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Facts
The assessee filed a return of income claiming deduction under Section 10AA of the Act. The CPC initially processed the return and issued intimations allowing the deduction. However, in a subsequent rectification order, the CPC disallowed the deduction claimed under Section 10AA without providing any opportunity to the assessee or specifying reasons. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the CPC's disallowance of the Section 10AA deduction in the rectification order was made without granting an opportunity to the assessee and without any apparent mistake on record. The initial intimations had allowed the deduction.
Key Issues
Whether the disallowance of deduction under Section 10AA by the CPC in a rectification order, without providing an opportunity to the assessee, is justified.
Sections Cited
10AA, 43B, 143(1), 154, 234B, 234C
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Income Tax Appellate Tribunal, MUMBAI “C” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI SANDEEP SINGH KARHAIL
Assessment Year : 2019-20 Portescap India Private Limited, The Deputy Commissioner of Unit No. 101, Tower II, Income Tax, SEEPZ SEZ, vs. Circle-2(3)(1), Andheri East, Room No. 552, 5th Floor, Seepz S.O., Aayakar Bhavan, Mumbai-400096. M.K.Road, PAN : AAACK4896K Mumbai-400020. (Appellant) (Respondent) For Assessee : Shri Pranay Gandhi a/w. Shri Lekh Mehta, For Revenue : Shri R.A. Dhyani, CIT-DR Date of Hearing : 17-02-2026 Date of Pronouncement : 05-03-2026 O R D E R PER VIKRAM SINGH YADAV, A.M :
This is an appeal filed by the assessee against the order of the Learned ADDL/JCIT(A)-Kochi [„Ld.CIT(A)‟], dated 20-09-2025, pertaining to Assessment Year (AY) 2019-20.
During the course of hearing, the Ld.AR submitted that the return of income was processed and the CPC, Bengaluru issued intimation u/s. 143(1)(a) of the Act, dt. 10-03-2021 proposing adjustment by way of disallowance of gratuity u/s. 43B of the Act and addition on account of variance in Schedule BP in ITR form and thereafter intimation u/s. 143(1) of the Act was issued on 28-03-2021, wherein the adjustments were made in terms of disallowance of gratuity paid u/s. 43B amounting to Rs. 1,49,35,897/-, addition of Rs. 36,22,327/- on account of variance in Schedule BP in ITR and determined the total income in excess by Rs. 16,82,483/-. It was further submitted that as far as the claim of deduction u/s. 10AA of the Act is concerned, there was no dispute and the same was clearly allowed in terms of intimation so issued by the CPC, Bengaluru vide order dt. 28-03-2021.
It was further submitted that against the said intimation, the assessee moved a rectification application on 31-05-2021 and also filed appeal before the Commissioner (Appeals). The Commissioner (Appeals) disposed- off the assessee‟s appeal vide order dt. 29-02-2024, wherein he has deleted the disallowance of gratuity claim u/s. 43B of the Act. However, the addition of Rs. 36,22,327/- on account of variance in Schedule BP in ITR form was confirmed and the addition to the deemed total income of Rs. 16,82,483/- was also confirmed. It was submitted that against the said order of the Ld.CIT(A), the assessee moved an appeal before the Tribunal and the Co-ordinate Bench of the Tribunal vide order dt. 19-11-2024 has allowed the assessee‟s appeal since the AO had already nullified the demand by issuing a rectification order u/s. 154 r.w.s. 143(1) of the Act, dt. 15-06-2021.
It was submitted that in the rectification order so passed by the CPC, Bengaluru on 15-06-2021 disposing off the assessee‟s application u/s 154, there was disallowance of gratuity paid claimed u/s. 43B of the Act of Rs. 1,49,35,897/- and for the first time, there was disallowance of deduction claimed u/s. 10AA of the Act amounting to Rs. 20,29,52,323/-. Besides that, there was incorrect levy of interest u/s. 234B and 234C of the Act. It was submitted that this is the limited issue under dispute in the present appeal in terms of disallowance of deduction claimed u/s. 10AA of the Act which has been made by the CPC, Bengaluru for the first time while passing the rectification order u/s. 154 of the Act, dt. 15-06-2021.
It was submitted that the assessee thereafter carried the matter in appeal before the Ld.CIT(A), specifically Ground No. 3 was raised before the Ld.CIT(A) in terms of disallowance of deduction of Rs. 20,29,52,323/- allowable u/s. 10AA of the Act. It was submitted that the Ld.CIT(A), however, dismissed the assessee‟s appeal and our reference was drawn to the relevant findings of the ld CIT(A) which are contained in paras No. 5.11 & 5.12 of the impugned order, which read as under: “5.11 To conclude, it is clarified that the present appeal is filed against the Rectification order u/s 154 dated 15.06.2021 passed by the CPC for the A.Y. 2019-20. As discussed in detail and reproduced in the previous paragraphs, it is observed that subsequently, appeal order u/s 250 dated 29.02.2024 was passed by the AddI/JCIT(Appeals)-4, Bengaluru deciding on these appeal issues and Order u/s 154 r.w.s. 250 dated 11.04.2025 was passed by the CIT(Appeals), NFAC, Delhi for the same Α.Υ. 2019-20. 5.12 In view of all the above, as the base intimation u/s 143(1) dated 28.03.2021 has been already decided and appeal order has also been passed on 29.02.2024 as reproduced in para no.5.7 above, and another order u/s 154 r.w.s.250 dated 11.04.2025 has also been passed based on rectification application stating that the appellant has been given relief by Honourable ITAT, Mumbai vide order dated 19th November, 2024, the present appeal for the same A.Y. 2019-20 filed against the CPC's Rectification order u/s 154 dated 15.06.2021 on these appeal issues, becomes infructuous and therefore, the grounds of appeal
of the appellant are dismissed.”
6. It was submitted that against the said order and findings of the Ld.CIT(A), the assessee is in appeal before us.
7. It was submitted that the CPC, Bengaluru while processing the rectification application has not granted any opportunity in terms of section 154 r.w.s. 143(1) of the Act, dt. 15-06-2021 before making disallowance of deduction u/s. 10AA of the Act. It was further submitted that the assessee has filed the return of income within the prescribed due date and has made requisite claim u/s. 10AA of the Act and has filed the necessary documentation/certification in support of thereof and, therefore, the assessee satisfies all the necessary conditions stipulated for claim of deduction u/s. 10AA of the Act and while processing the return of income, where the claim of deduction u/s. 10AA of the Act was allowed to the assessee in terms of intimation u/s 143(1) of the Act, there is no basis for CPC, while passing the rectification order u/s 154 to disallow the deduction claimed u/s. 10AA of the Act and the same will clearly amount to change of opinion and that too without providing necessary opportunity to the assessee. It was accordingly submitted that the disallowance of deduction so claimed by the assessee u/s. 10AA of the Act which has been disallowed by the CPC and summarily upheld by the Ld.CIT(A) be directed to be set aside.
Per contra, the Ld. DR is heard, who has relied on the orders passed by the lower authorities.
We have heard the rival contentions and perused the material available on record. The limited issue under dispute in the present appeal relates to disallowance of deduction claimed by the assessee u/s. 10AA of the Act which has been made by the CPC, Bengaluru while passing the rectification order u/s. 154 r.w.s. 143(1) of the Act, dt. 15-06-2021. During the course of hearing, we have gone through the records with the assistance of the Ld.AR and from perusal of records, it is evident that the assessee has filed its original return of income on 30-11-2019 and revised return of income on 15-07-2020. In the return of income so filed, the assessee has claimed deduction u/s 10AA amounting to Rs. 20,29,52,323/- and has stated that it has furnished audit report in specified form for the purposes of claim of deduction u/s 10AA on 29-11- 2019. The return of income was thereafter processed and the AO/CPC, Bengaluru issued an intimation u/s. 143(1)(a) of the Act dt. 10-03-2021 proposing certain adjustments. It is relevant to note that no proposed adjustment in respect of claim of deduction u/s 10AA was made in terms of the said intimation dated 10-03-2021. Thereafter, the intimation u/s 143(1) was issued on 28-03-2021 by AO/CPC wherein again, there was no adjustment done in respect of deduction so claimed by the assessee u/s 10AA. Infact, the intimation records in affirmative allowing the claim of deduction u/s 10AA so made by the assessee amounting to Rs. 20,29,52,323/-. Thereafter, the assessee moved a rectification application u/s 154 against the said intimation in respect of certain other adjustments and which was disposed-off by AO/CPC in terms of order passed u/s 154 r.w.s. 143(1) where the claim of deduction u/s 10AA has been denied for the first time and that too, without specifying any reasons. It is also a matter of record that no show-cause or notice has been issued by AO/CPC before carrying out such adjustment denying the claim of deduction so allowed initially in terms of intimation u/s 143(1) of the Act. It is therefore clearly a case where there is not just denial of opportunity to the assessee before such claim has been withdrawn, at the same time, no reasons has been specified by CPC in its order u/s 154 as to the reasons for such withdrawal of claim of deduction more so where the same has been allowed initially u/s 143(1) of the Act. We therefore find that there is no material on record which justify such withdrawal of claim of deduction u/s 10AA of the Act and more so any mistake apparent on record which justify such action on part of AO/CPC and such a action therefore deserve to be set-aside and is hereby set-aside. The AO is directed to allow the claim of deduction u/s 10AA as so allowed initially in terms of intimation u/s. 143(1) of the Act and the findings in order passed u/s 154 r.w.s. 143(1) to this extent is thus set-aside.
In the result, the appeal filed by the assessee is allowed in light of aforesaid directions.
Order pronounced in the open court on 05-03-2026
Sd/- Sd/- [SANDEEP SINGH KARHAIL] [VIKRAM SINGH YADAV] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 05-03-2026 TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file
By Order
Dy./Asst. Registrar I.T.A.T, Mumbai