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Facts
The assessee, a private limited company providing manpower services, filed a return declaring 'Nil' income. They claimed a deduction under Section 80JJAA, restricting it to their gross total income. The CPC, processing the return under Section 143(1), restricted the deduction to business income, leading to an appeal.
Held
The Tribunal held that the appeal against the Section 143(1) intimation order was infructuous because the subject matter of adjustment in the intimation merged with the subsequent assessment order under Section 143(3). Therefore, the appeal was dismissed.
Key Issues
Whether an appeal against a Section 143(1) intimation order is rendered infructuous when a subsequent assessment order under Section 143(3) addresses the same issues, leading to a merger of the two orders.
Sections Cited
143(1), 143(3), 80JJAA, 80A(4)
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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
This appeal by the assessee is directed against order dated 09.05.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – Madurai [in short ‘the Ld. CIT(A)’] for assessment year 2021-22 arising from order passed by the Central Processing Centre (CPC) Bengluru dated 22.09.2022 u/s 143(1) of the Income-tax Act,
Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 2 1961 (in short ‘the Act’). The grounds raised by the assessee are 1961 (in short ‘the Act’). The grounds raised by the assessee are 1961 (in short ‘the Act’). The grounds raised by the assessee are reproduced as under: reproduced as under:
Whether on facts and in the circumstances of the case and in Whether on facts and in the circumstances of the case and in Whether on facts and in the circumstances of the case and in law, the learned Additional/Joint Commission law, the learned Additional/Joint Commissioner of Income er of Income-tax (Appeals), Madurai ought to have appreciated that the appeal (Appeals), Madurai ought to have appreciated that the appeal (Appeals), Madurai ought to have appreciated that the appeal before him against the intimation under Section 143(1) date the intimation under Section 143(1) dated before him against 22 September 2022 ought to be 22 September 2022 ought to be dismissed as infructuous dismissed as infructuous owing to the fact an assessment order was passed on 29 owing to the fact an assessment order was passed on 29 owing to the fact an assessment order was passed on 29 December 2022. r 2022.
Whether on facts and in the circumstances of the case and in 2. Whether on facts and in the circumstances of the case and in 2. Whether on facts and in the circumstances of the case and in law, the learned Additional/Joint Commissioner of Income law, the learned Additional/Joint Commissioner of Income law, the learned Additional/Joint Commissioner of Income-tax (Appeals), Madurai has erred in confirming the action of the (Appeals), Madurai has erred in confirming the action of the (Appeals), Madurai has erred in confirming the action of the Centralized Processing Center in restricting the amount of Centralized Processing Center in restricting the amount of Centralized Processing Center in restricting the amount of deduction under section 80JJAA of the Act of Rs. 30,10,31,823 up uction under section 80JJAA of the Act of Rs. 30,10,31,823 up uction under section 80JJAA of the Act of Rs. 30,10,31,823 up to business income of Rs. 6,22,44,206 instead of gross total to business income of Rs. 6,22,44,206 instead of gross total to business income of Rs. 6,22,44,206 instead of gross total income of Rs. 11, 12,68,378. income of Rs. 11, 12,68,378. 2. Thereafter, the assessee vide letter dated 30.08.2024 filed Thereafter, the assessee vide letter dated 30.08.2024 filed Thereafter, the assessee vide letter dated 30.08.2024 filed following additional ground following additional grounds:
That the adjustment as made by the CPC reducing the adjustment as made by the CPC reducing the deduction allowable under section 80JJAA of the Act without deduction allowable under section 80JJAA of the Act deduction allowable under section 80JJAA of the Act giving an intimation giving an intimation in respect of the same in accordance with in respect of the same in accordance with 1st proviso below section 143(1)(a) is illegal and bad in law. 1st proviso below section 143(1)(a) is illegal and bad in law. 1st proviso below section 143(1)(a) is illegal and bad in law.
That the CPC was not ju 4. That the CPC was not justified in reducing the appellant's claim stified in reducing the appellant's claim for deduction under section 80JJAA in the Intimation issued Intimation issued for deduction under section 80JJAA in the under section 143(1) without specifying the sub under section 143(1) without specifying the sub under section 143(1) without specifying the sub-clause as per which the said adjustment has been made. per which the said adjustment has been made.
Assuming without admitting that sub 5. Assuming without admitting that sub-clause ii) of clause (a) of f clause (a) of sub-section (1) of section 143 has been applied in the present case, section (1) of section 143 has been applied in the present case, section (1) of section 143 has been applied in the present case, the quantum of deduction claimed by the appellant could not be the quantum of deduction claimed by the appellant could not be the quantum of deduction claimed by the appellant could not be regarded as 'an incorrect claim' and certainly not 'incorrect claim regarded as 'an incorrect claim' and certainly not 'incorrect claim regarded as 'an incorrect claim' and certainly not 'incorrect claim as apparent from any information in the as apparent from any information in the return' 3. We have heard rival submissions of the parties We have heard rival submissions of the parties We have heard rival submissions of the parties on the admissibility of the additional ground. The additional ground raised admissibility of the additional ground. The additional ground raised admissibility of the additional ground. The additional ground raised being purely legal in nature, not requiring investigation of the fresh being purely legal in nature, not requiring investigation of the fresh being purely legal in nature, not requiring investigation of the fresh
Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 3 facts, same were admitted for adjudication in view of the decision of same were admitted for adjudication in view of the decision of same were admitted for adjudication in view of the decision of the Hon’ble Supreme Court in the case of NTPC Ltd. 229 ITR 283 NTPC Ltd. 229 ITR 283 the Hon’ble Supreme Court in the case of (SC) and Jute Corporation of India Ltd. 187 ITR 688 (SC) Jute Corporation of India Ltd. 187 ITR 688 (SC) Jute Corporation of India Ltd. 187 ITR 688 (SC).
4. Briefly stated facts of the case are that the assessee is a Briefly stated facts of the case are that the assessee is a Briefly stated facts of the case are that the assessee is a domestic private limited company and ic private limited company and during year under reference during year under reference was engaged in the business of providing manpower services to was engaged in the business of providing manpower services was engaged in the business of providing manpower services other entities. For the year under consideration, the assessee filed . For the year under consideration, the assessee filed . For the year under consideration, the assessee filed return of income on 30.03.2022 declaring total income at Rs. Nil. In return of income on 30.03.2022 declaring total income at Rs. Nil. return of income on 30.03.2022 declaring total income at Rs. Nil. the said return of income, the assessee the said return of income, the assessee declared income under the declared income under the head ‘profit and gains of business or profession’ ( i.e. income from head ‘profit and gains of business or profession’ ( i.e. income from head ‘profit and gains of business or profession’ ( i.e. income from business of manpower supply) at Rs. 6,22,44,207/- and income business of manpower supply) at Rs. 6,22,44,207/ business of manpower supply) at Rs. 6,22,44,207/ under the head ‘income from other sources’( i.e. income other than under the head ‘income from other sources’( i.e. income under the head ‘income from other sources’( i.e. income business income may be in the nature of interest etc.) at Rs. business income may be in the nature of interest etc.) at Rs. business income may be in the nature of interest etc.) at Rs. 4,90,24,172/-). After adding income from both these heads worked ). After adding income from both these heads worked ). After adding income from both these heads worked out gross total income to Rs. 11,12,68,378/ out gross total income to Rs. 11,12,68,378/-. Thereafter, . Thereafter, the assessee computed deduction eligible u/s 80JJAA of the A u/s 80JJAA of the Act amounting to Rs.30,10,31,823/ amounting to Rs.30,10,31,823/- for the additional employee cost for the additional employee cost incurred, but restricted the claim to the extent of the restricted the claim to the extent of the restricted the claim to the extent of the ‘gross total income’ of Rs.11,12,68,378/ of Rs.11,12,68,378/- resulting into ‘Nil’ total income. The total income. The return of income filed by the assessee was processed u/s 143(1) of return of income filed by the assessee was processed return of income filed by the assessee was processed the Act on 22.09.2022 u/s 143(1) of the Act the Act on 22.09.2022 u/s 143(1) of the Act, wherein the deduction wherein the deduction claimed u/s 80JJAA was restricted to claimed u/s 80JJAA was restricted to ‘business income business income’ of Rs.6,22,44,207/- as against ‘gross gross total total income’ income of Rs.11,12,68,378/- as claimed by the assessee. Aggrieved, the as claimed by the assessee. Aggrieved, the as claimed by the assessee. Aggrieved, the Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 4 assessee filed appeal before the Ld. CIT(A) but could not succeed. essee filed appeal before the Ld. CIT(A) but could not succeed. essee filed appeal before the Ld. CIT(A) but could not succeed. Before the Ld. CIT(A), the assessee Before the Ld. CIT(A), the assessee urged for merging merging the appeal against order u/s 143(1) of the Act against order u/s 143(1) of the Act with the appeal file with the appeal filed against assessment order u/s 143(3) of the Act u/s 143(3) of the Act and to consider and to consider detailed submission filed during ongoing appeal proceedings against the submission filed during ongoing appeal proceedings against the submission filed during ongoing appeal proceedings against the said assessment order. The Ld. CIT(A) after considering the said assessment order. The Ld. CIT(A) after considering the said assessment order. The Ld. CIT(A) after considering the submission of the assessee dismissed the appeal observing as submission of the assessee dismissed the appeal observing as submission of the assessee dismissed the appeal observing as under:
OBSERVATION AND DECISION: OBSERVATION AND DECISION: The appellant admits that the order u/s143(3) is passed on29 The appellant admits that the order u/s143(3) is passed on29 The appellant admits that the order u/s143(3) is passed on29 December 2022. The appellant has requested that December 2022. The appellant has requested that In view of the above, we request your Honour to kindly merge In view of the above, we request your Honour to kindly merge In view of the above, we request your Honour to kindly merge captioned Appeal filed against the rectification order (Appeal captioned Appeal filed against the rectification order (Appeal captioned Appeal filed against the rectification order (Appeal no: NFAC/2020 no: NFAC/2020- 21/10192468 dated 21 October 2022) with 2468 dated 21 October 2022) with latest appeal filed against the Assessment Order (Appeal no: latest appeal filed against the Assessment Order (Appeal no: latest appeal filed against the Assessment Order (Appeal no: NFAC/2020-21/10201653 dated 27 January 2023) and 21/10201653 dated 27 January 2023) and 21/10201653 dated 27 January 2023) and consider detailed submission filed vide letter dated 23 consider detailed submission filed vide letter dated 23 consider detailed submission filed vide letter dated 23 February 2024 during ongoing appeal proceeding against th February 2024 during ongoing appeal proceeding against th February 2024 during ongoing appeal proceeding against the assessment order. assessment order. The appeal against the 143(3) order lies with CIT(A) and The appeal against the 143(3) order lies with CIT(A) and The appeal against the 143(3) order lies with CIT(A) and against 143(1) lies with JCIT(A). Hence combining this appeals against 143(1) lies with JCIT(A). Hence combining this appeals against 143(1) lies with JCIT(A). Hence combining this appeals is not possible. is not possible. 5.2 Ground 1 is against CPC restricting the claim under 5.2 Ground 1 is against CPC restricting the claim under 5.2 Ground 1 is against CPC restricting the claim under Section 80JJAA of the Act amounting to IN Section 80JJAA of the Act amounting to INR 30,10,31,823 to R 30,10,31,823 to the of Rs 6,22,44,207/ the of Rs 6,22,44,207/- and not restricting the claim under and not restricting the claim under Section 80JJAAto the gross total income of INR 11,12,68,378/ Section 80JJAAto the gross total income of INR 11,12,68,378/ Section 80JJAAto the gross total income of INR 11,12,68,378/- . In the 143(3) order the claim under Section 80JJAA itself is . In the 143(3) order the claim under Section 80JJAA itself is . In the 143(3) order the claim under Section 80JJAA itself is disallowed and a finding is given disallowed and a finding is given However, the interp However, the interpretation of law is always Prospective retation of law is always Prospective unless stated otherwise. In the extant case, the amendment is unless stated otherwise. In the extant case, the amendment is unless stated otherwise. In the extant case, the amendment is applicable with effect from 01 applicable with effect from 01- 04-2019. While as per the 2019. While as per the above issue, the assessee has claimed deduction u/s 80JJAA above issue, the assessee has claimed deduction u/s 80JJAA above issue, the assessee has claimed deduction u/s 80JJAA
Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 5 of over Rs.30,10,31,823/ of over Rs.30,10,31,823/- inter-alia, taking into account aking into account appointments as shown to be taken place in FY 2017 appointments as shown to be taken place in FY 2017- -18. With respect to above amendment, appointments made in F.Y. respect to above amendment, appointments made in F.Y. respect to above amendment, appointments made in F.Y. 2018-19 would be eligible for the said provision of, "Provided 19 would be eligible for the said provision of, "Provided 19 would be eligible for the said provision of, "Provided further that where an employee is employed during the further that where an employee is employed during the further that where an employee is employed during the previous year for a period of less than two hundred and forty us year for a period of less than two hundred and forty us year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but days or one hundred and fifty days, as the case may be, but days or one hundred and fifty days, as the case may be, but is employed for a period of two hundred and forty days or one is employed for a period of two hundred and forty days or one is employed for a period of two hundred and forty days or one hundred and fifty days, as the case may be, in the hundred and fifty days, as the case may be, in the hundred and fifty days, as the case may be, in the immediately succeeding year immediately succeeding year, he shall be deemed to have , he shall be deemed to have been employed in the succeeding year and the provisions of been employed in the succeeding year and the provisions of been employed in the succeeding year and the provisions of this section shall apply accordingly". Please note as per this section shall apply accordingly". Please note as per this section shall apply accordingly". Please note as per provisions of law, deduction u/s 80JJAA is allowable only for provisions of law, deduction u/s 80JJAA is allowable only for provisions of law, deduction u/s 80JJAA is allowable only for three years including the year of appointment an three years including the year of appointment and therefore, d therefore, there is no question of taking it to FY 2020 there is no question of taking it to FY 2020-21 as done by 21 as done by assessee. Since income declared is of Rs. 11,12,68,378/ Since income declared is of Rs. 11,12,68,378/- by the assessee, disallowance of Rs.11,12,68,378/ assessee, disallowance of Rs.11,12,68,378/- is being done is being done u/s 80JJAA as claimed by the assessee. u/s 80JJAA as claimed by the assessee. 5.3 In the 143(3) ord 5.3 In the 143(3) order a finding is given that the appellant is er a finding is given that the appellant is not eligible for deduction u/s Section 80JJAA for this not eligible for deduction u/s Section 80JJAA for this not eligible for deduction u/s Section 80JJAA for this assessment year. But the issue whether the appellant is assessment year. But the issue whether the appellant is assessment year. But the issue whether the appellant is eligible for deduction under Section 80JJAAon the gross total eligible for deduction under Section 80JJAAon the gross total eligible for deduction under Section 80JJAAon the gross total income of INR 11,12,68,378/ income of INR 11,12,68,378/- or is to be restricted to the e restricted to the business income of Rs 6,22,44,207/ business income of Rs 6,22,44,207/- will be relevant if the will be relevant if the appellate authority in the appeal filed against the 143(3) order appellate authority in the appeal filed against the 143(3) order appellate authority in the appeal filed against the 143(3) order decide in favour of the appellant. Hence this issue is discussed decide in favour of the appellant. Hence this issue is discussed decide in favour of the appellant. Hence this issue is discussed in this order. 5.4 The claim of the appellant 5.4 The claim of the appellant is that Section 80A(4) of the Act provides that where the amount of Section 80A(4) of the Act provides that where the amount of Section 80A(4) of the Act provides that where the amount of profit and gain is claimed and allowed as deduction i.e., profit profit and gain is claimed and allowed as deduction i.e., profit profit and gain is claimed and allowed as deduction i.e., profit linked deduction, the deduction under those section shall be linked deduction, the deduction under those section shall be linked deduction, the deduction under those section shall be restricted to the business income earned only. However, it i restricted to the business income earned only. However, it i restricted to the business income earned only. However, it is pertinent to note that under Section 80JJAA of the Act, the pertinent to note that under Section 80JJAA of the Act, the pertinent to note that under Section 80JJAA of the Act, the Appellant is eligible to claim deduction of the additional Appellant is eligible to claim deduction of the additional Appellant is eligible to claim deduction of the additional employee cost incurred in the course of business and not does employee cost incurred in the course of business and not does employee cost incurred in the course of business and not does not provide for deduction of profit and gain from a business. not provide for deduction of profit and gain from a business. not provide for deduction of profit and gain from a business. Hence, provision of Section 80A(4) of the Act shall not be ision of Section 80A(4) of the Act shall not be ision of Section 80A(4) of the Act shall not be Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 6 ITA No. 3424/MUM/2024 applicable for claiming deduction under Section 80JJAA of the applicable for claiming deduction under Section 80JJAA of the applicable for claiming deduction under Section 80JJAA of the Act since the amount is the claimed as a deduction is the Act since the amount is the claimed as a deduction is the Act since the amount is the claimed as a deduction is the additional employee cost and not the profit from business. additional employee cost and not the profit from business. additional employee cost and not the profit from business. Further, sub-section 4 of Se section 4 of Section 80A of the Act was introduced ction 80A of the Act was introduced vide Finance Act (No. 2) Act, 2019. The intention of introduction vide Finance Act (No. 2) Act, 2019. The intention of introduction vide Finance Act (No. 2) Act, 2019. The intention of introduction the said sub-section was to prevent abuse of tax incentive. The section was to prevent abuse of tax incentive. The section was to prevent abuse of tax incentive. The relevant extract of the Memorandum to Finance Bill 2009 relevant extract of the Memorandum to Finance Bill 2009 relevant extract of the Memorandum to Finance Bill 2009 wherein the intention is mentioned wherein the intention is mentioned is provided below: The profit linked deductions in Chapter VIA are prone to The profit linked deductions in Chapter VIA are prone to The profit linked deductions in Chapter VIA are prone to considerable misuse. Further, since the scope of the considerable misuse. Further, since the scope of the considerable misuse. Further, since the scope of the deductions under various provisions of Chapter VIA overlap, deductions under various provisions of Chapter VIA overlap, deductions under various provisions of Chapter VIA overlap, the taxpayers, at times, claim multiple deductions for the same the taxpayers, at times, claim multiple deductions for the same the taxpayers, at times, claim multiple deductions for the same profits. With a view to preventing such misuse, it is proposed to With a view to preventing such misuse, it is proposed to With a view to preventing such misuse, it is proposed to amend the provisions of section 80A of the Income amend the provisions of section 80A of the Income-tax Act to tax Act to provide the following, namely: provide the following, namely:- (i) deduction in respect of profits and gains shall not be (i) deduction in respect of profits and gains shall not be (i) deduction in respect of profits and gains shall not be allowed under any provisions of sectio allowed under any provisions of section 10A or section 10AA n 10A or section 10AA or section 10B or section 10BA or under any provisions of or section 10B or section 10BA or under any provisions of or section 10B or section 10BA or under any provisions of Chapter VIA under the heading "C. Chapter VIA under the heading "C.-Deductions in respect of Deductions in respect of certain incomes" in any assessment year, if a deduction in certain incomes" in any assessment year, if a deduction in certain incomes" in any assessment year, if a deduction in respect of same amount under any of the aforesaid has been respect of same amount under any of the aforesaid has been respect of same amount under any of the aforesaid has been allowed in the same assessment year; allowed in the same assessment year; (ii) (ii) the aggregate of the deductions under the various (ii) (ii) the aggregate of the deductions under the various (ii) (ii) the aggregate of the deductions under the various provisions referred to in (i) above, shall not exceed the profits provisions referred to in (i) above, shall not exceed the profits provisions referred to in (i) above, shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible and gains of the undertaking or unit or enterprise or eligible and gains of the undertaking or unit or enterprise or eligible business, as the case may be business, as the case may be; (iii) no deductions under the various provisions referred to in (i) (iii) no deductions under the various provisions referred to in (i) (iii) no deductions under the various provisions referred to in (i) above, shall be allowed if the deduction has not been claimed above, shall be allowed if the deduction has not been claimed above, shall be allowed if the deduction has not been claimed in the return of income; in the return of income; These amendments will take effect retrospectively from the 1st These amendments will take effect retrospectively from the 1st These amendments will take effect retrospectively from the 1st April 2003, and will accordingly a April 2003, and will accordingly apply in relation to pply in relation to assessment year 2003 assessment year 2003-2004 and subsequent years 7.13. Hence, reading Section 80A(4) of the Act along with the 7.13. Hence, reading Section 80A(4) of the Act along with the 7.13. Hence, reading Section 80A(4) of the Act along with the intention, it is submitted that the restriction under Section intention, it is submitted that the restriction under Section intention, it is submitted that the restriction under Section 80A(4) is applicable for profit linked deduction and given that 80A(4) is applicable for profit linked deduction and given that 80A(4) is applicable for profit linked deduction and given that Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 7 ITA No. 3424/MUM/2024
Section 80JJAA is not a profit linked deduction, the deduction Section 80JJAA is not a profit linked deduction, the deduction Section 80JJAA is not a profit linked deduction, the deduction under Section 80JJAA of the Act shall be allowed up to gross under Section 80JJAA of the Act shall be allowed up to gross under Section 80JJAA of the Act shall be allowed up to gross total income as per provision of Section 80A(2) of the Act. total income as per provision of Section 80A(2) of the Act. total income as per provision of Section 80A(2) of the Act. 5.5 It is correct that section 80JJAA is not a profit linked 5.5 It is correct that section 80JJAA is not a profit linked 5.5 It is correct that section 80JJAA is not a profit linked deduction and is linked with expenditure. The sections uses and is linked with expenditure. The sections uses and is linked with expenditure. The sections uses the words “gross total income of an assessee to whom section the words “gross total income of an assessee to whom section the words “gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from 44AB applies, includes any profits and gains derived from 44AB applies, includes any profits and gains derived from business and thus is applicable only to undertakings that business and thus is applicable only to undertakings that business and thus is applicable only to undertakings that have profits from business. T have profits from business. The appellant has profit from he appellant has profit from business and is eligible for deduction if other conditions are business and is eligible for deduction if other conditions are business and is eligible for deduction if other conditions are satisfied. In the 143(3) order AO has given a finding that satisfied. In the 143(3) order AO has given a finding that satisfied. In the 143(3) order AO has given a finding that conditions are not satisfies and hence is not eligible for conditions are not satisfies and hence is not eligible for conditions are not satisfies and hence is not eligible for deduction. 5.6 Section 80A(4) is as under 5.6 Section 80A(4) is as under (4) Notwithstanding anything to the contrary contained in ) Notwithstanding anything to the contrary contained in ) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or section 10A or section 10AA or section 10B or section 10BA or section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading "C. in any provisions of this Chapter under the heading "C. in any provisions of this Chapter under the heading "C.— Deductions in respect of certain incomes", where, in the case of Deductions in respect of certain incomes", where, in the case of Deductions in respect of certain incomes", where, in the case of an assessee, any an assessee, any amount of profits and gains of an amount of profits and gains of an undertaking or unit or enterprise or eligible business is undertaking or unit or enterprise or eligible business is undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those claimed and allowed as a deduction under any of those claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, provisions for any assessment year, deduction in respect of, provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shal and to the extent of, such profits and gains shall not be l not be allowed under any other provisions of this Act for such allowed under any other provisions of this Act for such allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and assessment year and shall in no case exceed the profits and assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible gains of such undertaking or unit or enterprise or eligible gains of such undertaking or unit or enterprise or eligible business, as the case may be. business, as the case may be. The section is very clear that “any prov The section is very clear that “any provisions of this Chapter isions of this Chapter under the heading "C. under the heading "C.—Deductions in respect of certain Deductions in respect of certain incomes”, and section 80H to 80VV comes under heading "C. incomes”, and section 80H to 80VV comes under heading "C. incomes”, and section 80H to 80VV comes under heading "C.— Deductions in respect of certain incomes. Hence the provisions Deductions in respect of certain incomes. Hence the provisions Deductions in respect of certain incomes. Hence the provisions under section 80A(4) and shall in no case exceed the prof under section 80A(4) and shall in no case exceed the prof under section 80A(4) and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible and gains of such undertaking or unit or enterprise or eligible and gains of such undertaking or unit or enterprise or eligible business,is applicable to section 10A or section 10AA or business,is applicable to section 10A or section 10AA or business,is applicable to section 10A or section 10AA or section 10B or section 10BA and section 80H to 80VV. The section 10B or section 10BA and section 80H to 80VV. The section 10B or section 10BA and section 80H to 80VV. The action of CPC restricting the deduction under section 80JJAAto action of CPC restricting the deduction under section 80JJAAto action of CPC restricting the deduction under section 80JJAAto the business income of Rs 6,22,44,207/ s income of Rs 6,22,44,207/- is correct as per law is correct as per law and facts. Ground 1 Is dismissed. and facts. Ground 1 Is dismissed.
Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 8 ITA No. 3424/MUM/2024
5. Before us, the Ld. counsel for the assessee filed a Paper Book Before us, the Ld. counsel for the assessee filed a Paper Book Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 74 including the intimation order u/s 143(1) containing pages 1 to 74 including the intimation order u/s 143(1) containing pages 1 to 74 including the intimation order u/s 143(1) of the Act dated 22.09.2022. of the Act dated 22.09.2022.
Firstly, we take up the additional ground No. 3 raised by the tly, we take up the additional ground No. 3 raised by the tly, we take up the additional ground No. 3 raised by the assessee. In the additional ground assessee. In the additional ground, it is submitted that no submitted that no intimation letter proposing adjustment intimation letter proposing adjustment was issued prior to issue of issued prior to issue of intimation order u/s 143(1)(a) of the Act and therefore, the intimation order u/s 143(1)(a) of the Act and therefore, the intimation order u/s 143(1)(a) of the Act and therefore, the intimation order issued is illegal and bad in law. n order issued is illegal and bad in law.
6.1 We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record the relevant materials on record. The proviso below the section The proviso below the section 143(1)(a) provides that before issuing intimation order u/s 143(1)(a) 143(1)(a) provides that before issuing intimation order u/s 143(1)(a) 143(1)(a) provides that before issuing intimation order u/s 143(1)(a) of the Act, the assessee shall be intimated the proposed adjustment. assessee shall be intimated the proposed adjustment. assessee shall be intimated the proposed adjustment. For ready reference, said proviso is reproduced For ready reference, said proviso is reproduced( bold portion) ( bold portion) as under: “143. 55[(1) Where a return has been made under [(1) Where a return has been made under section 139, or in response to a notice r in response to a notice under sub-section (1) of section 142 section 142, such return shall be processed in the following , such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following the total income or loss shall be computed after making the following the total income or loss shall be computed after making the following namely:— adjustments, namely: (i) any arithmetical error in the return; any arithmetical error in the return; 56[***] (ii) an incorrect claim, if such incorrect claim is apparent from any an incorrect claim, if such incorrect claim is apparent from any an incorrect claim, if such incorrect claim is apparent from any information in the return; information in the return; 57[(iii) disallowance of loss claimed, if return of the previous year for which set disallowance of loss claimed, if return of the previous year for which set disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified off of loss is claimed was furnished beyond the due date specified off of loss is claimed was furnished beyond the due date specified -section (1) of section 139; under sub- (iv) disallowance of expenditure disallowance of expenditure 58[or increase in income] indicated in the [or increase in income] indicated in the Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 9 audit report but not taken into account in computing the total income in audit report but not taken into account in computing the total income in audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under disallowance of deduction claimed under 59[section 10AA o [section 10AA or under any of the provisions of Chapter VI-A under the heading "C. of the provisions of Chapter VI A under the heading "C.—Deductions in respect of certain incomes", if] the return is furnished beyond the due respect of certain incomes", if] the return is furnished beyond the due respect of certain incomes", if] the return is furnished beyond the due ; or date specified under sub-section (1) of section 139; or date specified under sub (vi) addition of income appearing in addition of income appearing in Form 26AS or Form 16A Form 16A or Form 16 which has not been included in computing the total income in the return: which has not been included in computing the total income in the return: which has not been included in computing the total income in the return: Provided that no such adjustments shall be ma that no such adjustments shall be made unless an intimation de unless an intimation is given to the assessee of such adjustments either in writing or in is given to the assessee of such adjustments either in writing or in is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be that the response received from the assessee, if any, shall be that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where considered before making any adjustment, and in a case where considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments received within thirty days of the issue of such intimation, such adjustments received within thirty days of the issue of such intimation, such adjustments shall be made:] 60[Provided also that no adjustment shall be made under sub that no adjustment shall be made under sub-clause (vi) in that no adjustment shall be made under sub relation to a return furnished for the assessment year commencing on or after relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;]” the 1st day of April, 2018;]”
6.2 The ld counsel argued that any intimation order passed u/s The ld counsel argued that any intimation order passed u/s The ld counsel argued that any intimation order passed u/s 143(1)(a) of the Act without issuing intimation letter proposing 143(1)(a) of the Act without issuing intimation letter proposing 143(1)(a) of the Act without issuing intimation letter proposing adjustment, thus, would be in violation of principle of natural adjustment, thus, would be in violation of principle adjustment, thus, would be in violation of principle justice and void-ab-initio initio. But, during the course of the hearing, the uring the course of the hearing, the Ld. counsel for the assessee submitted that Ld. counsel for the assessee submitted that assessee assessee was unable to trace any intimation issued as per the said proviso below section trace any intimation issued as per the said proviso below section trace any intimation issued as per the said proviso below section 143(1)(a) of the Act with respect to the 143(1)(a) of the Act with respect to the adjustment adjustment carried out. In the affidavit dated 30.08.2024 dated 30.08.2024 filed by one ‘Shri Amit Chitale Shri Amit Chitale’, it is mentioned that despite thorough search, the said intimation letter mentioned that despite thorough search, the said intimation letter mentioned that despite thorough search, the said intimation letter couldn’t be located/traced in their records. be located/traced in their records. It is noted by us that It is noted by us that in the affidavit it is not mentioned what is the designation of Shri Amit not mentioned what is the designation of Shri Amit not mentioned what is the designation of Shri Amit Chitale and in what capacity said deposition Chitale and in what capacity said deposition had been had been given. We are Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 10 of the opinion that since it is t of the opinion that since it is the assessee, who , who has raised additional ground challenging the fact that no intimation letter challenging the fact that no intimation letter challenging the fact that no intimation letter proposing adjustment was issued to the assessee, proposing adjustment was issued to the assessee, then onus is on then onus is on the assessee to file an affidavit from the Principal Officer of the the assessee to file an affidavit from the Principal Officer of the the assessee to file an affidavit from the Principal Officer of the company or any other authorized person stating that such company or any other authorized person stating that such company or any other authorized person stating that such intimation letter was never issued to the assessee as never issued to the assessee. But the assessee . But the assessee has filed affidavit stating that said intimation letter stating that said intimation letter stating that said intimation letter was not traceable in the record of the assessee, and the authority of the e in the record of the assessee, and the authority of the e in the record of the assessee, and the authority of the person making affidavit is also not clear. person making affidavit is also not clear. The assessee The assessee could have filed an application before the Income application before the Income-tax Authority under Right to tax Authority under Right to Information Act for collecting Information Act for collecting said intimation letter said intimation letter or confirming that any such intimation letter was that any such intimation letter was never issued by the Income issued by the Income-tax Authorities. Since assessee is asserting the fact that said intimation Authorities. Since assessee is asserting the fact that said i Authorities. Since assessee is asserting the fact that said i letter was never issued letter was never issued, the onus lies on the assessee to establish the onus lies on the assessee to establish that said intimation letter was never issued. If assessee succeed in that said intimation letter was never issued. If assessee succeed in that said intimation letter was never issued. If assessee succeed in proving that said intimation letter was never issued, the burden proving that said intimation letter was never issued proving that said intimation letter was never issued would shift on to Revenue to substantiate th would shift on to Revenue to substantiate that any such intimation at any such intimation was ever issued and then was ever issued and then issue in dispute could be issue in dispute could be decided in accordance with law as to whether non issue of intimation letter accordance with law as to whether non issue of intimation letter accordance with law as to whether non issue of intimation letter would be in the nature of ‘illegality’ of the order or a curable would be in the nature of ‘illegality’ of the order or a curable would be in the nature of ‘illegality’ of the order or a curable ‘irregularity’. But in absence of any suc But in absence of any such confirmation of the fact h confirmation of the fact that no intimation letter was issued, the that no intimation letter was issued, the additional ground raised ground raised at serial No. 3, cannot be decided cannot be decided in favour of assessee. A in favour of assessee. Accordingly, we dismiss the same as the same as infructuous.
Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 11 ITA No. 3424/MUM/2024
In additional ground In additional ground raised at Serial No. 4, the as No. 4, the assessee has again raised the issue that the Assessing Officer has not specified again raised the issue that the Assessing Officer has not specified again raised the issue that the Assessing Officer has not specified the sub-clause of section 143(1) of the Act while making clause of section 143(1) of the Act while making clause of section 143(1) of the Act while making adjustment. The Ld. Departmental Representative (DR) in this adjustment. The Ld. Departmental Representative (DR) in this adjustment. The Ld. Departmental Representative (DR) in this regard submitted that as per the practice said sub-clause is regard submitted that as per the practice said sub regard submitted that as per the practice said sub specified in the intimation letter proposing the adjustment. But specified in the intimation letter proposing the adjustment. But specified in the intimation letter proposing the adjustment. But since the intimation letter issued proposing the adjustment has not since the intimation letter issued proposing the adjustment has not since the intimation letter issued proposing the adjustment has not been traceable at the the end of the assessee, this additional additional ground raised by the assessee is also dismissed as infructuous. raised by the assessee is also dismissed as infructuous raised by the assessee is also dismissed as infructuous
In additional ground In additional ground at S. No. 5, the assessee has raised the No. 5, the assessee has raised the issue that quantum of deduction claimed by the assessee could not issue that quantum of deduction claimed by the assessee could not issue that quantum of deduction claimed by the assessee could not be recorded as ‘incorrect claim incorrect claim’ apparent from the information in apparent from the information in the return. Before adjudication of this ground, we may li Before adjudication of this ground, we may like to refer Before adjudication of this ground, we may li regular ground No.1 of No.1 of the assessee (reproduced above), (reproduced above), in which the assessee itself is requesting that appeal against the order the assessee itself is requesting that appeal against the order the assessee itself is requesting that appeal against the order passed under section 143(1) of the Act should be held as passed under section 143(1) of the Act should be held as passed under section 143(1) of the Act should be held as infructuous as subsequent to the order u/s 143(1) of the Act, infructuous as subsequent to the order u/s 143(1) of the A infructuous as subsequent to the order u/s 143(1) of the A assessment order u/s 143(3) of the Act has been passed. In regular assessment order u/s 143(3) of the Act has been passed. assessment order u/s 143(3) of the Act has been passed. ground No. 2 , the assessee has challenged the merit of the addition the assessee has challenged the merit of the addition the assessee has challenged the merit of the addition for restricting the deduction u/s 80JJAA of the Act to the extent of for restricting the deduction u/s 80JJAA of the Act to the extent of for restricting the deduction u/s 80JJAA of the Act to the extent of the business income instead of gross total inco the business income instead of gross total income. me. The ld counsel submitted that section 80A(4) of the Act would apply to a profit submitted that section 80A(4) of the Act would apply to a profit submitted that section 80A(4) of the Act would apply to a profit linked deduction and can have no application to a case of present linked deduction and can have no application to a case of present linked deduction and can have no application to a case of present type , where deduction is linked to a certain percentage of the type , where deduction is linked to a certain percentage of the type , where deduction is linked to a certain percentage of the Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 12 expenditure incurred by the assessee. expenditure incurred by the assessee. The ld counsel ld counsel referred to the decision of hon’ble Supreme Court in the case of CIT Vs Reliance decision of hon’ble Supreme Court in the case of CIT Vs Reliance decision of hon’ble Supreme Court in the case of CIT Vs Reliance Energy Ltd in Civil Appeal No. 1328 of 2021 and others and Energy Ltd in Civil Appeal No. 1328 of 2021 and others and Energy Ltd in Civil Appeal No. 1328 of 2021 and others and submitted that scope of sub section (5) of section 08IA of the Act is scope of sub section (5) of section 08IA of the Act is scope of sub section (5) of section 08IA of the Act is limited to determination of quantum limited to determination of quantum of deduction under subsection of deduction under subsection (1) of section 80IA of the Act by treating ‘eligible business’ as the (1) of section 80IA of the Act by treating ‘eligible business’ as the (1) of section 80IA of the Act by treating ‘eligible business’ as the ‘only source of income’ and subsection (5) can’t be pressed into ‘only source of income’ and subsection (5) can’t be pressed into ‘only source of income’ and subsection (5) can’t be pressed into service for reading limitation of deduction under subsection (1) only service for reading limitation of deduction under subsection (1) only service for reading limitation of deduction under subsection (1) only to ‘business income’ to ‘business income’. The ld counsel also referred to commentary . The ld counsel also referred to commentary authored by sh AC Sampath Iyengar to emphasize that deduction authored by sh AC Sampath Iyengar to emphasize that deduction authored by sh AC Sampath Iyengar to emphasize that deduction u/s 80JJAA of the Act is quantified or computed based on u/s 80JJAA of the Act is quantified or computed based on u/s 80JJAA of the Act is quantified or computed based on expenditure incurred by the assessee for the purpose of creating expenditure incurred by the assessee for the purpose of creating expenditure incurred by the assessee for the purpose of creating employment opportunities. employment opportunities.
8.1 The brief facts qua the issue in dispute are that after The brief facts qua the issue in dispute are that after The brief facts qua the issue in dispute are that after issue of the intimation order dated 22/09/2022, the return of income , the return of income filed by the assessee was by the assessee was selected for scrutiny assessment and selected for scrutiny assessment and during scrutiny assessment, the Assessing Officer examined the claim of scrutiny assessment, the Assessing Officer examined the scrutiny assessment, the Assessing Officer examined the deduction u/s 80JJAA of the Act. In the queries raised, the deduction u/s 80JJAA of the Act. In the queries raised, the deduction u/s 80JJAA of the Act. In the queries raised, the Assessing Assessing Assessing Officer Officer Officer raised raised raised question question question for for for taking taking taking into into into account account account appointment of the employees in the financial year 2017-18. The appointment of the employees in the financial year 2017 appointment of the employees in the financial year 2017 Assessing Officer further questioned that assessee was engaged in Assessing Officer further questioned that assessee was engaged in Assessing Officer further questioned that assessee was engaged in supply of the manpower services and those employees had worked supply of the manpower services and those employees had worked supply of the manpower services and those employees had worked for different entities and not work different entities and not worked for the assessee company. The for the assessee company. The Assessing Officer further questioned that the assessee has not Assessing Officer further questioned that the assessee has not Assessing Officer further questioned that the assessee has not Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 13 brought anything on record to prove that deduction u/s 80JJAA of brought anything on record to prove that deduction u/s 80JJAA brought anything on record to prove that deduction u/s 80JJAA the Act in respect of those persons had not been claimed by those the Act in respect of those persons had not been claimed by those the Act in respect of those persons had not been claimed by those entities. The assessee did not respond . The assessee did not respond to the queries issued by the to the queries issued by the Assessing Officer and therefore, he issued a final show cause notice Assessing Officer and therefore, he issued a final show cause notice Assessing Officer and therefore, he issued a final show cause notice on 20.09.2022. In on 20.09.2022. In response to final show cause, response to final show cause, the assessee responded to query regarding considering appointment made in responded to query regarding considering appointment responded to query regarding considering appointment financial year 2017- 18. The assessee claimed that deduction was he assessee claimed that deduction was granted to the assessee in assessment year 2018 granted to the assessee in assessment year 2018-19 and 2020 19 and 2020-21 but the ld DR pointed out that in those years, the ld DR pointed out that in those years, the ld DR pointed out that in those years, no scrutiny assessment was carried out. After examining the part documents was carried out. After examining the part documents was carried out. After examining the part documents filed by the assessee, the Assessing Officer in the order u/s 143(3) filed by the assessee, the Assessing Officer in the order u/s 143(3) filed by the assessee, the Assessing Officer in the order u/s 143(3) dated 29.12.2022 rejected the entire claim of deduction u/s 80JJAA dated 29.12.2022 rejected the entire claim of deduction u/s 80JJAA dated 29.12.2022 rejected the entire claim of deduction u/s 80JJAA of the Act holding that not only legally but on the facts also the of the Act holding that not only legally but on the of the Act holding that not only legally but on the claim had serious anomalies. A copy of the assessment order is claim had serious anomalies. A copy of the assessment order is claim had serious anomalies. A copy of the assessment order is placed on Paper Book page 36 to 54 of the Paper Book. placed on Paper Book page 36 to 54 of the Paper Book. placed on Paper Book page 36 to 54 of the Paper Book.
8.2 We have heard rival submissions of the parties on the issue of We have heard rival submissions of the parties on the issue of We have heard rival submissions of the parties on the issue of the merger of the intimation order u/s 143(1)(a) of the Act with the merger of the intimation order u/s 143(1)(a) of the A the merger of the intimation order u/s 143(1)(a) of the A assessment order u/s 143(3) of the Act. We find that assessee filed u/s 143(3) of the Act. We find that assessee filed u/s 143(3) of the Act. We find that assessee filed rectification against the intimation order dated 22.09.2022 which rectification against the intimation order dated 22.09.2022 which rectification against the intimation order dated 22.09.2022 which was disposed off by the was disposed off by the AO vide rectification order dated rectification order dated 21.10.2022. The Ld. CIT(A) has cited the submission of the assessee 21.10.2022. The Ld. CIT(A) has cited the submission of t 21.10.2022. The Ld. CIT(A) has cited the submission of t in the impugned order wherein the assessee has requested to merge in the impugned order wherein the assessee has requested to merge in the impugned order wherein the assessee has requested to merge the appeal against the rectification order with the appeal filed the appeal against the rectification order with the appeal filed the appeal against the rectification order with the appeal filed against the assessment order. In our opinion, the assessee itself is against the assessment order. In our opinion, the assessee itself is against the assessment order. In our opinion, the assessee itself is Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 14 accepting that the issue of adjustment made accepting that the issue of adjustment made u/s 143(1)(a) of the u/s 143(1)(a) of the Act and the rectification order merged with the assessment order. In Act and the rectification order merged with the assessment order. Act and the rectification order merged with the assessment order. the ground no. 1 raised before us also, the assessee is praying to the ground no. 1 raised before us also, the assessee is praying to the ground no. 1 raised before us also, the assessee is praying to this effect. In background of these facts and circumstances, we are In background of these facts and circumstances, we are In background of these facts and circumstances, we are of the opinion that , o of the opinion that , once, the issue involved in intimation order involved in intimation order gets merged with the assessment order, with the assessment order, the present appeal becomes the present appeal becomes infructuous. The irrespective of the . The irrespective of the fact of admission by the admission by the assessee, the law itself is clear assessee, the law itself is clear on the concept of merger between an concept of merger between an intimation and the a intimation and the assessment has been dealt with by various ssessment has been dealt with by various Hon’ble Courts and the Benches of the Tribunal. The Hon’ble High Hon’ble Courts and the Benches of the Tribunal. The Hon’ble High Hon’ble Courts and the Benches of the Tribunal. The Hon’ble High Court of Madras in the case of Tamil Nadu, Magnesite Ltd. Vs. Magnesite Ltd. Vs. Court of Madras in the case of Commissioner of Income Tax Commissioner of Income Tax Writ Petition No. 17819/2001 tion No. 17819/2001 held that after passing of an order u/s 143(3) of the Act, the that after passing of an order u/s 143(3) of the Act, the that after passing of an order u/s 143(3) of the Act, the intimation u/s 143(1) of the Act get merged with the order u/s 143(3) intimation u/s 143(1) of the Act get merged with the order u/s 143(3) intimation u/s 143(1) of the Act get merged with the order u/s 143(3) of the Act and intimation order u/s 143(1)(a) of the Act does not of the Act and intimation order u/s 143(1)(a) of the Act does not of the Act and intimation order u/s 143(1)(a) of the Act does not survive independently survive independently for rectification by the Assessing Officer rectification by the Assessing Officer. The Hon’ble High Court of Calcutta in the case of CESC Ltd. v. DCIT CESC Ltd. v. DCIT Hon’ble High Court of Calcutta in the case of (2004) 134 Taxman 647 (Cal) (2004) 134 Taxman 647 (Cal) held that when assessee accepted in that when assessee accepted in the intimation has been reversed in the regular assessment and the the intimation has been reversed in the regular assessment and the the intimation has been reversed in the regular assessment and the assessee has preferred appeal which is pending, the theory of erred appeal which is pending, the theory of erred appeal which is pending, the theory of merger is bound to apply in the present case for the reason that the merger is bound to apply in the present case for the reason that the merger is bound to apply in the present case for the reason that the intimation issued u/s 143(1)(a) of the Act is no longer operative. The intimation issued u/s 143(1)(a) of the Act is no longer operative intimation issued u/s 143(1)(a) of the Act is no longer operative ordinate Bench of the Delhi Tribunal in South India Tribunal in South India Club v. Co-ordinate Bench of the ITO (2024) 163 taxmann.com taxmann.com 479 (Delhi) held held that exemption claimed u/s 11 of the Act was denied vide the intimation u/s 143(1) claimed u/s 11 of the Act was denied vide the intimation u/s 143(1) claimed u/s 11 of the Act was denied vide the intimation u/s 143(1)
Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 15 of the Act and subsequently the matter was picked up for scrutiny of the Act and subsequently the matter was picked up for scrutiny of the Act and subsequently the matter was picked up for scrutiny and the Assessing Officer also denied the same exemption in the and the Assessing Officer also denied the same exemption in the and the Assessing Officer also denied the same exemption in the assessment order u/s 143(3) of the Act. The Co order u/s 143(3) of the Act. The Co-ordinate Bench of the ordinate Bench of the Tribunal held that intimation order u/s 143(1) of the Act merges with Tribunal held that intimation order u/s 143(1) of the Act merges with Tribunal held that intimation order u/s 143(1) of the Act merges with the assessment order u/s 143(3) of the Act and the said intimation the assessment order u/s 143(3) of the Act and the said intimation the assessment order u/s 143(3) of the Act and the said intimation becomes inoperative and the appeal filed against such intimation becomes inoperative and the appeal filed against such int becomes inoperative and the appeal filed against such int could also become infructuous. could also become infructuous. But if the subject matter of But if the subject matter of adjustment u/s 143(1) of the Act and section 143(3) are different adjustment u/s 143(1) of the Act and section 143(3) are different adjustment u/s 143(1) of the Act and section 143(3) are different then said concept of the merger may not apply. In the case of Areca then said concept of the merger may not apply. In the case of then said concept of the merger may not apply. In the case of Trust v. CIT(A), NFAC Trust v. CIT(A), NFAC reported in (2024) 117 ITR (2024) 117 ITR (Trib) 264 (ITAT[Bang]), the Bengluru Bench Bengluru Bench of the Tribunal observed that of the Tribunal observed that the assessee filed return of income declaring total income at Rs. Nil the assessee filed return of income declaring total income at Rs. Nil the assessee filed return of income declaring total income at Rs. Nil which was processed by the Assessing Officer and in the intimation which was processed by the Assessing Officer and in the intimation which was processed by the Assessing Officer and in the intimation u/s 143(1) of the Act, the Assessing Officer u/s 143(1) of the Act, the Assessing Officer considered an amount considered an amount of Rs.23,29,62,417/- - as income chargeable to tax u/s 115JB of the as income chargeable to tax u/s 115JB of the Act. The assessee filed a rectification application against the said Act. The assessee filed a rectification application against the said Act. The assessee filed a rectification application against the said intimation u/s 154 of the Act. Subsequently, the case of the intimation u/s 154 of the Act. Subsequently, the case of the intimation u/s 154 of the Act. Subsequently, the case of the assessee was selected for scrutiny and assessee was selected for scrutiny and assessment order u/s 143(3) assessment order u/s 143(3) of the Act was passed whereby assessing total income at of the Act was passed whereby assessing total income at of the Act was passed whereby assessing total income at Rs.23,29,63,417/- as per the intimation letter issued u/s 143(1) of as per the intimation letter issued u/s 143(1) of as per the intimation letter issued u/s 143(1) of the Act. The Assessing Officer merely repeated the figure of the the Act. The Assessing Officer merely repeated the figure of the the Act. The Assessing Officer merely repeated the figure of the income which was mentioned in the intim income which was mentioned in the intimation order, the assessee ation order, the assessee preferred appeal against the order u/s 143(3) of the Act before the preferred appeal against the order u/s 143(3) of the Act before the preferred appeal against the order u/s 143(3) of the Act before the Ld. CIT(A), the Ld. CIT(A) held that appeal filed by the assessee Ld. CIT(A), the Ld. CIT(A) held that appeal filed by the assessee Ld. CIT(A), the Ld. CIT(A) held that appeal filed by the assessee against the order u/s 143(3) of the Act was not maintainable since against the order u/s 143(3) of the Act was not maintainable since against the order u/s 143(3) of the Act was not maintainable since
Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 16 the Assessing Officer Assessing Officer did not adjudicate the matter on merits and te the matter on merits and merely concluded the assessment by incorporating adjustment from merely concluded the assessment by incorporating adjustment from merely concluded the assessment by incorporating adjustment from the intimation u/s 143(1) of the Act. Similarly, the Co-ordinate the intimation u/s 143(1) of the Act. Similarly, the Co the intimation u/s 143(1) of the Act. Similarly, the Co Bench of the Tribunal in the case of Orient Craft Ltd. v. Dy. CIT Tribunal in the case of Orient Craft Ltd. v. Dy. CIT Tribunal in the case of Orient Craft Ltd. v. Dy. CIT (2024) 158 taxmann.com 1124 (Del (2024) 158 taxmann.com 1124 (Delhi-Trib.) also affirm the also affirm the finding of the Co-ordinate Bench of the Tribunal in the case of ordinate Bench of the Tribunal in the case of ordinate Bench of the Tribunal in the case of Areca Trust (supra). From the above decisions, it is clear that an Areca Trust (supra). From the above decisions, it is clear that an Areca Trust (supra). From the above decisions, it is clear that an intimation order u/s 143(1) of the Act will not automatically merged intimation order u/s 143(1) of the Act will not automatically merged intimation order u/s 143(1) of the Act will not automatically merged with the assessment order u/s with the assessment order u/s 143(3) of the Act in case where the 143(3) of the Act in case where the issues dealt in the intimation issues dealt in the intimation order and the assessment order are and the assessment order are different and in the assessment order u/s 143(3) of the Act merely different and in the assessment order u/s 143(3) of the Act different and in the assessment order u/s 143(3) of the Act the income adopted under the intimation order u/s 143(1) of the the income adopted under the intimation order u/s 143(1) of the the income adopted under the intimation order u/s 143(1) of the Act has been accepted a Act has been accepted and no addition has been made separately no addition has been made separately. The ld counsel referred referred before us to the decision of the Coordinate the decision of the Coordinate in the case of National Stock Exchange of India National Stock Exchange of India bench of Mumbai in the case of Limited vs DCIT in Limited vs DCIT in ITA No. 732/Mum/2023 for AY 2020 for AY 2020-21 and submitted that no appea submitted that no appeal lied against assessment order, l lied against assessment order, but we find that in said case the adjustment which was made in intimation case the adjustment which was made in intimation case the adjustment which was made in intimation order, was not made in the assessment order passed after order, was not made in the assessment order passed after order, was not made in the assessment order passed after discussion. Thus, facts of that case are different from the facts of discussion. Thus, facts of that case are different from the facts of discussion. Thus, facts of that case are different from the facts of instant case before us. instant case before us.
8.3 In light of the above discussion, upon examining the facts of In light of the above discussion, upon examining the facts of In light of the above discussion, upon examining the facts of the present case, it is evident that the adjustment proposed in the the present case, it is evident that the adjustment proposed in the the present case, it is evident that the adjustment proposed in the order issued under Section 143(1) of the Act pertains to the order issued under Section 143(1) of the Act pertains to the order issued under Section 143(1) of the Act pertains to the Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 17 deduction claimed under Section 80JJAA of the Act. Notably, the deduction claimed under Section 80JJAA of the Act. deduction claimed under Section 80JJAA of the Act. same issue has also been addressed in the order issued under same issue has also been addressed in the order issued under same issue has also been addressed in the order issued under Section 143(3) of the Act, which is currently under appeal before Section 143(3) of the Act, which is currently under appeal before Section 143(3) of the Act, which is currently under appeal before the Learned First Appellate Authority. the Learned First Appellate Authority. The primary question in the The primary question in the order under Section 143(1)(a) is whether the deduction under order under Section 143(1)(a) is whether the deduction under order under Section 143(1)(a) is whether the deduction under Section 80JJAA should be restricted to the business income or Section 80JJAA should be restricted to the business income or Section 80JJAA should be restricted to the business income or extended to the gross total income. The assessee contends that the extended to the gross total income. The assessee contends that the extended to the gross total income. The assessee contends that the deduction, being calculated based on t deduction, being calculated based on the expenditure incurred, he expenditure incurred, should not be limited to the business income. However, in the should not be limited to the business income. However, in the should not be limited to the business income. However, in the assessment order, the assessee did not provide complete responses assessment order, the assessee did not provide complete responses assessment order, the assessee did not provide complete responses to the queries raised by the Assessing Officer. Consequently, the to the queries raised by the Assessing Officer. Consequently, the to the queries raised by the Assessing Officer. Consequently, the Assessing Officer denied the entire d Assessing Officer denied the entire deduction claim amounting to eduction claim amounting to ₹30,10,31,823. Given that the issue of deduction is identical in both Given that the issue of deduction is identical in both Given that the issue of deduction is identical in both the order under Section 143(1) and the order under Section 143(3) the order under Section 143(1) and the order under Section 143(3) the order under Section 143(1) and the order under Section 143(3) of the Act, the former order effectively merges with the latter. of the Act, the former order effectively merges with the latter. of the Act, the former order effectively merges with the latter.
8.4 We further observe that We further observe that the question of whether the deduction the question of whether the deduction under Section 80JJAA of the Act should be restricted to the extent under Section 80JJAA of the Act should be restricted to the extent under Section 80JJAA of the Act should be restricted to the extent of the business income or extended to the gross total income is of the business income or extended to the gross total income is of the business income or extended to the gross total income is intrinsically linked to the larger issue of the assessee's eligibility intrinsically linked to the larger issue of the assessee's eligibility intrinsically linked to the larger issue of the assessee's eligibility under Section 80JJAA 0JJAA , which is presently sub-judice in the appeal judice in the appeal filed against the order under Section 143(3) of the Act before the filed against the order under Section 143(3) of the Act before the filed against the order under Section 143(3) of the Act before the Learned First Appellate Authority. In the event that the First Learned First Appellate Authority. In the event that the First Learned First Appellate Authority. In the event that the First Appellate Authority upholds the findings of the Assessing Officer, Appellate Authority upholds the findings of the Assessing Officer, Appellate Authority upholds the findings of the Assessing Officer, adjudicating this issue ating this issue by us at this stage would lead to at this stage would lead to Innovsource Services Pvt. Ltd. Innovsource Services Pvt. Ltd. 18 complications and an anomalous situation for the subordinate complications and an anomalous situation for the subordinate complications and an anomalous situation for the subordinate authorities tasked with implementing the appellate orders. authorities tasked with implementing the appellate orders. authorities tasked with implementing the appellate orders.
8.5 Accordingly, we hold Accordingly, we hold that the intimation order u/s 143(1) of the intimation order u/s 143(1) of the Act as inoperative ve and infructuous in the light of the scrutiny infructuous in the light of the scrutiny assessment completed u/s 143(3) of the Act. assessment completed u/s 143(3) of the Act. The ground no. 1 of The ground no. 1 of the appeal is accordingly adjudicated as prayed by the assessee. In the appeal is accordingly adjudicated as prayed by the assessee. the appeal is accordingly adjudicated as prayed by the assessee. view of merger of intimation order with of intimation order with assessment order in the assessment order in the case, we are not required to adjudicate additional ground no. 5 and not required to adjudicate additional ground no. 5 and not required to adjudicate additional ground no. 5 and regular ground no. 2 of the appeal. regular ground no. 2 of the appeal. However, we grant the liberty to However, we grant the liberty to both the assessee as well as to Revenue as well as to Revenue to raise to raise this issue of limiting the deduction u/s 80JJAA to the extent gross total income limiting the deduction u/s 80JJAA to the extent gross total income limiting the deduction u/s 80JJAA to the extent gross total income vis-à-vis business income vis business income by way of additional ground before the by way of additional ground before the Ld. First Appellate Authority in appeal pending against the order Ld. First Appellate Authority in appeal pending against the order Ld. First Appellate Authority in appeal pending against the order u/s 143(3) of the Act which may be decided u/s 143(3) of the Act which may be decided by the ld First Appellate by the ld First Appellate Authority in accordance with law. accordance with law. Accordingly, the ground he grounds raised by the assessee are adjudicated as discussed above adjudicated as discussed above. .
In the result, the appeal of the assessee is dismissed. In the result, the appeal of the assessee is dismissed. In the result, the appeal of the assessee is dismissed.