HEXAWARE TECHNOLOGIES LIMITED ,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX 10(1)(1), MUMBAI

This appeal has been filed by the assessee assailing the order of Commissioner of Income Tax (Appeals)-17, Mumbai (in short CIT(A)) dated 27/12 /2017 for the assessment year 2011-12, originating from proceedings under section 154 of the Income Tax Act, 1961 (in short ‘the Act’) .

The brief facts of the case as emanating from records are, the assessee is engaged in providing software solutions and IT enabled services. The assessee filed its return of income for the impugned assessment year on 30/11/2011 declaring total income of Rs.31,03,63,786/- under the normal provisions of the Act and Book Profit of Rs.143,62,22,901/- under provisions of section 115JB of the Act. The assessee allegedly claimed deduction under section 80JJAA of the Act during assessment proceedings. The Assessing Officer passed the assessment order dated 27/03/2015 under section 143(3) of the Act, without commenting on assessee’s claim made during assessment proceedings. The assessee filed rectification petition under section 154 of the Act before Assessing Officer to consider assessee’s claim of deduction under section 80JJAA of the Act. The Assessing Officer rejected assessee’s claim not made in the return of income/revised return of income in the light of decision rendered by Hon'ble Supreme Court of India in the case Goetze (India) Ltd. vs. CIT, reported as 284 ITR 323(SC). Aggrieved by the order dated 20/08/2015 passed under section 154 of the Act, the assessee filed appeal before the CIT (A). The first appellate authority dismissed assessee’s appeal primarily on the ground that the appeal against the order passed u/s 154 of the Act for claiming deduction u/s 80 JJAA is not appropriate remedy. The assessee should have filed appeal against the assessment order passed under section 143(3) for claiming such deduction. Against the aforesaid findings of the First Appellate Authority, the assessee is in appeal before the Tribunal.

Shri Rajan Vora, appearing on behalf of the assessee submitted that the only issue in this appeal is denial of benefit of deduction under section 80JJAA of the Act. The deduction under section 80JJAA was allowed to the assessee by CIT (A) in assessment year 2010-11 vide order dated 26/09/2019. Even, in the subsequent assessment years the assessee was allowed benefit of deduction u/s 80JJAA of the Act. Thus, the assessee’s eligibility to claim deduction under aforesaid section in the impugned assessment year is not in question. Admittedly, the assessee while filing return of income for AY 2011-12 failed to claim deduction under section 80JJAA of the Act. The assessee made claim of deduction before the Assessing Officer at the time of assessment proceedings and filed Form DA, mandatory for claiming deduction. The Assessing Officer while passing order under section 143(3) of the Act did not consider assessee’s claim under section 80JJAA of the Act. In fact, there was no reference in the assessment order of assessee’s claim of deduction lodged at the time of assessment proceedings. Thereafter, the assessee filed rectification petition under section 154 of the Act on 08/06/2016 for considering claim of deduction under section 80JJAA of the Act. The Assessing Officer in proceedings under section 154 of the Act rejected assessee’s claim by placing reliance on the decision rendered in the case of Goetze (India) Ltd. vs. CIT (supra). The petition of the assesse seeking rectification was not rejected by the Assessing Officer on the ground of maintainability. The ld. Authorized Representative of the assessee submitted that as assessee’s claim of deduction was for the first time considered and rejected by the Assessing Officer in proceedings under section 154 of the Act, hence, the assessee filed appeal against the order passed under section 154 of the Act before CIT(A) .

Per contra, Ms. Mamta Bansal, representing the Department vehemently defended the impugned order. The ld.Departmental Representative submitted that the assessee never made claim of deduction under section 80JJAA of the Act in the return of income/revised return of income. As per documents furnished by the assesse, the assesse lodged its fresh claim of deduction before the Assessing Officer on 28-3-2015, whereas, the assessment order was passed on 27-3-2015 i.e. prior to the claim made by the assesse. Thus, the Assessing Officer had no occasion to consider assessee’s claim during assessment proceedings. The ld. Departmental Representative further submitted that non consideration of a claim, not made in return of income during assessment proceedings does not amount to mistake apparent from record. The scope for invoking provisions of section 154 for rectification of mistake is very narrow. A fresh claim made by the assessee cannot be entertained in proceedings under section 154 of the Act.

The ld. Authorised Representative of the assesse clarified that the fresh claim was filed with the Assessing Officer before the receipt of the assessment order. Till the filing of the claim, the assesse was not aware that the assessment order was passed. The assesse made claim well within his rights during assessment proceedings. While passing the order U/s154 of the Act, the Assessing Officer nowhere observed that the claim was made for the first time in rectification proceedings.

We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also considered various decisions on which the ld.Authorized Representative of the assessee has placed reliance.

Undisputedly, in the present case assessee did not make claim of deduction u/s 80JJAA of the Act in the return of income or revised return of income. The fresh claim was allegedly made at the time of assessment proceedings. In the assessment order dated 27/03/2015, the Assessing Officer has not made any note of assessee’s said claim. We observe, in fact the Assessing Officer had no occasion to consider assessee’s fresh claim as the same was filed on 28/3/2015 i.e. one day after the passing of the assessment order. The assessee filed petition under section 154 of the Act for considering assessee’s claim of deduction under section 80JJAA of the Act. The Assessing Officer in proceedings under section 154 of the Act rejected assessee’s claim of deduction under section 80JJAA expressing his inability to entertain the same in the light of decision of Hon’ble Apex Court in the case of Goetze (India) Ltd. vs. CIT (supra). In first appellate proceedings, the CIT(A) rejected assessee’s claim of deduction merely on the ground that for necessary relief the assessee ought to have appealed against the assessment order passed under section 143(3) of the Act and not in appeal against order seeking rectification under section 154 of the Act.

A perusal of the assessment order reveal that the Assessing Officer has not made mention of assessee’s claim of deduction in the assessment order, as the claim was ostensibly received after the passing of order. The Assessing Officer considered the claim of assesse in proceedings under section 154 of the Act and rejected the same on the ground of jurisdiction. The cause of action arose to the assesse when its claim was considered and rejected by the Assessing Officer. In the back drop of these facts, we do not concur with the view of CIT (A) for rejecting assesse’s claim of deduction at the outset by taking pedantic and hyper-technical approach.

As the assesse failed to make claim of deduction u/s. 80JJAA of the Act in the return of income, the Assessing Officer was justified in rejecting assessee’s claim in the light of decision rendered by Hon’ble Apex Court in the case of Goetze (India) Ltd. vs. CIT (supra). However, the appellate authorities are not precluded from entertaining assessee’s fresh claim not made in the return of income. The Hon’ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers & Shareholders (supra) has held that an assessee is entitled to raise before appellate authorities additional claims not made in the return of income. Taking into consideration entirety of facts we are of considered view that asessee’s claim of deduction under section 80JJAA of the Act deserves to be admitted for consideration.

Since, legality and quantum of the claim were not examined by any of the lower authorities, without commenting on merit of claim, we deem it appropriate to restore the issue back to the file of Assessing Officer for consideration of same. While examining assessee’s claim, the Assessing Officer shall allow reasonable opportunity of hearing to the asseesee, in accordance with law.

In the result, appeal of the assessee is allowed for statistical purpose.

This appeal was heard on 30/01/2020. As per Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963, (ITAT Rules, 1963), the order was required to be “ordinarily” pronounced within a period of 90 days from the date of conclusion of the hearing of appeal. The instant appeal was heard prior to the lockdown declared by the Hon’ble Prime Minister on 24-03-2020 in view of COVID-19 pandemic. The lockdown was forced due to extra ordinary circumstances caused by world wide spread of COVID-19. Thereafter, the lockdown was extended from time to time. Therefore, the pronouncement of order beyond the period of 90 days from the date of hearing is not under “ordinary” circumstances. The Co-ordinate Bench of the Tribunal in the case of DCIT vs. JSW Ltd., for A.Y 2013-14 decided on 14/05/2020, under identical circumstances, after considering the provisions of Rule 34(5) of the ITAT Rules, 1963, judgements rendered By Hon’ble Apex Court and the Hon’ble Bombay High Court on the issue of time limit for pronouncement of orders by the Tribunal and the circumstances leading to lockdown held:-

The appeal of the assessee is allowed for statistical purpose. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.