DBS Technology Services India Private Limited vs. Assistant Commissioner of Income Tax

The petil ioner-assessee ts an undertaking the Special 1n Economic Zoru' (SEZ), engaged in the business of electronic data processing, te,:hnology and product suPport services. The petitioner-assessee in order to claim deduction under Section 10AA of the Ar:t, 1,961, got its accounts audited and was issued a report in Form-r6F on 18.11.2019, i.e., prior to the last date of filing of the return of income on 30.11.2019. The petitioner filed its return of inco me on 26.1"1.2019, declaring a total income of Rs.20,98,1.20/-. However, due to inadvertence, petitioner failed to attach the Form-56F along with the return of income, and as soon as the petitioner realized the said mistake, immediately the said Form-56F was uploaded on L6.72.2019. Further, the respondent No.2 served a notice on the petitioner on 09.12.2079 under Section 1a3(1)(a) of the Act, 1961, proposing to make certain adjustments to the return, tc which the petitioner filed reply orr 06.01..2020. However, the irtimation, dated 70.06.2020 was received by the petitioner, rejecting the claim of the petitioner for deduction under Section 10AA of the Act, 1961., and aggrieved by the said intimation, the pstili6ngr filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] on 10.07.2020. The CIT(A)

Thereafter, the Assistant Commissioner of Income Tax, Circle-S(1), Hyderabad, being the JAO, issued a notice dated 05.03.2025 to the petitioner to substantiate his claim under Section 10AA of the Act, 1961, pursuant to the order of the ITAT dated 2L.07.2023. However, the petitioner submitted a belated resPonse on-1.4.03.2025 stating that ITAT restored the matter to CPC because

Thereafter, the Assistant Commissioner of Income Tax, passed conserluential Order on24.03.2025 by declining the relief to the petitioner-assessee, hold ing that the submission of the petitioner/ assessee is unacceptable as the Centralized Processing Centre is an automated processing centre, and further, the said claim of the petitioner/ assessee was rejected as it was not feasible to issue a fresh notice proposing adjustment to income declared by the assessee as it is fully automated centre.

Learned counsel for petitioner would contend that petitioner/ ass,:ssee has been allowed deduction under Section 10AA of the ltct, "1961, in the carlier and subsequent assessment years, and t here is no dispute regarding the petitioner's entitlement to claim deduction under Section 10AA of the Act. He further submi.ted that there was an error on the part of the petitioner in not uploading Form 56F (original report), but immediately the said form l,u,as uploaded on 1,6.12.2019 and though the matter went up to the CIT(A), who directed the - 5 { authorities to allow the deduction, however, on Appeal before the ITAT, the matter was remanded to t}re 1.. resPondent, and once again the l" resPondent, though has given notice, has reiected the claim in flimsy grounds that since it is totally operated and processed by the Centralized Processing Center, as such' it is not feasible to give nohice to the petitioner/ assessee so as to extend the benefit under Section 10AA of the Act'

The learned Senior Standing Counsel Ms' J'sunitha for Income Tax appearing for the respondent Nos'1 and 2' would contend that the return of income was processed through the Automated Processing Centre and no functionality was available at Centralized Processing Centre (CPC) to furnish any fresh notice proposing adjustment to income declared by the assessee' and the orders passed by the leamed ITAT was properly dealt with' and the Department issued notice dated 05'03'2025 to the petitioner by giving a chance to submit his submissions and since the filing of Form 56F is mandatory in nature and not procedural or directory' the order of the ITAT directing the ACIT, CPC' to issue notice is an impossibility. Therefore, the order passed by the 1't respondent i {

Admittedl'/, the said Form-56F was uploaded by the petitioner/ assesr;ee and that ground on which the said claim was denied is onlv on the ground that since the Centralized Processing Center is an au tomated processing center, it cannot issue anv notice and conduct a opportunity of hearing and it is also not - 7 possible to issue fresh notice proposing adjustment to income declared by assessee etc., aPpears to be not proPer for rejection of the claim of the petitioner for granting benefit under Section 10AA of the Act. Further, such mere technicalities cannot defeat the legitimate dght of the petitioner. Though the entire procedure is stimulated and operated by the Centralized Processing Center' the authorities ought to have exercised the discretion of accepting the Form-56F filed by the petitioner and compute the return of income by extending the benefit under Section 10AA of the Act to him' More so, it is an undisputed fact that all the previous and subsequent years, petitioner was extended the benefit under Section 10AA of the Act, 1,967, and doctrine of consistency has to be followed. In that view of the matter, rejecting the claim of the petitioner to extend the said benefit under Section 10AA of the Act, by not accepting Form-56F, solely on the ground that system being operated by the Centralized Processing Center and there is no provision for issuance of notice since it is operated by the Centralized Processing Center, is neither proper nor legal' and as aforesaid rejection on mere technicalities should not deprive the legitimate right of the petitioner/ assessee, more so' Centralized

In that vir:w of the matter, the impugned proceedings, dated 24.03.2025 are herebv set aside and quashed. The respondent No.1 is directed to scrutinize the Form-56F filed by the petitioner, dated 16.12.2019 and thereafter, consider and extend the benefit of deduction if he otherwise entitled to under Section 10AA of the Act,1961,, by par;sing consequential order in accordance with law

The Writ I)etition stands allowed accordingly. There shall be no order as to cc,sts. Miscellaneous petitions, if any,, shall stand closed M.NAGAMANI ASSI ANT REGISTRAR //' . To SECTION OFFICER

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