TANGAR EXPORTS LLP,RANIPET vs. ADIT , CPC , BANGALORE / ACIT, VELLORE

PER G. MANJUNATHA, ACCOUNTANT MEMBER:

:-2-: ITA. No:666/Chny/2022 ii) Consequent levy of tax & cess; iii) Levy of interest u/s 234B and iv) Computation of interest u/s 234C for 2018-19 a/y on the following grounds: 1. The CIT(A) erred in not deciding the illegality of the 'adjustment' (denial of deduction u/s 80JJAA of Rs.176543) made to the Total income, in CPC's impugned intimation u/s 143(1 ). 2.1 The CIT(A) failed to appreciate that the 'adjustment' (denial of deduction u/s 80JJAA of Rs.176543) could not have been made u/s 143(1)a)(ii), as it is neither an "incorrect 'CLAIM', nor, an 'incorrect CLAIM which is apparent from any information in the return'. 2.2 The CIT(A) failed to appreciate Clause 8 of the Central Processing of Returns Scheme, 2011, CPC can ONLY process the return and that it does not permit CPC to make any adjustments u/s 143(1) and therefore the 'adjustment' (denial of deduction u/s 80JJAA OF Rs.176543) made u/s143(1)(a)(ii), is ultra vires the said scheme, illegal and therefore liable to be deleted. 3.1 The CIT(A) omitted to consider that both the reasons of CPC for denying deduction u/s 80JJAA, viz., that the audit report in Form 10DA was not filed. OR audit report in 3CB is NOT filed, are erroneous as this is the 2nd year of claiming the said deduction, which was claimed and allowed in 2017-18 a/y, in which year the audit report in 10DA was filed AND as 3CB for 2018-19 a/y (which is irrelevant to allowance ofdeduction u/s 80JJAA), was also filed. 3.2 The CIT(A) failed to appreciate that the deduction u/s 80JJAA is computed for 1 year on the basis of satisfaction of the conditions specified in sec.80JJAA in that year and the conditions are NOT APPLICABLE for the following 2 years and that the SAME deduction is allowable in following 2 years is also apparent from various provisions in sec.80JJAA and as held in: DCIT vs Amar Ujala Publications Ltd. -ITA No. 4166/Del/2012 dt.9.10.2015 (Delhi)

:-3-: ITA. No:666/Chny/2022 DCIT vs Page industries Ltd. dt.14.6.2019 (Bangalore) 3.3 The CIT(A) misdirected himself in denying the deduction without appreciating that if exemption for a specified number of years is granted on satisfaction of conditions in the 1st year - then exemption CANNOT be denied for subsequent years without withdrawing the exemption for 1st year, as held in: CIT vs Western outdoor interactive pvt ltd - 349 ITR 309 BOM CIT vs Arts & crafts exports 246 ctr 463 (Born) CIT vs Macbrout engineering pvt ltd 232 Taxman 406(Bom) CIT vs Tata communications internet services ltd 204 Taxman 606 (Del) - SLP dismissed 282 Taxman 462 (SC) CIT vs Paul bros 216 ITR 548 (Born) Direct information (p) ltd vs ITO 203 Taxman 70 (Born) 3.4 The learned CIT(A) erred in not allowing the deduction u/s 80JJAA as directed in the DIRECT & binding decision of the Madras H.C in Craftsman automation P Ltd. vs CIT 435 ITR 558 (Mad) that the substantive benefit of a deduction u/s 80JJAA cannot be denied on account of a procedural lapse of non filing of audit report.

4. The CIT(A) failed to appreciate that even Form1 ODA (audit report FORMAT) for 2918-19 a/y did not require or contain any provision for filling data for the 2"" & 3rd years of claiming deduction u/s 80JJAA & that this requirement in Form 10DA was introduced only by a NEW form on 18.12.2019.

5. In any view of the matter, the CIT(A) ought to have deleted the adjustment u/s 143(1) by CPC as was done by the Honourable Tribunal in the Appellant's own case for the subsequent 2018-19 a/y in ITA No.505/CHNY/2021 dated. 13.7.2022.

7. Appellant denies its liability to the levy of interest of Rs.420332 uls 234B.

8. The interest levied u/s 234C requires re-computation consequent to the above.

:-4-: ITA. No:666/Chny/2022 On these grounds and on such other grounds as may be put forth at the time of hearing, the appellant prays that i) Deduction of Rs.176543 u/s BOJJAA be allowed; ii) Consequent Levy of tax, cess etc. be deleted; iii) Interest levied u/s 234B be deleted & iv) correct interest u/s 234C, as in the return, be computed and justice rendered.”

The brief facts of the case are that the assessee has filed 3. return of income for the assessment year 2018-19 on 30.09.2018 declaring total income of Rs. 7,08,50,544/-. The assessee has claimed deduction u/s.80JJAA of the Income Tax Act, 1961 (hereafter referred to as “the Act”), for Rs.1,76,543/- for employing new employees and such deduction has been claimed for the first time for the assessment year 2017-18. The ADIT, CPC, has completed assessment u/s.143(1) of the Act and determined total income of Rs. 7,65,56514/- and rejected deduction claimed u/s.80JJAA of the Act, on the ground that the assessee has not filed audit report, as required under the provisions of section 44AB of the Act, in Form No.10DA. The assessee challenged the matter in appeal before the first appellate authority, but could not succeed. The learned CIT(A) for the reasons stated in his appellate order rejected arguments of the assessee and sustained additions made by the Assessing Officer on the ground that filing of audit report in Form No.10DA is a pre-condition for claiming

:-5-: ITA. No:666/Chny/2022 deduction u/s.80JJAA of the Act. Aggrieved by the learned CIT(A) order, the assessee is in appeal before us.

We have heard both the parties, perused materials 6. available on record and gone through orders of the authorities below. We find that an identical issue had been considered by the Tribunal in assessee’s own case for assessment year 2019- 20 in where under identical set of facts, it was held that the AO cannot make any adjustments towards deduction claimed u/s. 80JJAA of the Act, in the intimation issued u/s. 143(1)(a) of the Act, because such issue

:-6-: ITA. No:666/Chny/2022 is highly debatable which can be resolved by deliberation, including verification of necessary documents. The relevant findings of the Tribunal are as under:

5. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The Assessing Officer has made adjustment of total income computed in the intimation received u/s.143(1) of the Act, towards deduction claimed u/s.80JJAA of the Act, in respect of employment of new employees on the ground that the assessee has not satisfied conditions prescribed therein, including filing of audit report in Form 10DA. It was explanation of the assessee before the learned CIT(A) that only prima-facie mistakes in computation of income can be adjusted in intimation received u/s.143(1), but not on the issues which need discussion and deliberation, including verification of documents. It is well settled principle of law by the decisions of various Courts, including decision of the Hon'ble Supreme Court in the case of CIT vs. Raghuvir Synthetics Ltd. (2017) 247 taxman.com 393(SC), if the issue involved is debatable, then same cannot be adjusted in intimation issued u/s.143(1) of the Income Tax Act, 1961. In this case, if you go through nature of adjustment made by the Assessing Officer towards deduction in respect of employment of new employees as per provisions of section 80JJAA of the Act, we find that the issue is highly debatable which can be resolved by deliberation, including verification of necessary documents and thus, we are of the considered view that the Assessing Officer cannot make adjustments towards deduction u/s.80JJAA of the Act, while processing return u/s.143(1) of the Income Tax Act, 1961. Therefore, we direct the Assessing Officer to delete additions made towards disallowance of deduction claimed u/s.80JJAA of the Income Tax Act, 1961.

:-7-: ITA. No:666/Chny/2022 505/Chny/2021, dated 13.07.2022, we are of the considered view that the AO has erred in disallowing deduction claimed u/s. 80JJAA of the Act, while processing return of income u/s. 143(1)(a) of the Act, and thus, we direct the AO to delete the additions made towards disallowance u/s. 80JJAA of the Act.