA No.341/Bang/2026 Page 3 of 30 proposed to set aside the assessment order dated 18.03.2024 and direct a fresh assessment.

ITA No.341/Bang/2026 Page 4 of 30 modified Form 3CD, and the details of the combined claim under section 80JJAA arising from the merger were disclosed in clause 33 of the revised tax audit report filed on 26.08.2023. A copy of Form 3CD was filed as Annexure-3. It was also submitted that Rule 19AB read with Form 10DA does not require filing of a revised report merely because a modified return under section 170A is filed. The report already submitted and forming part of the assessment record was sufficient compliance with section 80JJAA(2)(c). The assessee further furnished the computation of the claim under section 80JJAA as per the return filed under section 170A, namely Rs.7,43,94,580/- for CAGL for the pre-amalgamation period and Rs.13,20,881/- for MMFL for the pre-amalgamation period, aggregating to Rs.7,57,15,461/-. It was stated that the details of additional employees employed during the previous year relevant to A.Y. 2022-23 were duly covered in the annexures to Form 10DA already furnished during assessment. The assessee also submitted that the claim of Rs.13,20,881/- relating to MMFL had been disallowed by the Assessing Officer in the scrutiny assessment order dated 18.03.2024 passed under section 143(3), against which an appeal had been preferred and was pending adjudication. It was therefore requested that the proceedings under section 263 be kept in abeyance until disposal of the said appeal.

ITA No.341/Bang/2026 Page 5 of 30 itself and by M/s. Madura Micro Finance Ltd., and disclosed a consolidated figure in Form 3CD filed with the revised return under section 170A. The Assessing Officer had also not verified the assessee’s claim under section 80JJAA with reference to the prescribed eligibility conditions, and the assessment order contained no discussion on this issue. The ld. PCIT therefore held that the assessment order dated 18.03.2024, passed under section 143(3) read with section 144B, was erroneous in so far as it was prejudicial to the interests of the Revenue within the meaning of Explanation 2 to section 263 of the Income-tax Act, 1961. Accordingly, the assessment order was set aside, and the Assessing Officer was directed to revise the assessment in accordance with law after examining the assessee’s claim under section 80JJAA, in addition to the issues already examined. The Assessing Officer was also directed to conduct the necessary enquiries and verification, follow the applicable CBDT instructions, give the assessee an opportunity to produce supporting evidence and explain why the proposed addition or disallowance should not be made, and thereafter consider the facts, enquiry results, and the assessee’s explanation.

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requesting the Ld. CIT(A) to rectify the order to the extent of claim of deduction under section 154 of the Act. A copy of the rectification petition is enclosed in Annexure 4.

B. Appellant's submission

i. In the impugned order, Ld. PCTT has presumed that during the assessment proceedings the Appellant has not filed the details of joining dates of additional employees, their remuneration or compliance with other conditions stipulated in the section Ld. PCIT has further mentioned that the Appellant has only relied on the Form I0DA filed for the Appellant and MMFL and the Assessing Officer has not verified the Appellant's claim of deduction under section 80JJAA. Relevant extract from the order is reproduced below:

"During the assessment proceedings, the assessee has not filed details of the joining dates of the additional employees or their remuneration or compliance with the other conditions stipulated in the Explanation to the section for claiming the deduction u/s 80JJAA. The assessee has merely relied on the Form 10DA filed respectively for the assessee company and M/s Madura Micro Finance Ltd. and reflected a cumulative figure in the Form 3CD filed along with the revised return filed u/s 170A. The Assessing Officer has also not verified the details of the assessee's claim of deduction u/s 80JJAA with regard to the above eligibility criteria. A

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perusal of the assessment order shows that there is no discussion with regard to the deduction claimed u/s 80JJAA. The Assessing Officer has not carried out the necessary enquiries or verification required to be made with regard to the assessee's claim of deduction u/s 80JJAA. In view of the above discussion, the aforesaid assessment order u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961, dated 18.03.2024 is erroneous in so far as it is prejudicial to the interests of Revenue in terms of Explanation 2 to section 263 of the Income Tax Act, 1961. The assessment order dated 18.03.2024 is accordingly set aside and the Assessing Officer is directed under section 263, to revise the assessment order, in accordance with law, after examining the assessee's claim for deduction u/s 80JJAA, in addition to the issues already examined."

ii. At the outset, the Appellant would like to submit that Ld. PCIT has proceeded on an erroneous presumption that no details apart from Form 10DA was called for and filed during the assessment proceedings.

iii. The Appellant would like to refer to Annexure 6 wherein the notice issued by the Assessment Unit during the assessment proceedings dated 14th February 2024 is enclosed. In para 3 of the notice, the Assessment Unit has called for details relating to claim of deduction under section 80JJAA including the following details:

 Details of additional employees such as Name, PAN and address

 Documentary evidence in respect of the claim

 Rationale/ justification for the claim made under the section

iv. In reply to the notice, the Appellant has furnished a detailed response vide letter dated 26thFebruary 2024. Copy of the response along with data submitted is enclosed in Annexure 7. Inthe response, the Appellant has provided the following detailed documentation in support of the deduction claimed under section 80JJAA

 Year-wise break up of the deduction claimed under section 80JJAA  Detailed computation for the deduction claimed. This computation captures the following details:

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 Name of the employees and employee code

 Address

 PAN

 Date of joining

 Number of days worked during the year

 Amount of emoluments paid to the employees

 Details of mode of payment

 Demonstration of satisfaction of conditions prescribed under section 80JJAA like whether the quantum of emoluments do not exceed Rs. 25,000 per month, whether the employee has worked for more than 240 days, whether the employee has registered under the Recognized Provident Fund etc.  Sample copies of Pay slips and Offer Letters issued to the additional employees employed during the year

v. In addition to the above, the Appellant has also clearly detailed in the response how to navigate the computation file and verify the claim. Also, the Appellant has presented a table providing the conditions imposed under the Act and description of how the conditions are satisfied by the Appellant.

vi. From the above documents, it is clear that during the assessment proceedings the Assessing Officer called for details relating to claim of deduction under section 80JJAA, the Appellant furnished a detailed response and the same was subject to verification. Contrary to the order of Ld. PCIT, the Appellant has indeed furnished details of date of joining of additional employees, their remuneration details, compliance with conditions stipulated in the section before the Assessment Unit and the same was duly verified. Therefore, the Ld. PCIT is factually incorrectin stating that no details were called for and furnished during the assessment proceedings apart from the Form 10DA.

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vii. The Appellant submits that this error is not a mere factual error but rather an egregious error on which stands the conclusion of the Ld. PCIT to set aside the assessment order. The rationale given by the Ld. PCIT (as extracted above) is that no details relating to 80JJAA deduction were furnished during the assessment proceedings. Once it is proven that such factual understanding is incorrect, ergo falls the reasoning given by the Ld. PCIT to conclude that assessment order was erroneous and prejudicial to the interest of the revenue.

viii. While exercising powers under section 263 of the Act, the Ld. PC1T ought to have verified the details submitted by the Appellant during the course of assessment proceedings and drawn conclusions as to whether the order is erroneous and prejudicial to the interests of revenue after giving proper reasons based on enquiry conducted and details submitted during the assessment proceedings.

ix. This demonstrates that Ld. PCIT has not properly appreciated the record of the documents and details submitted during the assessment proceedings before passing the order under section 263 of the Act and has remanded the matter back to the Assessment Unit in a mechanical manner. There are plethora of rulings wherein it has been held that revisionary powers under section 263 cannot be invoked in a mechanical manner.

x. In this regard, the Appellant relies on the Hon'ble Jammu and Kashmir High Court ruling in the case of Commissioner of Income-tax, Jammu vs. Green Fields Commercial (P.) Ltd. 120151 57 taxmann.com 64 (Jammu & Kashmir) wherein the High Court held as below:

"The assessee-company submitted a detailed reply to the notice issued, controverting all factual aspects of the case reflected in the notice. The Commissioner surprisingly in its order did not deal with detailed reply supported by reasons, submitted by assessee-company. Least that was expected of Commissioner was to make reasonable and fair discussion of the reply, and material referred to in such reply and given reasons for recording disagreement with stand taken in the reply. Otherwise granting an opportunity to assessee as required under section 263 would be reduced to an idle formality. This is what has been exactly done by Commissioner. The mode and manner in which the matter has been dealt with is in gross violation of mandate of section 263."

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Refer Annexure CL-1

xi. The Appellant would also like to rely on the following rulings

 Agarwal Joint Venture vs. Commissioner of Income-tax [2023] 157 taxmann.com 582 (Ahmedabad - Trib.)[31-08-2023]

 Rajinder Chauhan v. Pr. CIT [IT Appeal No. 308 (CHD) of 2020]

xii. In light of the above, the Appellant submits that on this ground alone the order of the Ld. PCITis liable to be quashed and set aside.

There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted."

Refer Annexure CL-2 ii. Primary reasoning o f the Ld. PCIT to set aside the assessment order as erroneous and prejudicial to the interests of the Revenue is that no details related to deduction under section 80JJAA were filed during the assessment proceedings

ITA No.341/Bang/2026 Page 12 of 30 and the Assessing Officer has not verified the same and the deduction under section 80JJAA is not allowable in the event of business reorganization.

iii. The Appellant submits that neither of it is factually correct in this case. As already elaborated above, detailed submission along with all documentary evidence was made with respect to the deduction during the assessment proceedings. Further, the provisions of clause (b) to section80JJAA(2) of the Act are not even applicable in the facts of the case. This is elaborated further in Para 4). Therefore, the premise on which the Ld. PCIT concludes that assessment order is erroneous and prejudicial to the interests of the revenue is not valid.

iv. The entire computation details along with documentary evidence was submitted during the assessment proceedings. The fact that there was an amalgamation was also communicated to the Assessment Unit vide submitted on 29th August 2023. A copy of the letter is also enclosed in Annexure 8. Along with that, copy of the NCLT order and the scheme of amalgamation was also furnished before the Assessment Unit. The Appellant also filed a modified Form 3CA-3CD along with modified return of income which captures the revised deduction under section 80JJAA. In fact, the assessment order also captures the fact that there has been an amalgamation in para 1.2 and 1.3 of the order. All these demonstrate that the relevant details were submitted before the Assessment Unit and the Assessment Unit has called for and duly verified the claim made by the Appellant. It cannot be said that there was no verification or lack of enquiry on the part of Assessment Unit before concluding the assessment.

v. In this regard, the Appellant would like to rely on the Hon'ble Supreme Court ruling in the case of PCIT vs V-Con Integrated Solutions Pvt Ltd [2025] 173 taxmann.com 774 (SC)/[2025] 304 Taxman 598 (SC)/[2025] 476 ITR 526 (SC)[04-04-2025]wherein the Hon'ble Court held as below:

“The assessee does not have control over the pen of the Assessing Officer. Once the Assessing Officer carries out the investigation but does not make any addition, it can be taken that he accepts the plea and stand of the assessee."

Refer Annexure CL-3

vi. In this case, the Assessment Unit has called for all the details, verified the claim and accepted the Appellant's submission by not making any addition. In fact, in the assessment order the Assessment Unit has disallowed the claim made under section 80JJAA to the extent of Rs. 13,20,881 pertaining to MMFL in the

ITA No.341/Bang/2026 Page 13 of 30 computation sheet which clearly shows that the claim was duly verified by the Assessment unit before passing the order.

vii. There are plethora of rulings which support the proposition that where during the assessment proceedings the Assessing officer raises a query and all the details were furnished by the tax payer before the Assessing Officer, then it follows that the Assessing officer has verified the claim and accepted the position of the tax payer.

viii. Recently, Hon'ble Madras High Court in the case of Commissioner of Income-tax vs. VelloreInstitute of Technology [2025] 175 taxmann.com 277 (Madras) as below:

"It is true that the assessment order does not discuss the queries raised or the answers given thereto. But the fact is, the Assessing Officer had issued a questionnaire under section 142(1) raising 34 questions on various issues and assessee had given an explanation and also submitted materials. It is viewed that once a notice is issued and assessee is called upon to show cause or give explanation or submit documents and assessee has complied, not giving a finding or discussing the same would mean that the Assessing Officer was satisfied with the explanation given by the assessee."

Refer Annexure CL-4

ix. The Appellant would like to rely on the following rulings in this regard:

 Supreme Court in the case of Commissioner of Income-tax vs. M. Chandra Sekhar [1985] 20 Taxman 3 (SC)/[1985] 151 ITR 433 (SC)

 Jurisdictional High Court in the case of Commissioner of Income-tax, Bangalore vs. Saravana Developers [2016] 68 taxmann.com 148 (Karnataka) (Refer Annexure CL-5)

 Jurisdictional High Court in the case of PCIT vs Chemsworth (P.) Ltd. [2020] 119 taxmann.com 358 (Karnataka) (Refer Annexure CL-6)

 Delhi High Court in the case of Leisure Wear Exports Ltd. [2011] 11 taxmann.com 54 (Delhi)

ITA No.341/Bang/2026 Page 14 of 30  Delhi High Court in the case of Anil Kumar Sharma Commissioner of Income-tax vs. Anil Kumar Sharma [2010] 194 Taxman 504 (Delhi)/[2011] 335 ITR 83 (Delhi)

 Delhi High Court in the case of Principal Commissioner of Income-tax vs. Clix Finance India (P.) Ltd. [2024] 160 taxmann.com 357 (Delhi)

 Bombay High Court in the case of Aroni Commercials Ltd. vs. Deputy Commissioner of Income-tax -2(1) [2014] 44 taxmann.com 304 (Bombay)

 Delhi High Court in the case of Commissioner of Income-tax vs. Sunbeam Auto Ltd. [2010] 189 Taxman 436 (Delhi)/120111 332 ITR 167 (Delhi)/[2009] 227 CTR 133 (Delhi)[11-09-2009]

 Bombay High Court in the case of Marico Ltd. vs. Assistant Commissioner of Income-tax-12(3)(2) [2019] 111 taxmann.com 253 (Bombay)/[2020] 425 ITR 177 (Bombay) [21-08-2019]

 Jurisdictional ITAT in the case of Ashok kappa Bannur vs. Principal Commissioner of Income-tax 120221 139 taxmann.com 447 (Bangalore - Trib.)

x. All the above rulings confirm the position that once the Assessing Officer raises a query during the assessment proceedings and the details were furnished by the Appellant, it cannot be held that the Assessing Officer has not carried out the necessary verification or investigation. The facts presented above demonstrate that all the relevant details were submitted and the claim was explained in detail before the Assessment Unit.

xi. In light of the above, the Appellant submits that the assessment order was passed by the Assessment Unit after due verification of the claim made by the Appellant and therefore cannot be treated as 'erroneous'.

i. Under section 263 proceedings, Ld. PCIT has powers to either set aside the assessment order and direct the Assessing Officer to conduct a fresh assessment or modify the assessment by going into the merits of the case.

ii. In a case where there is a failure on the part of the Assessing Officer to conduct verification or investigation, Ld. PCIT can direct the Assessing Officer to conduct a fresh assessment. However, in a case where the Assessing Officer has conducted

ITA No.341/Bang/2026 Page 15 of 30 the verification but has not made the addition, then the Ld. PCIT cannot merely set aside the assessment with direction but decide the matter on merits of the case.

iii. This position was upheld by the Hon'ble Supreme Court ruling in the case of PCIT vs V-Con Integrated Solutions Pvt Ltd 120251 173 taxmann.com 774 (SC)/[2025] 304 Taxman 598 (SC)/[2025] 476 ITR 526 (SC)(04-04-20251. Relevant extract from the ruling is provided below:

"The assessee does not have control over the pen of the Assessing Officer. Once the Assessing Officer carries out the investigation but does not make any addition, it can be taken that he accepts the plea and stand of the assessee. In such cases, it would be wrong to say that the Revenue is remediless. The power under Section 263 of the Income Tax Act, 1961, can be exercised by the Commissioner of Income Tax, but by going into the merits and making an addition, and not by way of a remand, recording that there was failure to investigate. There is a distinction between the failure or absence of investigation and a wrong decision/conclusion. A wrong decision/conclusion can be corrected by the Commissioner of Income Tax with adecision on merits and by making an addition or disallowance.

Refer Annexure CL-3

iv. In this case, it is beyond doubt that verification was conducted by the Assessment Unit. It is not a case where there was lack of enquiry by the Assessment Unit. After verification of details submitted by the Appellant, the Assessment Unit has accepted the position of the Appellant. This fact has been completely ignored by the Ld. PCIT. In fact, the Ld. PCIT proceeded on an erroneous understanding that no details were called for relating to deduction under section 80JJAA during the assessment proceedings.

v. Therefore, as distinguished by the Hon'ble Supreme Court, this is not a case of failure or absence of investigation. Even assuming without admitting that there was a wrong decision/ conclusion made by the Assessment Unit, the Ld. PCIT erred in setting aside the matter back to the file of Assessing Officer.

vi. Even for a moment assuming, without admitting, that deduction under section 80JJAA of the Act was not allowable in the case under clause (b) to section 80JJAA(2), Ld. PCIT ought to have concluded the matter on merits of the case. If in the opinion of Ld. PCIT that is the correct interpretation of the law, then the Ld.

ITA No.341/Bang/2026 Page 16 of 30 PCIT ought to have decided the case on merits of the case instead of merely remitting the case back to the file of the Assessing officer.

vii. The Assessment Unit has already verified the satisfaction of all the conditions of section 80JJAA of the Act. Satisfaction of all the conditions were specifically substantiated by the Appellant to the Assessment Unit vide its letter dated 26th February 2024 during the assessment proceedings and based on that Assessment Unit has accepted the position and has not made any addition. Now, again remitting the case back to the file of Assessment Unit to test the same conditions would amount to review of an already concluded assessment, which is not permissible under the eyes of the law.

viii. In light of the above, the Appellant submits that the order of the Ld. PCIT remitting the case back to the file of Assessment Unit to verify the satisfaction of conditions of deduction is not permissible within the ambit of section 263 of the Act read with the Hon'ble Supreme Court ruling in the case of V-Con Integrated Solutions Pvt Ltd (supra).

i. In the subject order Ld. PCIT has mentioned that under the provisions of section 80JJAA(2)(b) the deduction shall not be available in the event of business reorganization. Since, in this case, there is an amalgamation of the Appellant with MMFL w.e.f. 1st April 2020, the Appellant shall not be eligible to claim the deduction of Rs. 7,57,15,461 which includes the deduction of Rs. 13,20,881 claimed on account of MMFL.

ii. In this case, the Appellant is already engaged in the business as a Micro Finance NBFC. The Appellant was incorporated in the year 1991 and it has been engaged in the NBFC business since its incorporation. As per its business requirement, the Appellant employs new employees in respect of which it is entitled to claim deduction under section 80JJAA subject to satisfaction of other conditions prescribed therein.

iii. During the year, the Appellant had claimed in its original income tax return deduction under section 80JJAA to the tune of Rs. 7,43,94,580. Break up of that is provided below:

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iv. As could be seen from the above, the deduction pertains to additional employees employed in the current year as well as in FY 2019-20 since the section allows 30% deduction for a period of 3 years.

v. Snapshot of additional employee details in respect of the deduction claimed with respect to FY 2021-22 is provided below

vi. The addition of new employees of 6,874 above does not include employees who became employees of the Appellant pursuant to the merger i.e., employees of MMFL prior to merger. This includes only the new employees employed by the Appellant in its business carried on prior to the merger. Similarly, deduction claimed in respect of FY 2019-20 would definitely not include employees of MMFL since anyway it was prior to the appointed date of the scheme of amalgamation.

vii. Similar to the Appellant, MMFL was also carrying on NFBC business prior to the mergerandin respect of the same it had employed some additional new employees during the FY 2020-21 i.e. year prior to the current year. Snapshot of the additional employee details employed by MMFL is given below:

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viii. The deduction was claimed by MMFL in its original return of income based on the additional new employees employed by the company in its business prior to giving effect of merger.

ix. Both the Appellant and MMFL had claimed deduction under section 80JJAA in their original return of income based on the additional employees employed by them prior to giving effect of the merger. Therefore, the effect of business reorganization i.e., transfer of business along with the employees is nowhere given effect to in the claims made by the respective Companies.

x. This is also true because the scheme of amalgamation clearly provides that employees of MMFL as on the Effective date of the amalgamation shall become employees of the Appellant upon the scheme becoming effective. Relevant extract of the scheme is provided below:

"Upon the coming into effect of this Scheme, all Employees as on the Effective Date shall become the permanent employees of the Transferee Company on terms and conditions not less favourable than those on which they are engaged by the Transferor Company and without any interruption of, or break in service as a result of the transfer of the Undertaking. The past services of the Employees and benefits to which the Employees are entitled in the Transferor Company be taken into account for the purpose of payment of any compensation, gratuity and other terminal benefits by the Transferee Company.”

xi. As per the scheme of amalgamation, the Effective date of amalgamation is 15th February 2023 which is after the approval of scheme of amalgamation by the NCLT. Therefore, as per the scheme of amalgamation, the employees of MMFL

ITA No.341/Bang/2026 Page 19 of 30 became employees of the Appellant on 15th February 2023, which is well after the end of the FY 2021-22.

xii. From all the above, it is clear that the deduction under section 80JJAA claimed by the Appellant or MMFL. did not include any impact of the amalgamation. It was claimed purely based on theadditional employees employed by them in their respective businesses prior to giving effect of the merger.

xiii. After the amalgamation was approved by the NCLT in February 2023, the Appellant filed a modified return of income under section 170A of the Act to give effect to the amalgamation. While filing the return of income, the Appellant had combined its original claim of Rs. 7,43,94,580 and Rs. 13,20,881 pertaining to the claim made by MMFL in its original return of income. Therefore, it made a total claim of Rs. 7,57,15,461.

xiv. This is also clearly allowable under the scheme of amalgamation since Clause 7.3 of the Scheme clearly provides that all taxes paid, refund dues, tax holiday benefits, tax incentives and any rights of MMFL under the Income Tax Act shall be transferred to the Appellant and the Appellant shall be entitled to claim the same. Therefore, the deduction claimed by MMFL under section 80JJAA shall stand transferred to the Appellant vide the scheme of amalgamation.

xv. Therefore, the Appellant submits that it is entitled to claim the deduction under section 80JJAA in respect of additional employees employed by the Appellant and also by MMFL.

xvi. Further, the Appellant submits that its claim is not impacted by the operation of subsection 2(b) of section 80JJAA.

xvii. The section provides that deduction shall be allowed from the profits and gains of the business with respect to the additional employee cost incurred in the course of such business. Subsection 2(b) provides that deduction shall not be allowable if the business is acquired by the Assessee by way of business reorganization.

xviii. On a combined reading of subsection I and 2, it is clear that deduction in respect of employee cost incurred in a business shall not be allowable if the business is acquired by the Assessee by way of business reorganization. The anti abuse provision contained in subsection 2(b) ties itself to the business in respect of which the additional employee cost is incurred. Therefore, the test to be applied is what is the business in respect of which the deduction is claimed? and whether that business is acquired under a business reorganization?

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xix. The Appellant had claimed the deduction to the tune of Rs. 7,43,94,580 in respect of additional employees employed by it in the business carried on by itself and not in respect of business acquired by it under the amalgamation. The claim is made in respect of 796 additional employees employed by the Appellant during the year. As explained above, this does not include the employees who have joined the Appellant from MMFL pursuant to the merger. Therefore, there is no occasion for invocation of subsection 2(b) of section 80JJAA.

xx. In this regard, the Appellant would also like to refer to the object and purpose of the section as explained vide CBDT Circular No. 772 dated 23-12-1998. Relevant extract from the Circular is provided below:

"45.1 Despite increase in employment of new workmen, economic growth and the employment growth rate has not been high enough to absorb addition to the workforce. In order to encourage employers to create more employment opportunities, it was considered necessary to provide fiscal incentives in the Income-tax Act.

45.2 With this objective, a new section 80JJAA has been inserted in the Income-tax Act. The deduction under this section can be availed of by an Indian company. Under the provisions of the new section, an amount of 30% of additional wages paid to the new workmen is to be allowed as a deduction for a period of three years beginning with the year in which the new workman is employed, provided other conditions as laid down in the provision are met."

xxi. It is very clear that the object of the section is to encourage the employers to create new employment opportunities by giving fiscal incentives. It is with this background of the object and intent, the provision needs to be interpreted.

xxii. Inthis regard, the Appellant refers to the Jurisdictional High Court ruling in the case of Commissioner of Income-tax, LTU vs. Texas Instruments India (P.) Ltd. [2021] 127 taxmann.com 59 (Karnataka).The Hon'ble High Court categorically held that the provisions of section 80JJAA must be interpreted taking into consideration the intent and object of the provision to create new employment opportunities. Relevant extract from the judgment is provided below:

Admittedly, the provisions concerned, i.e. section 80JJAA, comes under Chapter VI-A, which deals with deductions in certain income; this deduction is issued and or permitted as an incentive to the assessee on fulfilling certain criteria as required

ITA No.341/Bang/2026 Page 21 of 30 under the various provisions under Chapter VI-A. The incentive of the deduction provided under section 80JJAA is with an intention to encourage the assessee to employ more and more people, provide employment and, in lieu thereof permit the employer/assessee to deduct certain amounts from the income when the returns are filed. It is with this object, purport and intent of section 80JJAA that the present facts and circumstances would have to be considered. It is also required for the Assessing Officer, CIT(A), Tribunal, as also any other officer to always interpret and or apply the provisions of the Act, taking into consideration the intent and purport of the said provision.

Refer Annexure CL-7

xxiii. Further the Hon'ble High Court held that the section being a benevolent provision must be interpreted reasonably and liberally.

It also being on account of the fact that section 80.1J-AA relating to deductions under Chapter is an incentive and, therefore, has to be read liberally. In this aspect, we are also supported by the decision of the Apex Court in Mavilayi Service Co- operative Bank Ltd.'scase (supra), wherein the Apex Court has held that a benevolent provision has to be read liberally and reasonably and if there is an ambiguity in favour of the Assessee.

xxiv. Bearing the above principle in mind, the anti abuse provision contained in sub section 2(b) must be interpreted in a manner which serves its purpose. The section denies the deduction when the business is acquired under business reorganization for the reason that although employees acquired by the transferee due to business reorganization are new employees from the perspective of the transferee but it does not create any new employment opportunities. Rather it only transfers the existing set of employees from one entity to another. Therefore, it provides that if the business is acquired by way of transfer or business reorganization, then the additional employment cost of such business will not be allowable as deduction.

xxv. Such a provision cannot be interpreted in a manner to provide that the entire deduction shall not be allowable the moment there is a business reorganization. Such is the approach taken by the Ld. PCIT which is excessive and beyond the intent and object of the provision. What the sub-section restricts is the claim in respect of existing employees of MMFL who were transferred to the Appellant along with MMFL business under the scheme of amalgamation. It cannot be interpreted to mean that deduction shall not be available in respect of new

ITA No.341/Bang/2026 Page 22 of 30 employees employed by the transferor or transferee prior to giving effect of the merger.

xxvi. In this case, it is clear that the deduction is claimed only in respect of the additional/ new employees employed by the Appellant and MMFL. These were claimed by the respective entities in their original return of income by filing Form 10DA. Post the approval of merger, the Appellant has filed a modified return of income combining these two claims which it is entitled to claim under the scheme of amalgamation. The Appellant has not made any additional claim or claim in respect of the employees who were already employed with MMFL and became employees of the Appellant pursuant to the merger.

xxvii. In light of facts and judicial precedents referred above, the Appellant submits that the provisions of sub section 2(b) of section 80JJAA are not applicable to the present facts of the case and therefore the Appellant shall be entitled to claim the deduction.

i. The assessment order passed by the Assessment Unit primarily contained an addition towards the disallowance of deduction claimed by the Appellant under the head 'any other amount allowable as deduction'. Apart from the same, the Assessment Unit had also not granted 80JJAA deduction claimed by the Appellant to the tune of Rs. 13,20,881. It can be seen from the Computation sheet that the total deduction allowed is only to the extent of Rs. 7,43,94,580 whereas the Appellant had claimed Rs. 7,57,15,461 in the modified ITR. The difference pertains to the MMFL's portion of 80JJAA deduction.

ii. Aggrieved by the same, the Appellant had filed an appeal before the Commissioner of Income Tax (Appeals) on both the grounds including the disallowance of 80JJAA deduction. A copy of the grounds of appeal is enclosed in Annexure 9.

iii. Thus, it is clear that both at the time of invocation of proceedings under section 263 and at the time of passing of order under section 263, the matter relating to claim of deduction under section 263 was pending before the Commissioner of Income Tax (Appeals).

iv. Explanation 1(c) to section 263(1) clearly provides that the powers of Principal Commissioner under the section shall be extended to only matters which had not

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been considered in the appeal. So, in respect of matters which are pending before the Commissioner of Income Tax (Appeals), the PCIT cannot invoke his revisionary powers.

v. This position was upheld by the Hon'ble Allahabad High Court in the case of Commissioner of Income Tax, Meerut vs. Vam Resorts & Hotels (P.) Ltd. [2019]111 taxmann.com 62 (Allahabad) wherein the Court held that where an appeal is pending before the Commissioner, the exercise of jurisdiction under section 263 is barred. Refer Annexure CL-8

vi. The Appellant would also like to rely on the following rulings in support of its contention:

 Madras High Court in the case of Smt. Renuka Philip vs. Income-tax Officer, Business Ward-XV(2) Chennai [20191 101 taxmann.com 119 (Madras)

 Madras High Court in the case of Commissioner of Wealth-tax v. Sampathmal Chordia, Executor to the Estate of Late Neni Kavur Bai [2003] 127 TAXMAN 525 (MAD.)

 Delhi ITAT in the case of IREO (P.) Ltd. vs. Commissioner of Income-tax (TD5)-1 [2025] 170 taxmann.com 7 (Delhi - Trib.)[31-12-2024]

 Delhi ITAT in the case of Rajesh Kumar Jalan vs. Principal Commissioner of Income-tax [2024] 163 taxmann.com 574 (Kolkata - Trib.)[2024] 113 ITR(T) 188 (Kolkata - Trib.)

vii. All the above rulings categorically support the position that powers under section 263 cannot be invoked when the matter was pending before the CIT(A).

viii. In light of the above, the Appellant submits that invocation of revisionary powers under section 263 of the Act by Ld. PCIT is invalid.

i. In the impugned order, the Ld. PCIT has mentioned that mandatory Form 10DA was not furnished by the Appellant to claim the deduction under section 80JJAA of the Act.

ii. The Appellant would like to submit that it had duly filed Form 10DA at the time of filing its original return of income. Similarly, MMFL had also duly filed the Form

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10DA at the time of filing its return of income. A copy of these Form 10DA was also submitted before the Ld. PCIT during the proceedings.

iii. Post the NCLT order approving the amalgamation, the Appellant filed a modified return of income as mandated under 170A of the Act. Section 170A of the Act provides that where prior to the date of NCLT order, return of income has been furnished by the successor then the successor shall file a modified return of income in accordance with the NCLT order. The section clearly mandates filing of modified return of income but it doesn't mandate filing of Form 10DA.

iv. Filing of Form 10DA is clearly mandated at the time of filing the original return of income which was duly complied by both the Appellant and MMFL. There is no requirement to file a modified/ revised Form 10DA at the time of filing a modified return of income. Therefore, contrary to the Ld. PCIT's contention, it is not mandatory under the Act to furnish the revised Form 10DA along with the modified return under section 170A.

v. Further, the Ld. PCIT erred in not appreciating the fact that the Appellant is not making any fresh claim of deduction under section 80JJAA. Having already claimed the deduction under section 80JJAA in its original return of income, the Appellant had claimed the deduction pertaining to MMFL's portion in its modified return of income which is also duly certified under a Form 10DA filed by MMFL. The claim made by the Appellant is duly certified by the Accountant and can be easily verified from the original Form 10DA filed by the Appellant and MMFL.

vi. Without perjudice to above, even assuming without admitting that filing of revised Form 10DA was required in this case, substantial claim of the Appellant cannot be denied merely due to procedural omission to file the revised Form. There are plethora of rulings which confirm thatfiling of Form 10DA is procedural in nature. In this regard, the Appellant would like to rely on the following rulings:

 Deputy Jurisdictional ITAT in the case of IFLSamasta Finance Ltd. vs. Deputy Commissioner of Income-tax [2025] 176 taxmann.com 278 (Bangalore Trib) Refer Annexure CL-9

 Madras High Court in the of Craftsman Automation Private Limited vs Commissioner of Income (2021) 435 ITR 558 (Madras) Refer Annexure CL-10

 Delhi ITAT in Aakash Bhardwaj vs. Assessing Officer, Circle Ghaziabad (2025) 183 taxmann.com 717 (Delhi-Trib)

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 Indore ITAT is Charchit Garg vs. Income-tax Officer [2026] 182 taxmann.com 559 (Indore-Trib)[13-01-2026]

 Delhi ITAT in Jubilant Food works Ltd. Assistant Commissioner of Income Tax [2025] 177 taxmann.com 374 (Delhi-Trib.)/[2025] 214 ITD 361 (Delhi– Trib.)[06- 08-2025]

vii. Therefore, the Appellant submits that substantive claim of the Appellant under section 80JAA cannot be denied merely due to non-filing of revised Form 10DA in this case. Prayer

In light of the above, the Appellant pleads before your Honour to quash and set aside the order passed by Ld. PCIT under section 263 of the Act

The Appellant would be obliged in provide any further information or clarification your Honour may require in this regard

ITA No.341/Bang/2026 Page 26 of 30 resulting in a total claim of ₹7,57,15,461. According to him, the letter dated 26 February 2024 submitted before the Assessing Officer fully explained the computation, statutory basis and eligibility of the claim. On merits, he submitted that the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in Commissioner of Income-tax, LTU v. Texas Instruments India (P.) Ltd. [2021] 127 taxmann.com 59 (Karnataka). He further submitted that neither the Act nor the Rules require filing of a revised Form 10DA in these circumstances. Referring to the decision of the Hon’ble Supreme Court in PCIT v. V-Con Integrated Solutions Pvt. Ltd. [2025] 476 ITR 526, he submitted that the learned PCIT had not identified any further enquiry that the Assessing Officer was required to make. He also submitted that there was no fresh claim by the assessee; the claims of the amalgamated and amalgamating companies were merely combined pursuant to the amalgamation. Therefore, no further examination was required by the Assessing Officer. He pointed out that the order of the learned PCIT also does not specify any further enquiry to be conducted. He further relied on the decision of the Hon’ble Allahabad High Court in Commissioner of Income-tax v. Vam Resorts and Hotels (P.) Ltd. [2019] 418 ITR 723, wherein it was held that when, during scrutiny assessment, the Assessing Officer calls for material in respect of a claim, the assessee furnishes the same, and the Assessing Officer accepts the claim after enquiry, section 263 cannot be invoked merely to revise such assessment. In view of these facts, the learned Authorized Representative submitted that the revisionary order passed by the learned PCIT was unsustainable, as the Assessing Officer had made adequate enquiries regarding the assessee’s claim and no fresh claim had been made except the aggregation of the claims of the amalgamated and amalgamating companies.

ITA No.341/Bang/2026 Page 27 of 30 12. We have carefully considered the rival submissions and perused the orders of the lower authorities. Briefly stated, pursuant to the order of the National Company Law Tribunal dated 7 February 2023, Madura Micro Finance Limited was amalgamated with the assessee company with retrospective effect from 1 April 2020. The assessee claimed deduction under section 80JJAA of the Income-tax Act amounting to ₹7,43,94,583 for the year under consideration and had filed Form 10DA in support of the claim.

ITA No.341/Bang/2026 Page 28 of 30 15. The assessee contended that there was no increase in the employees of the assessee company on account of amalgamation so there is no increase in deduction on account of amalgamationand that it had merely aggregated the deduction of ₹7,43,94,580 claimed by the assessee company and ₹13,20,880 claimed by the amalgamating company. As regards the alleged requirement to file a revised Form 10DA with the modified return, the assessee submitted that no such requirement exists in law where Form 10DA had already been filed for the original claim of ₹7,43,94,580 in the hands of the assessee company and ₹13,20,880 in the hands of the amalgamating company.

ITA No.341/Bang/2026 Page 29 of 30 considered for the assessee’s own claim nor enhanced its eligible deduction under section 80JJAA.Therefore, section 80JJAA(2)(b) cannot be invoked to deny the assessee’s claim.

Order pronounced in the open court on 07th July, 2026.

Sd/- Sd/- (SOUNDARARAJAN K.) (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE-PRESIDENT Bangalore, Dated, the 07th July, 2026. *TNTS*

ITA No.341/Bang/2026 Page 30 of 30 Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. CIT(A) By order

Assistant Registrar, ITAT, Bangalore