BNY MELLON INTERNATIONAL OPERATIONS (INDIA) PVT LTD,PUNE vs. I.T.O , CPC BANGALURU, BANGULURU

Learned counsel for the assessee referring to the grounds of appeal submitted that interest u/s. 234C can be levied only on the returned income and not on the assessed income and that on deletion of the erroneous addition made, the interest liability u/s. 234C shall not arise. He further submitted that Ld.CIT(A) erred in not adjudicating the issue of deletion of interest liability u/s. 234C of the Act despite having jurisdiction.

We have heard rival contentions and perused the records placed before us. We observe that the assessee is a private limited company and return of income for the A.Y. 2021-22 furnished on 10/03/2021 declaring income of Rs.3,40,58,93,234/-. The return was processed u/s. 143(1)(a) of the Act making certain adjustments and assessing the income at Rs. 4,17,17,06,640/-. Further, CPC also levied

The assessee challenged the adjustments made by the CPC in the grounds of appeal before the Ld.CIT(A). In the appeal filed on 20/10/2022, the assessee has also raised an additional ground before the Ld.CIT(A) against the erroneous levy of interest u/s. 234C of the Act. We observe that based on passing intimation u/s. 143(1)(a) of the Act, case of the assessee selected for scrutiny and assessment u/s. 143(3) r.w.s. 144B of the Act has been framed on 02/12/2022 and the Assessment Unit, Income Tax Department accepted the returned income. In other words, no additions/disallowances were made in the assessment order. The Ld.CIT(A) on taking note of the assessment order u/s. 143(3) of the Act, dated 02/12/2022, dismissed the grounds of appeal Nos. 1, 2 & 3 raised on merits as not pressed. So far as additional ground of appeal charging interest u/s. 234C of the Act, Ld.CIT(A) rejected the same observing as follows:-

Before us, the grievance of the assessee is against the levy of interest u/s. 234C of the Act. We find that since the assessment order u/s. 143(3) r.w.s. 144B of the Act has been passed by the Assessment Unit, Income Tax Department, dated 02/12/2022, the intimation u/s. 143(1)(a) gets merged with the assessment order u/s. 143(3) of the Act. Further, since no addition has been made in the hands of the assessee and the returned income has been accepted as the assessed income, prima-facie the ground raised by the assessee deserves to be dismissed as infructuous. However, since the computation of income sheet, which is normally attached with the assessment order is not available on record, the details of interest levied u/s. 234C is not discernable. We therefore deem it appropriate to remit the issue back to the file of the Jurisdictional Assessing Officer (JAO) for necessary verification of interest u/s. 234C of the Act calculated by the assessee on the returned income and then decide in accordance with law. Grounds of appeal raised by the assessee are allowed for statistical purposes. wherein along with ground No.2 raised for levy of excess interest u/s. 234C of the Act, the assessee also raised ground No.1 challenging

Facts of the case, in brief, are that the assessee filed return of income for A.Y. 2022-23 on 25/11/2022 and tax audit report u/s. 44AB also furnished. The tax Auditor in column No. 16(b) of Form 3CD which is in respect of amounts not credited to the profit & loss account, the Auditor has mentioned at para 16(b) about the refund of Goods and Services Tax at Rs. 38,10,67,339/-. Now the assessee in the return of income which in this case ITR Form-6 is required to fill various columns mentioned in Part A-OI i.e. other information (mandatory if covered u/s. 44AB) and in schedule at serial No.5, the assessee is required to mention the “amounts not credited to the profit & loss account”, but the assessee has mentioned NIL amount against column No. 5(b) which also refers refund of GST. Now when the return was processed by the CPC there was mismatch between the “observation of the tax Auditor” and “the details filed in the income tax return” and based on such observations and the commands given in the computer software, on which the CPC runs and processing of the returns is carried out, the impugned adjustment/ addition of Rs. 38,10,67,339/- has been made on account of refund of GST not credited to profit & loss account. Thereafter, the assessee has preferred appeal

Learned counsel for the assessee, firstly took us through various documents filed running into 205 pages. He submitted that assessee is in export business and GST paid on the purchases is firstly not passed through the profit & loss account and is directly shown as asset under the head GST receivable in the balance sheet and whatever amount of refund is received from GST department, the same is reduced from such balance appearing in the balance sheet. However, the 8 ITA.Nos.2706 & 2707/PUN/2024 (BNY Mellon International Operations (India) Pvt. Ltd.) main focus of the learned counsel for the assessee in his submission is to the question the procedure and system adopted by the CPC in processing the returns and making of such adjustments, which are debatable in nature and also referring to other columns of the tax audit report, which allegedly contains some anomaly, the nature of adjustments made by the CPC, reference has also been made to plethora of decisions of this Tribunal in support of its contention and submitted that alleged type of adjustments cannot be made by the CPC. However, he fairly accepted that on merits, case of the assessee deserves to be restored to the file of the JAO for necessary verification of the claim of GST paid/received by the assessee that the adjustments of GST refund is not carried out through profit & loss account.

On the other hand, ld. DR supported the orders of the lower authorities.

We have heard rival contentions and perused the records placed before us. The issue for our consideration raised by the assessee in ground No.1 is against the addition of Rs.38,10,67,339/- made by the CPC for refund of GST not credited to the profit & loss account. Learned counsel for the assessee failed to controvert the fact that tax Auditor has mentioned the alleged sum in Form 3CD under the heading „amounts not credited to the profit & loss account‟ which for a 9 ITA.Nos.2706 & 2707/PUN/2024 (BNY Mellon International Operations (India) Pvt. Ltd.) layman to understand is that the amounts required to be credited and shown in the profit & loss account, but has not been credited by the assessee and the same has been reported by the Auditor in the tax audit report. Based on such observation of the Auditor in the tax audit report, the assessee in the return of income failed to fill the very same amount of refund of GST under the column mentioned in Schedule A-OI and other information. The CPC has processed the return as per the software installed by the Income Tax Department and there being no human intervention has captured such mismatch, and based on the tax Auditor‟s report the impugned adjustment has been made. The same situation prevailed before the Ld.CIT(A) and the assessee failed to file the details of the alleged account of GST paid and GST refunded and also the particulars schedule of the assets side of the balance sheet, in which such GST refund is reduced from GST paid.

Learned counsel for the assessee has utilized most of the energy referring to various decisions of this Tribunal containing that such adjustments cannot be made by the CPC being debatable in nature and secondly he has mainly challenged the processing system of CPC and the columns of Form 3CD attached to the tax Auditor‟s report. Such contention of the assessee challenging the processing system of CPC and the contents of Form 3CD report cannot be 10 ITA.Nos.2706 & 2707/PUN/2024 (BNY Mellon International Operations (India) Pvt. Ltd.) addressed by this Tribunal, but it can only be taken up by filing the representation before the concerned authorities.

So far as the case in hand is concerned, we find that the CPC has processed the return based observations of the tax Auditor in the audit report e-filed on Income Tax portal. The tax Auditor has an option to revise its tax audit report in case any apparent mistake in the original report. In the given case, as contended by learned counsel for the assessee, the GST refund was not at all required to be routed through profit & loss account as the assessee is an exporter and is entitled to refund of GST. It consistently maintains the accounting system of reducing GST refund from GST paid account appearing under the head „other current assets‟. Now, once the assessee had informed the tax Auditor about the accounting method adopted by the assessee, the tax Auditor would have easily revised tax audit report, but for such inaction on the part of the assessee in not getting tax audit report revised and blaming the CPC‟s processing method is not correct. There may be certain problems in processing of returns, but they are being rectified by the CPC from time to time by updating its system, but the case in hand directly falls u/s. 143(1)(a)(iv) of the Act which refers to the adjustments which can be made by the CPC for disallowance of expenses or increase in income indicated in the audit report, but not taken into account in computing the total income in the return.

However, the contention of the assessee that the GST refund is adjusted under the head „other current assets‟ shown in schedule 16 in the audited balance sheet. The claim of the assessee is that the GST paid on the goods purchased is not debited as expenditure in the profit & loss account and, therefore GST refund is also not required to be credited to the profit & loss account. This fact is evident from the audited balance sheet and GST refund has been adjusted under the head „other current assets‟. However, for necessary verification of the GST ledger account, GST refund application filed by the assessee, the orders of the Goods and Services Tax department granting GST refund and book entry made in the books of accounts, needs to be verified by the Ld.JAO. We, therefore, are of the considered view, the issue raised in ground No.1 regarding addition made for GST refund is hereby restored to the file of JAO, who shall grant reasonable opportunity to the assessee to file the details referred above and decide in 12 ITA.Nos.2706 & 2707/PUN/2024 (BNY Mellon International Operations (India) Pvt. Ltd.) accordance with law. Ground No.1 is allowed for statistical purposes.

So far as ground No.2 is concerned, the same is against the levy of interest u/s. 234C of the Act. Since the only addition made by the CPC and challenged by the assessee has already been restored by us to the file of the JAO for necessary verification, calculation of interest u/s. 234C of the Act being consequential, can also be verified by the Ld. JAO along with due consideration of the submissions of the assessee that levy of interest u/s. 234C of the Act is only on the returned income and not on the assessed income. Ground No.2 raised by the assessee is allowed for statistical purposes.

In the result, both appeals of the Assessee are allowed for statistical purposes.