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Facts
The assessee, engaged in IT services, filed its income tax return which was processed by CPC under Section 143(1), leading to adjustments including an ICDS add-back of Rs. 14.37 Cr and denial of Section 80JJAA deduction of Rs. 1.12 Cr. The ld. ADDL./JCIT(A)-2 allowed the assessee's appeal, deleting both additions. Aggrieved, the Revenue filed an appeal to the ITAT, and the assessee filed a cross-objection.
Held
The Tribunal dismissed the Revenue's appeal, affirming that adjustments under Section 143(1) cannot be made without discussing merits or providing notice, and confirmed that the ICDS adjustment and denial of Section 80JJAA deduction were not justifiable. It allowed the assessee's cross-objection, holding that the intimation issued under Section 143(1) by the CPC, without prior notice for adjustments, violated principles of natural justice and was illegal and bad in law.
Key Issues
1. Whether adjustments made by the CPC under Section 143(1) of the Income Tax Act, 1961, without providing notice and discussing the merits, are permissible. 2. Whether the denial of deduction under Section 80JJAA to an assessee who opted for the concessional tax regime under Section 115BAA is valid when the return was filed before the due date.
Sections Cited
143(1), 143(1)(a), 80JJAA, 115BAA, 250, 139, 142(1)
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Income Tax Appellate Tribunal, “C’’BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
Assessee by : Sri B.K. Manjunath, A.R. Revenue by : Ms. Neera Malhotra, D.R. Date of Hearing : 23.10.2024 Date of Pronouncement : 15.01.2025 O R D E R
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal and cross objection are directed against the order of the ld. ADDL/JCIT(A)-2, Chennai dated 12.04.2024 vide DIN & Order No. ITBA/APL/S/250/2024-25/1064061680(1) for the Assessment Year 2023-24 passed u/s. 250 of the Income Tax Act, 1961 (in short “The Act”).
The revenue has raised the following grounds of appeal:
2.1 The assessee has raised the following grounds of appeal in its cross objection:
There is a delay of 1 day in filing the appeal before this Tribunal by the revenue. The ld. D.R. for the revenue has drawn our attention on the application for condonation of delay filed by the ld. DCIT, Circle-4(1)(1), Bangalore, which is reproduced below for ease of reference & convenience:-
3.1 On going through the above application, the main reason as cited for the delay in filing the appeal before this Tribunal by the revenue is reshuffling of staffs due to Annual General Transfer (AGT) in the department and further, since the office of DCIT was under additional charge because regular officer was on official training, hence the delay of one day occurred. Considering the fact CO 28/Bang/2024 Microland Limited, Bangalore Page 4 of 9 that it is a case of short delay of just 1 day, we hereby condone the delay and proceed to decide the matter in the interest of justice.
Brief facts of the case are that the assessee company engaged in the business of providing IT Infrastructure management services, Technical Support services etc. The assessee filed its original income tax return for the Assessment Year (A.Y) 2023-24 on 30.11.2023 declaring a total income of Rs. 1,54,57,78,798/- with Tax Liability of Rs. 35,45,45,411/-. Subsequently, the assessee filed a revised return of income on 22.12.2023 admitting total income of Rs. l,54,57,78,798/- with a tax liability of 35,26,36,341/- and accordingly claimed refund of Rs. 19,09,070/-. Thereafter, the original return of income has been processed u/s. 143(1) of the Act on 22.12.2023 by making the following adjustments: (a) ICDS adjustment of Rs. 14,37,45,699/- has been added back & (b) Denial of deduction under section 80JJAA amounting to Rs. Rs.1,12,46,618/- as claimed by the assessee.
Aggrieved by the intimation dated 22.12.2023 passed u/s. 143(1) of the Act, the assessee has preferred an appeal before the ld. ADDL/JCIT(A) disputing the demand of Rs.4,45,39,630/- as raised.
The ld. ADDL./JCIT (A)-2, Chennai has allowed the appeal of the assessee by observing that the ICDS adjustments were made under the head ICDS-I & ICDS-VI relates to accounting policies and changes in the exchange rates. As per adjustment, the net negative effect of Rs. 14,37,45,699/- was considered by the appellant while computing total income for the AY 2023-24, the relevant Col. No. 13(e) of Form 3CD for the AY 2023-24. The ld. ADDL./JCIT (A)-2, Chennai is of the opinion that as the appellant has reported the CO 28/Bang/2024 Microland Limited, Bangalore Page 5 of 9 necessary adjustments under Col. No. 13(e) of the audit report disclosing the necessary ICDS adjustments, the adjustment made by the AO (CPC) adding back the negative amount of Rs. 14,37,45,699/- is not justifiable. Besides such adjustments are not permissible under section 143 (1) of the I.T. Act without any valid reasons and accordingly, directed the Jurisdictional Assessing Officer (JAO) to delete the above addition of Rs. 14,37,45,699/-.
6.1 Further, with regard to the denial of deduction under section 80JJAA of the Act amounting to Rs. Rs.1,12,46,618/-, the ld. ADDL./JCIT (A)-2, Chennai noted from the original income tax return filed for A.Y. 2023-24 on 30.11.2023, that the appellant has opted for the concessional tax regime under section 115BAA of the IT Act, as indicated in the Col No. (e) of the “Filing Status”. Furthermore, it is observed that the appellant had previously opted for concessional tax regime based on Form 10IC filed in the assessment year 2020-21, acknowledged under ack no. 254965001130221 dated 13.02.2021. The appellant’s choice was duly accepted by the AO (CPC) while processing the return of income under section 143(1) for the AY 2023-24. However, despite this, the AO (CPC) denied the appellant’s claim for deduction under section 80JJAA amounting to Rs. 1,12,46,618/- for the AY 2023-24 without providing valid reasons. Since the appellant filed the original return of Income for the AY 2023-24 before the extended due date of 30.11.2023, therefore the denial of deduction u/s. 80JJAA of the Act lacks validity.
Aggrieved by the order of the ld. ADDL./JCIT (A)-2, Chennai the Revenue has filed the present appeal and the assessee has also filed a Cross Objection before us.
CO 28/Bang/2024 Microland Limited, Bangalore Page 6 of 9 8. Before us, the ld. DR from the Revenue vehemently submitted that without discussing the merits on the basis of documentary evidence, the allowability of deduction u/s. 80JJAA lacks validity. Further, the ld. DR submitted that without discussing the case on merit on the basis of documentary evidences, the ld. ADDL. CIT (A) erred in facts and in law by holding that the adjustment made by the CPC adding back the negative amount of Rs.14,37,45,699/- is not justifiable.
The ld. AR of the assessee on the other hand vehemently submitted that the intimation passed u/s. 143(1) of the Act is in violation of the provisions of sec. 143(1)(a) of the Act and accordingly, illegal and bad in law. Further, the AR submitted that no opportunity of being heard was provided before making adjustment u/s. 143(1) of the Act which is a gross violation of principle of natural justice and accordingly, prays to quash the intimation passed u/s. 143(1) of the Act.
We have heard the rival submissions and perused the material on record. The main contention of the revenue in their appeal is that the ld. ADDL. CIT(A), lacks validity in allowing the appeal of the assessee without discussing the case on merit on the basis of documentary evidences. It is an undisputed fact that the assessee filed the appeal before the ld. ADDL./JCIT (A) against the intimation passed u/s. 143(1) of the Act. We are of the opinion that where return has been made u/s. 139 or in response to notice u/s. 142(1) of the Act, such returns are only processed under the provisions of sec. 143(1) of the Act by making the adjustment as mentioned in clauses (i) to (vi) of sec. 143(1)(a). Therefore, the contention of Revenue is not tenable as there is no scope to process the return on merits based on examination of documentary evidences under the provisions of Section 143 (1) of the Act. This CO 28/Bang/2024 Microland Limited, Bangalore Page 7 of 9 can of course be done during the course of the assessment proceedings. Therefore, we are of the considered opinion that there is a difference between the intimation specifying the sum determined to be payable or the amount of refund due to the assessee on the basis of return filed by the assessee and the assessment made by the AO assessing the total income of the assessee in which in our opinion, the case should be discussed in details on merits based on examination of documentary evidences. Further, as per the explanation (b) of provisions of sec. 143(1) of the Act, the acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c) and where no adjustment has been made under clause (a) of the Act. Therefore the question of examination of the documentary evidences while processing of return u/s 143(1) of the act does not arise at all. In our view the AO has wide powers to examine the same by initiating the Assessment/Reassessment proceedings. Therefore this contention of the revenue fails.
10.1 In our opinion while allowing the appeal of the assessee, the ld. ADDL./JCIT (A)-2, Chennai has elaborately discussed on the merits of the case. In the case of the ICDS adjustment of Rs. 14,37,45,699/- which has been added back u/s. 143(1) of the Act, we are completely in agreement with the view of the ld. ADDL./JCIT (A)-2, Chennai in observing that the ICDS adjustments were made under the head ICDS-I & ICDS-VI which relates to accounting policies and changes in the exchange rates. As per the adjustment, the net negative effect of Rs. 14,37,45,699/- was considered by the assessee while computing total income for the AY 2023-24. We also concur with the opinion of the ld. ADDL./JCIT (A)-2, Chennai that as the assessee has reported the necessary adjustments under Col. No. 13(e) of the audit report disclosing the necessary ICDS CO 28/Bang/2024 Microland Limited, Bangalore Page 8 of 9 adjustments, the adjustment made by the AO (CPC) adding back the negative amount of Rs. 14,37,45,699/- is not justifiable.
10.2 Further with regard to denial of deduction under section 80JJAA amounting to Rs. Rs.1,12,46,618/-, we also concur with the opinion of the ld. ADDL./JCIT (A)-2, Chennai that as the assessee has opted for the concessional tax regime under section 115BAA of the IT Act previously based on form 10IC filed for AY 2020-21, which was duly accepted by the AO (CPC) while processing the return of income under section 143(1) of the Act, then denying the assessee claim u/s. 80JJAA of the Act amounting to Rs. 1,12,46,618/- for the AY 2023-24 without providing valid reasons lacks validity. We are also of the opinion that companies opting for the concessional tax regime u/s. 115BAA though not claiming any exemption or deduction under the Act can still make a claim under section 80JJAA of the Act. In the present case, the assessee had also filed the original return before the extended due date of 30.11.2023. Therefore, we find no infringement in the order of the ld. ADDL./JCIT (A)-2, Chennai and accordingly, we dismiss the appeal of the Revenue.
Now, with regard to cross objection filed by the assessee contending that the intimation passed u/s. 143(1) of the Act is in violation of the provisions of sec. 143(1)(a) of the Act, we are of the opinion that the intimation passed u/s. 143(1) of the Act by the central processing centre by ignoring the mandate law contained in sec. 143(1)(a) that before making such adjustment, the assessee should be put to notice is illegal & bad in law. Since this has not been done, the jurisdiction of the Central processing centre in doing such adjustments sans any notice is vitiated. Consequently, the adjustment done by the central processing centre is not sustainable CO 28/Bang/2024 Microland Limited, Bangalore Page 9 of 9 in law as it violates the principles of natural justice. Therefore, the CO filed by the assessee is allowed on this count.