Loading judgment…
Facts
The assessee, a private limited company, opted for taxation under Section 115BAA for AY 2021-22 but faced issues in filing Form 10IC electronically due to a technical glitch on the Income Tax Portal and an incorrect PAN status (showing as 'Firm' instead of 'Company'). Consequently, the CPC processed the return under Section 143(1) by applying the old tax regime, leading to a demand. The assessee filed an appeal, arguing that the denial of Section 115BAA benefits was incorrect and that no proper opportunity of being heard was provided.
Held
The Tribunal found that no show-cause notice was issued to the assessee before making adjustments under Section 143(1), which is a mandatory procedural requirement as per the first proviso to Section 143 of the Income Tax Act. Citing earlier pronouncements, the Tribunal concluded that the intimation issued under Section 143(1) was unsustainable and quashed the adjustments, allowing the assessee's grounds.
Key Issues
Whether the CPC can deny Section 115BAA benefits and tax income under the old regime due to the assessee's inability to file Form 10IC electronically caused by technical glitches and an incorrect PAN status. Additionally, whether adjustments made under Section 143(1) without issuing a prior show-cause notice are procedurally valid and sustainable.
Sections Cited
139(1), 139(5), 115BAA, 143(1), 143(1)(a), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, KOLKATA
Before: Shri Duvvuru RL Reddy, Vice-(KZ)
Assessment Year: 2021-2022 M/s. Kriti Securities Consultants Pvt. Ltd,…Appellant 15, India Exchange Place, 1st Floor, Kolkata-700001 [PAN:ABJFM7166M] -Vs.- Income Tax Officer,…………………..…………..Respondent Ward-30(1), Kolkata, Aayakar Bhawan, Dakshin, 2, Gariahat Road (South), Kolkata-700031 Appearances by: Shri Sunil Surana, A.R., appeared on behalf of the assessee Shri Somnath Das Biswas, Sr. D.R., appeared on behalf of the Revenue Date of concluding the hearing: May 01, 2025 Date of pronouncing the order: July 28, 2025 O R D E R
The present appeal is directed at the instance of assessee against the order of Id. Additional/ Joint Commissioner of Income Tax (Appeals)-3, Chennai dated 06.12.2024 passed for Assessment Year 2021-2022.
(A.Y. 2021-2022) M/s. Kriti Securities Consultants Pvt. Limited 2. The brief facts of the case are that the assessee company filed its return of income u/s 139(1) electronically for the assessment year 2021-22 on 15.03.2022 declaring a total income of Rs. NIL. The assessee is a private limited company incorporated on 20.05.1992. Copy of MCA master data downloaded online evidencing the proof of company. The assessee company was allotted PAN No. as ABJFM7166M, fourth character denoting the status of the PAN holder as of Firm/Limited Liability Partnership. In spite of the fact that the status of the PAN is showing as of firm, each and every preceding and succeeding year's Income Tax Return including the disputed year's return was filed in Form ITR- 6 which is applicable to that of a company. Copy of ITR Acknowledgement of every year evidencing the return filed in Form ITR-6 regardless of the wrong status reflecting in the portal. Thereafter the assessee filed a revised return u/s 139(5) on 29.03.2022 declaring a total income of Rs. 17,07,028/- and continued to opt for taxation under section 115BAA i.e., as per the new tax regime in the Income Tax Return. Assessee has already opted tax regime u/s 115BAA during the preceding assessment year 2020-21, for which Form 10-IC as required under the law (whose delay was condoned by the CBDT) was also duly filed before the AO through e-mail along with the explanation citing the reason of inability to e- file form 10IC during the AY 2020-21. However, while filing form 10IC, the status of the assessee company was wrongly displaying as firm in the Income Tax Portal and is still showing as the same. Although the assessee has already made an application and submitted the PAN correction form vide letter dated 15.0.3.2022 along with a reminder dated 26.04.2022. The (A.Y. 2021-2022) M/s. Kriti Securities Consultants Pvt. Limited status of assessee’s application is still showing as under process at NSDL screenshot of NSDL portal. Unable to way out a resolution the assessee filed the Form 1OIC accompanying with the genuine reasons of inability to e-file the aforesaid form in brief through its registered mail before its jurisdictional AO i.e. Income Tax Officer, Ward-30(5), Kolkata on 30.06.2022. However, while processing the return u/s 143(1) for current A.Y 2021-22, the Ld. CPC taxed the income as per the old tax regime which resulted into a huge demand for Rs.20,98,030/- only on the ground that the required form 10IC was not filed online before filing of return when the same was already filed. Being aggrieved, the assessee filed the instant appeal before the ld. CIT(Appeals) against the older u/s 143(1) passed by the ld. Assessing Officer.
The ld. Addl./JCIT(Appeals) observed that the assessee company while filing the return of income for assessment year 2021-22 continued to opt for taxation u/s 115BAA, i.e. as per new tax regime which was originally opted in assessment year 2020- 21. In addition to this, it was also stated that the assessee company was not able to file Form 10IC electronically during the A.Y 2020-21, which was required to be filed by the companies to avail the benefit of tax at concessional rate of 22% under Section 115BAA of the Income Tax Act, due to a technical glitch arose because of the system failure from the side of the Department. As a consequence of which the CPC has calculated the tax as per the old tax regime for A.Y 2021-22. It was stated that the assessee is a private limited company- incorporated on 20.05.1992. Therefore, the assessee company have duly satisfied the conditions and filed (A.Y. 2021-2022) M/s. Kriti Securities Consultants Pvt. Limited the Form 10IC on 30.06.2022. Hence still the status of the company is not changed, portal does not permit the assessee to file the form online. However, the assessee cannot be denied. The benefit of new- regime u/s 115BAA on account of technical glitches of the income tax website and the assessee cannot be penalized for such technical faults on the income tax website. Even the fact that lower income tax rate under section 115BAA has been availed was clearly stated in Schedule Part-A General (I) and tax on returned income was calculated accordingly. It was also stated in the return that the assessee has opted for availing the tax rates u/s 115BAA. This was implied application for availing the lax rates u/s 115BAA. In the intimation u/s 143(1), since the Form 10-IC was not filed electronically before filing of return, tax has been calculated at normal rates and as a result demand has been created. Although when it was not disputed in the earlier year then the same should also be not disputed this year. As per provisions of section 115BAA once opted for concessional tax rates for any previous year, it shall apply to subsequent assessment years and cannot be withdrawn for the same or any other previous year, with reference to section 115BAA. As per section 115BAA of the Act, the option for availing benefit of taxation is to be made in the relevant column of the ITR, which the assessee failed to do. However, the assessee has not filed Form 10IC within the prescribed time limit. The assesese claimed that the taxation under section 115BAA was opted for the first time in AY 2020-21, however, the assessee has not opted for the same. The assessee failed to satisfy one of the conditions for taxation under section 115BAA of the Act. The ld. Assessing Officer has rightly taxed the assessee as prescribed in the Act and the ld. (A.Y. 2021-2022) M/s. Kriti Securities Consultants Pvt. Limited Addl./JCIT(Appeals) by upholding the order passed by the ld. Assessing Officer rejected the grounds filed by the assessee.
On being aggrieved, the assessee preferred an appeal before the ITAT and raised the following issues:- (i) For that the Ld. CIT(A) erred in confirming the order of the Ld. CPC in applying the tax rates under the normal provision of the IT Act, 1961 when the assessee opted for application of the tax rates as per the provisions of section 115BAA in the return of income and the form 10IC could not be uploaded due to circumstances beyond the control of the assessee. (ii For that the Ld. CIT(A) erred in confirming the order of the Ld. CPC when the assessee was not allowed any proper and reasonable opportunity of being heard by issuing prior intimation 143(1)(a) before making the impugned adjustments u/s 143(1) of the IT Act and therefore the adjustments are liable to be nullified and return income and correspondence tax liability be accepted. (iii) For that the Ld. AO CPC erred in making adjustments in the intimation for procedural irregularity when such adjustments were not permissible u/s 143(1) where only prima facie adjustments are only permissible. (iv) For that the Ld. AO CPC erred in making adjustments in the intimation when the assessee had filed the form for the preceding year which was not disputed and therefore the section once opted for any previous year could not have been withdrawn for subsequent year which is the impugned year under consideration.
The main grievance of the assessee is that the ld. Addl./JCIT(Appeals) is not justified in confirming the order of ld. CPC when the asessee was not allowed any proper and reasonable opportunity of being heard by issuing prior intimation under section 143(1)(a) of the Act before making the impugned adjustments under section 143(1) of the Income Tax Act. Therefore, the adjustments are liable to be nullified. On this (A.Y. 2021-2022) M/s. Kriti Securities Consultants Pvt. Limited aspect, the ld. Counsel for the assessee also relied on the decision of the Coordinate Bench of this Tribunal dated 26th March, 2025 in in the case of Maharajapur Samabay Krishi Unnayan Samity Limited -vs.- ADIT, CPC, Bengaluru, wherein it was held that - “We have considered the rival submissions. Obviously, the appeal is against the order passed u/s. 143(1). Consequently, the issues cannot be sent back to the Assessing Officer for verification in so far as the verification can be done in an order u/s. 143(3) of the Act only. Further, a perusal of the intimation issued u/s. 143(1) dated 03.03.2023 shows that no show cause notice has been issued to the assessee as per the requirement of the 1st proviso to section 143 of the Act. This having not been done, we are of the view that the intimation issued u/s. 143(1) is unsustainable and consequently, the addition made u/s. 143(1) of the Act is deleted”.
Ld. Counsel for the assessee also relied on another decision of the Coordinate Bench dated 29th April, 2025 in the case of Veer Mehra Trust -vs.- ITO, Ward-1(2), Exempt, Kolkata in wherein it was held that – “A perusal of the facts of the present case clearly shows that no show cause notice had been issued to the assessee before the intimation has been issued u/s 143(1) of the Act. Issuance of a show cause notice is a condition precedent as per the provision of section 143(1) of the Act. On account of the failure to issue the show cause notice as also on account of the fact that the status of the assessee has been changed in the intimation and this itself is not permissible, the intimation issued u/s 143(1) of the Act is quashed”.
Ld. Counsel pleaded to set aside the order passed by the ld. Addl./JCIT(Appeals).
On the other hand, ld. Departmental Representative relied on the orders passed by the CPC and also Commissioner (Appeals).
I have heard both the sides. It is an undisputed fact that before intimation there is no show-cause notice issued to the assessee as per the mandatory requirement of 1st Proviso to Section 143 of the Act. Issuance of show-cause notice is a condition precedent as per the provision of section 143(1) of the Act. Therefore, I am of the view that on account of failure to issue show-cause notice, the intimation issued under section 143(1) of the Act is hereby quashed. The decisions are squarely applicable to the facts of the case as relied by the ld. Counsel for the assessee. Therefore, the grounds raised by the assessee are allowed.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 28/07/2025.