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Facts
The assessee's appeal against the CIT(A)'s order for AY 2023-24 was filed beyond the prescribed time. The assessee had challenged an assessment order passed under Section 154. The primary issue revolves around the CPC's processing of the return where it allegedly changed the assessee's taxation option from "No" to "Yes" for Section 115BAA, leading to the disallowance of a Section 10AA deduction.
Held
The Tribunal condoned the delay in filing the appeal, noting that the assessee was not properly served the order. The Tribunal also observed that the CPC's action of altering the taxation option from "No" to "Yes" under Section 143(1)(a) was beyond its powers and that such a mistake is rectifiable under Section 154. The appeal was accordingly allowed.
Key Issues
Whether the CPC has the power to suo motu change the taxation option from 'No' to 'Yes' under Section 143(1)(a), and if such an action constitutes a 'mistake apparent from the record' rectifiable under Section 154. Also, whether the CIT(A) erred in dismissing the appeal without proper adjudication on merits due to procedural irregularity.
Sections Cited
154, 250, 10AA, 115BAA, 143(1), 143(3), 139, 141A, 167B, 16, 32, 32AD, 33AB, 33ABA, 35, 35AD, 35CCC, 35CCD, 80JJAA, 80M, 72A, 200A, 206CB
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 231/JP/2025
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 231/JP/2025 fu/kZkj.k o"kZ@Assessment Year : 2023-24 cuke Dynamic Powertech Private DCIT, Vs. Limited, Circle-04, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCD 1253 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Tarun Mittal, C.A jktLo dh vksj ls@ Revenue by : Sh. Arvind Kumar, CIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 09/04/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 08/05/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
This appeal filed by the assessee- appellant challenges the order of the learned National Faceless Appeal Centre, Delhi [ for short CIT(A) ] dated 26/09/2024 for assessment year 2023-24. The said order of the ld. CIT(A) arises because the assessee has challenged the assessment order short “Act”] by AO, CPC.
At the outset of hearing, the Bench observed that there is delay of 81 days in filing of the appeal by the assessee for which the ld. AR of the assessee filed an application for condonation of delay with following prayers:
“Sub: M/s Dynamic Powertech Private Limited - Assessment Year 2023-24 - Application seeking Condonation of delay In the aforesaid context, it is humbly submitted that order u/s 250 was passed by Ld. CIT(A) in the case of assessee company on 26.09.2024, which stood served on the e-portal of the assessee company. Against the order so passed, appeal could have been filed within 60 days, from the service of the order. However, the appeal got delayed by 84 days, as the appeal was filed on 19.02.2025 for the reasons as explained below:
1. 1. That, the order was passed by The National Faceless Appeal Centre, Delhi on 26.09.2024.
2. That, upon review of the appeal status on the Income Tax E-Portal by the accountant of the assessee company, it was discovered that the order dated 26.09.2024 has been passed which was not received by the assessee company via E-mail ID i.e. on praveen@mangals.com [mentioned on Form 35] or hebothraassociates@ yahoomail.com [as mentioned in the notice of the Income Tax Department). Consequently, the present appeal is being submitted before your goodself with respect to the order dated 26.09.2024 which is delayed.
3. Thus, it is submitted that the delay in filing the appeal is absolutely inadvertent and has occurred due to circumstances beyond the control of assessee.
4. That, the assessee always has acted in bonafide and the delay is of only 84 days.
Dynamic Powertech Pvt. Ltd. vs. DCIT In the circumstances of the matter it is humbly prayed to your goodself to please accept the application/prayer of the condonation of delay which is of 84 days and to please be kind enough to direct the listing of the appeal for disposal on the merits. Your kindness would go a long way to impart effective justice to the ignorant litigants.
Relying on the contention the ld. DR submitted that the reasons are sufficient to condone the delay as the order was not serviced on the email mentioned in the Form no. 35.
4. Ld. AO did not dispute the facts mentioned in the application but submitted that the reasons are not sufficient to condone the delay and at the same time prayed that bench may decide the issue as deem fit in the interest of justice.
We have heard the contention of the parties and perused the materials available on record. The bench noted that the assessee was not served the impugned order on the email id mentioned in the form no. 35 and therefore, the prayer by the assessee for condonation of delay of 81 days has merit and we concur with the submission of the assessee. Thus the delay of 81 days in filing the appeal by the assessee is condoned in view of the decision of Hon’ble Supreme Court in the case of Collector, land Acquisition vs. prevented by sufficient cause.
6. Having admitted the appeal of the assessee, before proceeding in the matter it would be appropriate to deal with the grounds upon which the assessee has preferred the present appeal which reads as follows: -
That the Ld. CIT(A) grossly erred in law and on facts by passing the impugned order which is bad in law and liable to be quashed, as it has been passed in undue haste without affording the appellant an adequate opportunity to furnish explanations, supporting documents, and legal submissions. 1.1 That the impugned order is in violation of the principles of natural justice, as the appellant was not given a proper and sufficient opportunity of being heard. The Ld. CIT(A) issued only one notice and proceeded to pass the order within 15 days of the due date mentioned in the notice, without considering the appellant’s submissions or granting a reasonable opportunity to present its case.
2. That the Ld. CIT(A) erred in dismissing the appeal without appreciating the full facts of the case and in law.
3. That the Ld. CIT(A) further erred in law and on facts in upholding the demand of Rs. 66,11,560/- without properly appreciating the rectification request made under Section 154 of the Income Tax Act, 1961 before CPC against changes made by CPC and disallowing claim u/s 10AA. 3.1 That the Ld. CIT(A) failed to consider that the Centralized Processing Centre (CPC) made a mistake in processing the return by not interpreting the Section 115BAA of the Income Tax Act, 1961, properly and moreover the appellant had already paid tax under the normal provisions at 25% plus surcharge instead of availing concessional rate of tax u/s 115BAA. 3.2 That the Ld. CIT(A) erred in not allowing the legitimate claim of exemption under Section 10AA of the Income Tax Act, despite the fact that the appellant had filed the requisite Form 56F well before due date for claiming the exemption.
Dynamic Powertech Pvt. Ltd. vs. DCIT 3.3 That the ld. CIT(A) has erred in upholding the rectification order passed by CPC dated 08.04.2024 despite the fact that it is apparent that assessee has not opted for the concessional tax scheme i.e. taxation u/s 115BAA of the Income Tax Act, 1961 and CPC arbitrarily and on its own changed the taxation option u/s 115BAA from “NO” opted by asessee to “YES”.
That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal.
7. Succinctly, the fact as culled out from the records is that the assessee company is having manufacturing unit at SEZ and has started its production from 19th Nov, 2014 and since then has been claiming deduction u/s 10AA of the Income Tax Act, 1961 (herein after referred to as “The Act”) since AY 2016-17, accordingly this is 8th consecutive year for which the deduction is claimed. During the year under appeal, assessee company filed its return of income on 30.10.2023 declaring total income of Rs. 8,63,02,210/- after claiming a deduction u/s 10AA to the tune of Rs.
3,17,05,251/-. Further, assessee company also filed its audit report in Form 56F to claim the deduction u/s 10AA on 27.11.2023 wherein amount of deduction claimed was mentioned as Rs. 3,17,05,251/-. The return was processed under Section 143(1) by CPC vide intimation dated 22.12.2023, wherein the system treated the assessee company as having opted for taxation under Section 115BAA (which provides a concessional rate of tax but disallows certain deductions). As a result, the CPC disallowed the Rs.66,11,560/-. The appellant immediately filed a rectification request under Section 154 on 22.01.2024 (Rectification Request No. 9091774400220124) highlighting the error in CPC's processing. However, CPC rejected the application on the ground that there was no mistake apparent from the record. A subsequent rectification application was filed on 29.02.2024 (Request No. 139133340290224), specifically pointing out the incorrect selection recorded by CPC in the field “Taxation Option u/s 115BAA”. However, even this second rectification was summarily rejected vide order dated 08.04.2024.
Against that order the assessee company preferred an appeal before the ld. CIT(A) against the rectification order passed u/s 154 of the Act dated 08.04.2024 wherein ld. CIT(A) vide its order dated 26.09.2024, without affording adequate opportunity of being heard, dismissed the appeal of assessee company stating that the issue being controversial and not being a mistake apparent from record and therefore beyond the purview of section 154. The relevant finding of the ld. CIT(A) is reiterated here in below :
“4. I have examined the facts and legal issues involved in this case and gone through the Order as well as grounds of appeal. The appellant has also relied upon various judgments of different courts of law on this issue, Since there are divergent views in this matter, the whole issue becomes contentious, This cannot, therefore, be said that there is an apparent mistake that had crept in the Order. It has been held by Hon'ble Supreme Court in Review Petition (Civil) no. 1620 of 2023 in Civil appeal no. 1661 of 2020 in the case of Sanjay Kumar Agarwal vs. State Tax Officer that an error which is not self-evident and has to be detected by a process of reasoning, cannot be said to be an error apparent on the face of record and that an error on the face of record must be such an error which, mere locking at the record should strike and it should not require any long-drawn process of reasoning on the points where there may conceivably be two opinions. Relevant part of the decision is reproduced below-
"5. It is very pertinent to note that recently the Constitution Bench in Beghar Foundation vs. Justice K.S. Puttaswamy (Retired) and Others, held that even the change in law or subsequent decision/judgment of co-ordinate Bench or larger Bench by itself cannot be regarded as a ground for review.
The gist of the afore-sated decision is that:- (i) A judgment is open to review inter alia if there is a mistake or an error apparent on the face of the record.
(ii) A judgment pronounced by the Court is final, and departure from that principle is justified only when circumstances of a substantial and compelling character make it necessary to do so.
(iii) An error which is not self-evident and has to be detected by a process of reasoning, con hardly be said to be an error apparent on the face of record justifying the court to exercise its power of review
(iv) In exercise of the jurisdiction under Order 47 Rule 1 CPC, it is not permissible for an erroneous decision to be "reheard and corrected"
(v) A Review Petition has a limited purpose and cannot be allowed to be "an appeal in disguise."
(vi) Under the guise of review, the petitioner cannot be permitted to reagitate and reargue the questions which have already been addressed and decided
(vii) An error on the face of record must be such an error which, mere looking at the record should strike and it should not require any long-drawn process of reasoning on the points where there may conceivably be two opinions.
Dynamic Powertech Pvt. Ltd. vs. DCIT (viii) Even the change in law or subsequent decision/judgment of a co-ordinate or larger Bench by itself cannot be regarded as a ground for review.
The above discussion makes it clear that the issue is a controversial one and is yet to attain finality. Despite, having been asked, vide DIN & letter no. ITBA/NFAC/F/APL_1/2024-25/1068314805(1) dated 04.09.2024, to furnish ground-wise written submission along with supporting documentary evidence, the appellant failed to furnish any such evidence. Therefore, being a controversial issue, this issue is beyond the ambit of provisions of section 154 of the Act. Various courts of law have time and again held that any controversial issue cannot be entertained u/s 154 of the Act, as the same cannot be stated to be "mistake apparent on record". Therefore, there is no scope in interfering with the Order and it is upheld.
In the result, the appeal is hereby dismissed.
As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A), the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds raised by the assessee, ld. AR of the assessee relied on the written submission which reads as follows :
“With this background, ground-wise submission is made as under: Grounds of Appeal No. 1 to 2: In these grounds of appeal, assessee company has challenged the actions of ld. CIT(A) in passing the order without affording adequate opportunity of being heard and deciding the matter ignoring the facts stated by assessee company. In the matter, it is submitted that the impugned appellate order is vitiated by procedural irregularity and lack of adherence to the principles of natural justice. Ld. CIT(A) issued single notice dated 04.09.2024 with a due date to submit response on or before 11.09.2024. Further, the notice so issued was issued on the E-mail ID other than the E-mail Id mentioned in the Form 35 filed by the assessee company. It is evident that the ld. CIT(A) passed the order in undue haste, having issued only a single notice and decided the appeal within 15 days of the response deadline, without affording the appellant sufficient opportunity to submit its explanations, supporting documents, or legal arguments. The appellant Dynamic Powertech Pvt. Ltd. vs. DCIT was denied an effective hearing, which renders the order fundamentally flawed and in violation of audi alteram partem, a settled principle of natural justice. It is further submitted that the ld. CIT(A) failed to appreciate the full facts and legal position while adjudicating the issue arising from the adjustment made by CPC and the resultant demand of ₹66,11,560/-. Ld. CIT(A) while adjudicating the matter only on the legal matter by observing that the issue involved is of controversial nature and beyond the scope of Section 154 of the Act and therefore, dismissed the appeal filed by the appellant. The relevant extract of the order of ld. CIT(A) is as under: “6 ……………………….. Therefore, being a controversial issue, this issue is beyond the ambit of provisions of section 154 of the Act. Various courts of law have time and again held that controversial issue cannot be entertained u/s 154 of the Act, as the same cannot be stated to be “mistake apparent from record”. Therefore, there is no scope in interfering with the Order and it is upheld.”
It is further submitted that, assessee company while filing the Form 35 to prefer an appeal before the ld. CIT(A), mentioned all the facts of the cases in the statement of fats and the same were available before the ld. CIT(A) for the perusal. From the perusal of the above, it is evident that ld. CIT(A) has acted in a casual manner as the appeal of the assesse company was dismissed by ld. CIT(A), completely ignoring the facts of the case, solely on the basis of below: • Beyond the scope of section 154 of the Act • Issue involved being controversial In regard to the issue being beyond the purview of section 154 of the Act, the relevant provision of section 154 of the Act is re-produced below for your ready reference: Rectification of mistake. 154. (1) With a view to rectifying any mistake apparent from the record an income- tax authority referred to in section 116 may,— (a) amend any order passed by it under the provisions of this Act; (b) amend any intimation or deemed intimation under sub-section (1) of section 143; (c) amend any intimation under sub-section (1) of section 200A; (d) amend any intimation under sub-section (1) of section 206CB. According to the provisions of sec154 of the Act, an income tax officer have the powers to rectify a mistake which was apparent from record that may have been occurred while passing an order u/s 143(1) of the Act. It is submitted the impugned error arising from the automated processing of return under Section 143(1), which led to the denial of deduction and incorrect alteration of the tax regime, clearly falls within the ambit of “mistake apparent from the record”, as contemplated under Section 154 of the Income-tax Act, 1961. It is further submitted that the term “mistake apparent from the record” has not been explicitly defined in the Income tax Act, 1961. However, its legal scope and judicial contours have been decisively laid down by the Hon’ble Supreme Court in the authoritative judgment in the case of Assistant Commissioner of Income-tax Dynamic Powertech Pvt. Ltd. vs. DCIT vs. Saurashtra Kutch Stock Exchange Ltd. reported in [2008] 305 ITR 227 (SC). In the said judgment, the Hon’ble Court held as under: “37. In our judgment, therefore, a patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected while exercising certiorari jurisdiction. An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long-drawn-out process of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no Court would permit it to remain on record. If the view accepted by the Court in the original judgment is one of the possible views, the case cannot be said to be covered by an error apparent on the face of the record.” The Hon’ble Court went on to clarify that a subsequent decision of the jurisdictional High Court or the Supreme Court, which settles a legal position that was previously debatable, would render the earlier view an apparent mistake, once such decision is brought to the notice of the Assessing Officer. Further, the Supreme Court emphasized that: “If the point is covered by a decision of the jurisdictional High Court or of the Supreme Court and a contrary view has been taken earlier, that would constitute a mistake apparent from the record.” In the present case, the error committed by the CPC in processing the return is not only clerical and factual in nature but is self-evident from the face of the ITR and Form 56F (both of which are available on the E-filing portal). The appellant had clearly selected “No” in response to the question of opting for taxation under Section 115BAA. Despite this, the CPC system altered the selection to “Yes,” and consequently disallowed the deduction under Section 10AA. The ITR, computation sheet, and accompanying Form 56F were all part of the return and available on record at the time of processing. This is a classic case of mechanical error that is verifiable without any need for fresh enquiry, investigation, or debatable reasoning, and therefore squarely falls within the parameters laid down by the Hon’ble Supreme Court in Saurashtra Kutch Stock Exchange Ltd. Hence, the rejection of rectification by CPC on the ground that “no mistake apparent from the record” exists is clearly unsustainable and contrary to the principle laid down in the binding precedent of the Hon’ble Supreme Court. Further with regard to the issue being controversial, it is submitted that the approach adopted by the ld. CIT(A) is erroneous both in law and in equity. The appellate authority, being a quasi-judicial forum, is expected to discharge its functions judiciously by applying mind to the facts of the case and rendering a reasoned decision. In the present matter, however, the ld. CIT(A) failed to exercise this quasi-judicial function in its true spirit. Instead of examining the grounds of appeal along with statement of facts on merits and making necessary factual or legal enquiries, the ld. CIT(A) chose to summarily reject the appellant's appeal by terming the issue as “controversial.” It is respectfully submitted that merely branding a matter as controversial does not absolve the appellate authority from its statutory duty of adjudication. In fact, Dynamic Powertech Pvt. Ltd. vs. DCIT where a controversy exists, it becomes all the more incumbent upon the appellate authority to examine the facts thoroughly, apply settled legal principles, and provide clarity by delivering a well-reasoned order. Avoiding such adjudication and passing a non-speaking, mechanical order amounts to abdication of appellate responsibility. The powers of the CIT(A) are co-terminus with those of the Assessing Officer, and as such, he is fully empowered to make enquiries, call for records, and examine additional evidence wherever necessary to ascertain the correct position. Despite the appellant filing rectification requests and submitting supporting documents, ld. CIT(A) chose not to examine whether the CPC’s alteration was supported by facts or law. Instead, the appellate authority dismissed the appeal with a generalized remark that the matter is controversial and not rectifiable under Section 154. Such dismissal without examining the substance of the claim and without any reference to the materials on record renders the appellate order vulnerable to challenge on the grounds of non-application of mind and violation of principles of natural justice. In conclusion, it is most humbly submitted that ld. CIT(A) erred in law by refusing to examine the factual error and by dismissing the appeal without making any enquiry, relying solely on the reasoning that the matter is controversial. Such a course of action not only violates statutory duties but also deprives the assessee of fair and proper adjudication. Grounds of Appeal from 3 to 3.3 In these grounds of appeal, appellant has challenged the actions of ld. CIT(A) in confirming the disallowance of Rs. 3,17,05,251/- claimed as deduction u/s 10AA by not interpreting the provisions of Section 115BAA of the Act. As submitted above, it is reiterated that assessee company filed its return of income on 30.10.2023 declaring total income of Rs. 8,63,02,210/- after claiming a deduction u/s 10AA to the tune of Rs. 3,17,05,251/-. Further, assessee company also filed its audit report in Form 56F to claim the deduction u/s 10AA on 27.11.2023 wherein amount of deduction claimed was mentioned as Rs. 3,17,05,251/-. The return was processed under Section 143(1) by CPC vide intimation dated 22.12.2023, wherein the system treated the assessee company as having opted for taxation under Section 115BAA (which provides a concessional rate of tax but disallows certain deductions). As a result, the CPC disallowed the assessee company's claim under Section 10AA and raised a demand of Rs.66,11,560/-. The appellant immediately filed a rectification request under Section 154 on 22.01.2024 (Rectification Request No. 9091774400220124) highlighting the error in CPC's processing. However, CPC rejected the application on the ground that there was no mistake apparent from the record. A subsequent rectification application was filed on 29.02.2024 (Request No. 139133340290224), specifically pointing out the incorrect selection recorded by CPC in the field “Taxation Option u/s 115BAA”. However, even this second rectification was summarily rejected via order dated 08.04.2024. It is further submitted that an intern working at the previous counsel of the assessee company had inadvertently filed Form 10IC on 15.01.2021 for AY
2020-21 and onwards. According to the provisions of law, once the Form 10IC is filed by any domestic companies, provisions of section 115 BBA of the Act starts applying and tax is paid at lower rate of 22%. The provisions of section 115BAA of the Act are herein below: Tax on income of certain domestic companies. 115BAA.(1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 115BA and section 115BAB, the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020, shall, at the option of such person, be computed at the rate of twenty-two per cent, if the conditions contained in sub-section (2) are satisfied: Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years. (2) For the purposes of sub-section (1), the total income of the company shall be computed,— (i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub- clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of 31-32[Chapter VI-A other than the provisions of section 80JJAA or section 80M]; (ii) without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); (iii) without set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and (iv) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.
From the perusal of the above provision, it can be concluded that the company who has opted to file its return of income u/s 115BAA of the Act cannot take the deduction of 10AA of the Act. Furthermore, according to the 1st proviso of the section 115BAA of the Act, it is further concluded that if a company fails to satisfy any conditions as mentioned in sub-section 2 to the sec 115BAA in any previous year, the provisions of this section will not apply in the assessment year relevant to that previous year and subsequent assessment years as well and it will be treated as this option was never exercised for that previous year and subsequent assessment year. AY 2020-21 In the case in hands, Form 10IC was filed inadvertently on 15.01.2021 for AY 2020-21 and later on assessee company filed its return on income on the same date (APB 1) after claiming deduction to the tune of Rs. 40,39,494/- u/s 10AA after paying tax on balance income at the rate of 25%. Furthermore, it stood Dynamic Powertech Pvt. Ltd. vs. DCIT processed u/s 143(1) of the Act by CPC wherein the deduction claimed u/s 10AA was allowed by CPC and return was accepted (APB 2-7). AY 2021-22 Similarly for AY 2021-22, assessee company filed its return of income on 28.02.2022 (APB 8) after claiming deduction to the tune of Rs. 8,34,457/- u/s 10AA after paying tax on balance income at the rate of 25%. Again the return was processed by CPC u/s 143(1) and deduction claimed u/s 10AA was allowed and return filed was accepted (APB 9-11). Thus, since assessee company had claimed deduction u/s 10AA and paid tax at rate of 25% in AY 2020-21 itself, the provision of sub-section 2 to the section 115BAA was violated and the 1st proviso to the section came into applicability. Therefore, the provisions of section 115BAA ought not to have applied from AY 2020-21 itself and other provisions of the Act became applicable according to which deduction u/s 10AA was allowable deduction. AY 2022-23 Moreover, in AY 2022-23, assessee company filed its return of income on 01.11.2022 (APB 12) wherein deduction to the tune of Rs. 2,05,26,007/- was claimed by assessee company u/s 10AA of the Act. The return of income filed by assessee company was processed by CPC u/s 143(1) (APB 13-18) wherein the deduction claimed u/s 10AA was disallowed and a demand was created. Later on the case of the assessee company was selected for scrutiny for AY 2022-23 for the reason significant increase in unsecured loan and large exemption claimed u/s 10AA. Various details and evidences as sought by AO were furnished before AO including Form 56F filed for claiming deduction u/s 10AA for that relevant year and assessment stood complete by AO by passing an order dated 14.02.2024 by accepting the return income filed by assessee company and allowing the claim of deduction u/s 10AA after detailed in depth enquiry in the matter for AY 2022-23 as well (APB 19-27). Thus, from the perusal of the above explanation and after considering the evidences adduced, it is evident that CPC has been correctly applying the provisions of Section 115BAA of the Act till last assessment year i.e. AY 2022-23 and disallowing the claim in the year under consideration is not in accordance of law and a mere change of opinion. In light of the above facts and circumstances, it is most respectfully submitted that the actions of the CPC and the confirmation by the Ld. CIT(A) are erroneous, lack legal sustainability, and are prejudicial to the interest of justice and deserves to be set-aside and the deduction u/s 10AA as claimed deserves to be allowed. ”
To support the contention so raised in the written submission reliance was placed on the following evidence / records:
S. PAGE PARTICULARS No. NOS.
Copy of Acknowledgement of return of Income along filed u/s 139 of the Act for A.Y. 1 1. 2020-21.
Copy of Intimation order passed u/s 143(1) of the Act for A.Y. 2020-21 2-7 2. Copy of Acknowledgement of return of Income filed u/s 139 of the Act for A.Y. 2021- 8 3. 22.
Copy of Intimation order passed u/s 143(1) of the Act for A.Y. 2021-22 9-11 4. Copy of Acknowledgement of return of Income filed u/s 139 of the Act for A.Y. 2022- 12 5. 23.
Copy of Intimation order passed u/s 143(1) of the Act for A.Y. 2022-23 13-18 6. Copy of Assessment order passed u/s 143(3) of the Act dated 14.02.2024 for A.Y. 19-27 7. 2022-23
Copy of Rectification order passed u/s 154 r.w.s.143(3) of the Act dated 12.02.2025 28-31 8. along with demand notice for A.Y. 2022-23
Copy of Acknowledgement of return of Income along with computation of total 32-37 9. income filed u/s 139 of the Act for A.Y. 2023-24.
Copy of Intimation order passed u/s 143(1) of the Act for A.Y. 2023-24 38-47 10. Copy of Acknowledgement of Rectification request filed for A.Y. 2023-24 on 48 11. 22.01.2024.
Copy of Acknowledgement of Rectification request filed for A.Y. 2023-24 on 49 12. 29.02.2024.
Copy of Form 56F filed on 27.11.2023 for A.Y. 2023-24. 50-52 13.
11. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that Form 10IC was filed on 15.01.2021 so as to avail the lower tax benefit for A. Y. 2020-21. The assessee subsequent to that choose not to avail that benefit as provided in section 115BBA of the Act being the lower tax benefit as in the subsequent violate the proviso to section 115BBA(i) of the Act and therefore, the assessee preferred to claim the deduction u/s 10AA of the Act which has been allowed for A.Y 2021-22 and 2022-23 and in the year under consideration being 2023-24 based on the form filed in 2020-21 the deduction claimed u/s 10AA was not allowed which was allowed in the earlier years. The Ld. AR of the assessee says that since the provisions itself suggest that if the assessee claimed the deduction in the computation of income, they shall not be eligible for the lower tax as per the provisions of section 115BAA of the Act and there is no procedure or form to withdraw from that option as the law itself takes care that the said benefit will not be given the assessee claimed the deduction u/s 10AA which was a case of the assessee to claim deduction and opt out from lower tax regime. The claim was allowed in the preceding year to the assessee. As regards, the contentions raised for the year, ld. AR of the assessee submitted that the contentions raised by the ld. CIT(A) that the assessee has not opted out from the provisions of section 115BAA on this aspect of the matter, Ld. AR of the assessee invited our attention to page 38 wherein it is categorically shown that the assessee has opted out from that by righting the relevant in below :
Per contra, ld. DR relied upon the finding of ld. CIT(A) and vehemently stated that the matter may be demanded to the Assessing Officer to the contention as the assessee did not represent the case.
We have heard the rival contentions and perused the material placed on record. Though the assessee in this appeal has raised various grounds but the apple of discord is that whether even though the assessee has submitted that they have not availed the benefit of section 115BAA of the Act while filling the ITR. Even though while processing the ITR CPC can change that option from “No” to “Yes” or not?. Since that adjustment was appropriate to deal with that provision of the Act, which reads as under:
Assessment. 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under section 10AA or under any of the provisions of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", if the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018; (b) the tax, interest and fee, if any, shall be computed on the basis of the total income computed under clause (a); As is evident from the above provision of the Act, that the CPC has no power to change the option of taxing the assessee at special rate or that of 143(1)(a) of the Act. The fact that the assessee has applied for that in earlier year and now the same is straight away cannot be made applied when the CPC for the past two year already considered the ITR filled by the assessee under normal provision of the Act. The matter the CPC is taking up cannot be subjected to processing of ITR u/s. 143(1)(a) of the Act. We support of our view from the decision of our Jurisdictional High Court in the case of JKs Employees Welfare Fund Vs. ITO [ 66 Taxman 447(Raj) ] where in our High Court has held that ;
6. A bare perusal of section 143(1)( a) contemplates that the ITO has to accept the return as it is and in the proviso, three exceptions have been given, which confer the jurisdiction on him for making adjustment. The action under this section cannot be taken beyond the power permitted by these three exceptions. The third exception provides that where any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed. This clause contemplates that power could be exercised only (a)( i) in respect of loss carried forward, (a)( ii) deduction or (a)( iii) allowance, and (a)(iv ) relief claimed; (b) the power in respect of the above four items should be on the basis of information available in the return, accounts or documents; (c) that these items are prima facie inadmissible.
7. The ITO appears to have exercised his power under this clause. The question arose as to whether the application of rate of tax could be covered by the term 'relief claimed in the return' because application of a different rate of tax will not fall under the category of loss carried forward, deduction, allowance. There is another provision in clause (i) regarding arithmetical errors in the return. There may be a case where the rate of tax is not disputed but while calculating the tax there is an error which could be corrected under this clause, i.e., while calculating the tax on the normal rate or maximum marginal rate there is a mistake which could be corrected and will fall in the category of arithmetical mistake, but whether maximum marginal rate is to be applied or the normal rate is applicable is not covered by any of the two clauses of the proviso of section 143(1)(a).
Dynamic Powertech Pvt. Ltd. vs. DCIT 8. The matter has also to be considered from another angle that the word 'prima facie' which has been used therein means on the face of and refers to the items, on which there cannot be two opinions. If the matter is arguable one or debatable then same cannot be disallowed under the proviso referred to above.
9. Earlier, there was a provision under section 141A in the Act, which has since been deleted, in which the ITO was required to frame provisional assessment for refund. The said provision contemplated the past provisional assessment order on the basis of the return and the Bombay High Court in Synthetic & Chemicals Ltd. v. D.R. Chawla, ITO [1985] 154 ITR 5041 has held that the ITO has power to make adjustment to the income declared in the return by disallowing any deduction which on the basis of the information available in such return, accounts and documents, is prima facie not admissible. The Hon'ble Supreme Court in Jaipur Udyog Ltd. v. CIT [1969] 71 ITR 799 interpreting the provisions of section 141 of the Act has observed : "Section 141 of the Income-tax Act, 1961, authorises the Income-tax Officer to make a provisional assessment of the income of the assessee on the basis of the return made under section 139 and the accounts and documents, if any, accompanying the return. The assessment so made is summary and is based only on the return and the accounts and documents filed by the assessee. The Income-tax Officer is not bound to make any enquiry before making a provisional assessment; he is not bound even to give to the assessee any notice of his intention to make a provisional assessment, nor to hear the assessee. He may, if he desires, call upon the assessee to elucidate the return or the entries posted in the accounts and documents, but he is not obliged to do so. Section 141 has been enacted with the object of expediting collection of tax on the basis of the return made by the assessee. . . ." (p. 802) 10. The object of summary assessment contemplated under section 143(1)(a) is not only to reduce the work of the department but is also to minimise the litigation and create confidence of taxpayers for submitting true and correct returns. If it appears that the return submitted by the assessee cannot be accepted for the purpose of taking action under section 143(1)(a) then the rights of the ITO are not fettered and he can proceed to finalise the assessment after giving an opportunity to the assessee in respect of any arguable point only under section 143(2). Thus, on the proper interpretation of this section, the rights of the ITO are restricted with regard to the disallowances which are prima facie inadmissible. Whether the provisions of a particular section are applicable or not, will not be covered under this section. If the provisions are applied by the assessee himself of a particular section and while computing deduction, etc., under that section, there is a mistake, it could be corrected like in the case of a salaried person in computing Dynamic Powertech Pvt. Ltd. vs. DCIT the income from salary if the standard deduction as prescribed under section 16 of the Act is claimed at a lesser figure or higher figure then that mistake could be corrected as it would fall within the category of arithmetical error in the calculation of standard deduction. The second clause of the proviso casts a duty in respect of the deduction, allowance, etc., which have not been claimed in the return, but are prima facie admissible on the basis of information available in the return. A problem may arise in such a situation where the information is not available in the return, and the deduction, allowances, etc., are prima facie admissible then no duty is cast on the ITO to allow such a claim under this clause. On the same analogy, if any, different interpretation is sought to be taken, on which there could be two views or the information in respect thereof is not available in the return, then no such disallowance can be made. The ITO should have disallowed the claim if the fact of shares of the members in the assessee's case being indeterminate was evident from the return itself. In the reply submitted by the respondents, it has been mentioned in para 8 that the 'return of income filed by the assessee for the assessment year 1991-92 did not mention any reason for applying any rate other than those prescribed in section 167B and, therefore, the tax was charged as prescribed under section 167B'. No doubt, the assessee has not mentioned the reasons as explained by the respondents, but has, at the same time, not submitted that the provisions of section 167B are applicable. For applying the provisions of section 167B, it was incumbent on the ITO to have provided an opportunity to the assessee and then he should have framed the assessment under section 143(3). The provisions of section 143(1)(a) cannot be invoked and the jurisdiction being limited for disallowing only prima facie inadmissible deductions, allowances, etc., the ITO was not justified in sending intimation creating the demand by applying a provision, the application of which itself was disputed one.
In the aforesaid circumstances, the intimation sent by the ITO (Annexure 1) is quashed. The ITO would be free to proceed in accordance with law by providing an opportunity to the assessee and then frame the assessment under section 143(3). The writ petition is allowed accordingly. No order as to costs.
As is evident from the record that while filling the ITR about the applicability of section 115BAA of the Act, the assessee submitted as “No” and the ld. CPC made to “Yes”. This action of the CPC is beyond the scope as he held in above case by our jurisdictional High Court in the above case and thus apparent on record the same is rectifiable u/s 154 of the Act and therefore, we direct the ld. AO to give effect to that application filed by the assessee.
Based on these observations the appeal filed by the assessee is allowed. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 08/05/2025.
Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 08/05/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Dynamic Powertech Pvt. Ltd., Jaipur 2. izR;FkhZ@ The Respondent- DCIT, Circle-04, Jaipur vk;dj vk;qDr@ The ld CIT 3. vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. 6. xkMZ QkbZy@ Guard File (ITA No. 231/JP/2025) vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत