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Facts
The assessee challenged an intimation under section 143(1) making an adjustment of Rs. 28,57,640/- for disallowance of employee's contribution to PF & ESI under section 36(1)(va) without prior intimation. The Addl./JCIT(A) dismissed the appeal, holding that grounds related to the 143(1) order did not survive due to a subsequent assessment under section 143(3), and failed to adjudicate additional grounds, including a claim for deduction under section 80JJAA.
Held
The ITAT found that the Addl./JCIT(A) erred by not adjudicating the grounds challenging the validity of the 143(1) order and the claim for 80JJAA deduction. The Tribunal remanded the case back to the Addl./JCIT(A) for fresh adjudication of all grounds raised by the assessee after giving a proper opportunity.
Key Issues
1. Whether the Addl./JCIT(A) was justified in dismissing the appeal against the intimation u/s 143(1) without adjudicating on the grounds of lack of prior intimation. 2. Whether the Addl./JCIT(A) erred in not adjudicating the additional ground for allowing deduction u/s 80JJAA on income enhanced by disallowance u/s 36(1)(va).
Sections Cited
143(1), 143(1)(a), 143(3), 144B, 250(6B), 36(1)(va), 80JJAA, 80AB, 32, 40(a)(ia), 40A(3), 43(b), 246A, Chapter VIA
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Income Tax Appellate Tribunal, DELHI BENCH “SMC” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD
आदेश /O R D E R This appeal is filed by the assessee against the order of the Ld. Addl./JCIT(Appeals), Mumbai dated 25.05.2024 for the AY 2020-21 arising out of the intimation passed u/s 143(1) of the Income Tax Act, 1961. Assessee raised the following grounds: - 1. “The Addl./JCIT(A) erred on the facts and under the law in not adjudicating ground no.1 wherein the AO, CPC has made adjustment u/s 143(1)(a) of Rs.28,57,640/- in the intimation issued u/s 14391) without giving intimation to the appellant and has not followed the mandate of the first proviso to section 143(1)(a) require which no such adjustment shall be made unless an intimation is given to
the assessee of such adjustment either in writing or in electronic mode issued and the appeal order is silent about the intimation to the appellant. Hence order passed u/s 14391) of the IT Act be quashed.
The Addl./JCIT(A) erred on the facts and in law in not admitting the legal additional ground of appeal duly specifying the reason for omission in filing the appeal without recording any reason in the appeal order and there is a violation of procedure for deciding the appeal in the faceless regime according to the Faceless Appeal Scheme 2021 as notified u/s 250(6B). Therefore, the Addl./JCIT(A) is not justified in dismissing the appeal of the appellant which is arbitrary and against the law.
The Addl./JCIT(A) erred on facts and under the law innot adjudicating the additional ground of appeal for allowing the deduction u/s 80JJAA on the gross total income on the enhancement by the disallowance u/s 36(1)(va) as clarified by the CBDT Circular no.37/2016 dated 02.11.2016 and merely dismissed the appeal by taking another view that subsequently assessment unit passed the assessment u/s 143(3) r.w.s. 144B wherein the AO upheld the disallowance made by the CPC u/s 36(1)(va) and ground of appeal taken u/s 143(1) do not survive without appreciating the facts that since sectin 246A specifically provided for an appeal before the CIT(A) against the intimation u/s 143(1) and accordingly, this appeal is against the order u/s 143(1). Therefore, the Ld.Addl./JCIT(A) is not justified in dismissing the appeal filed against the intimation u/s 143(1) which is arbitrary and against the law.
The Addl/JCIT(A) erred on the facts and inlaw has not adjudicated the additional ground of appeal no.3 raised by the appellant that the deduction u/s 80JJAA be allowed on the gross total income as allowable under the provisions of section 80AB r.w.s. 80JJAA and as clarified by the CBDT Circular no. 37/2016 dated 02.11.2016 which result direct whereas of enhancement of the profit of the eligible business and deduction under chapter VIA is admissible on the profits so enhanced by the disallowance. Therefore, the Addl/JCIT(A) failed to adjudicate additional ground of appeal and merely dismissed the appeal and not considered then principal of natural justice for allowing the statutory deduction u/s 80JJAA on the gross total income assessed u/s 143(1) at Rs.28,57,640/- accepted by the appellant as against the declared nil income which is arbitrary and against the law.
5. The appellant craves leaves to amend or alter any ground or add a new ground which may be necessary.”
Ld. Counsel for the assessee, at the outset, referring to grounds of appeal submits that the Ld.Addl./JCIT(Appeals) did not adjudicate ground no.1 of the assessee which challenged the passing of order u/s 143(1) of the Act without giving intimation to the assessee and not following the mandate of the first proviso to section 143(1)(a) of the Act which requires that no such adjustment shall be made unless an intimation is given to the assessee of such adjustment either in writing or in electronic mode. Ld. Counsel placed reliance on the decision of the Kolkata Bench of the Tribunal in the case of Onkar Society for Engineering and Technological Research and Development Vs. ITO (161 Taxmann.com 773).
The Ld. Counsel for the assessee further submits that the Ld.Addl./JCIT (Appeals) erred in not admitting the legal additional ground of appeal for allowing the deduction u/s 80JJAA on the gross total income on the enhancement by the disallowance u/s 36(1)(va) 3 of the Act. The Ld. Counsel for the assessee placing reliance on the CBDT Circular No.37/2016 dated 02.11.2016 submits that the Board has clarified in its Circular that in the instances where disallowances made u/s 32, 40(a)(ia), 40A(3), 43(b) etc. resulted in increase in profits the assessee is eligible for deduction under Chapter VIA on such enhanced income. Ld. Counsel for the assessee also placed reliance on the decision of the Bangalore Bench of the Tribunal in the case of ACIT Vs. SAP Lab Pvt. Ltd. in ITA No.623/Bang./2016 dated 29.11.2021. Referring to this decision the Ld. Counsel submits that the Bangalore Tribunal considering the circular issued by the Board and also referring to various High Courts including the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. M/s Empact Technology Services Pvt. Ltd. in ITA No.228/2013 dated 11.7.2018, held that the assessee is entitled for chapter VIA deductions on the enhanced profits on account of disallowance made u/s 40(a)(ia) of the Act.
On the other hand, the Ld. DR placed reliance on the orders of the authorities below.
Heard rival submissions, perused the orders of the authorities below. In this case an intimation u/s 143(1) was passed by CPC, Bangaluru on 24.12.2021 making disallowance u/s 36(1)(va) of the 4 Act in respect of employee’s contribution to PF & ESI. Assessee preferred an appeal before the Addl./JCIT(Appeals) and the Addl./JCIT(Appeals)-11, Mumbai by order dated 25.9.2024 disposed off the appeal with the following observations: -
“In this instant case, order u/s 143(3) of the Act vide DIN: ITBA/AST/S/143(3)/2022-23/1045239556(1) dated 06/09/2022 has been passed by assessment unit where disallowance of Rs.28,57,640/- made by CPC u/s 36(1)(va) of the Act has been upheld. Accordingly, the grounds of appeal taken by the appellant for proceedings u/s 143(1) do not survive and are liable to be dismissed.”
As could be seen from the above, the Ld. Addl./JCIT(Appeals)
dismissed the grounds of appeal observing that appeal filed by the assessee against proceedings u/s 143(1) of the Act do not survive and is liable to be dismissed for the reason that the Assessing Officer completed the assessment u/s 143(3) of the Act dated 06.09.2022 upholding the disallowance made by CPC u/s 36(1)(va) of the Act. With these observations the appeal of the assessee was dismissed by the Addl./JCIT(Appeals).
7. It is observed that the ground raised by the assessee in respect of non service of notice and not giving opportunity prior to passing intimation which goes to the very validity of the order passed u/s 143(1) of the Act was not adjudicated. It is also observed that the additional ground, as an alternative, taken by the assessee that deduction under chapter VIA (in the case of the assessee deduction u/s 80JJAA) shall be allowed on the enhanced income on account of disallowance made u/s 36(1)(va) of the Act was not adjudicated.
The reasoning given by the Addl./JCIT(Appeals) for not adjudicating these grounds is not correct and misplaced. The AO while passing the assessment order u/s 143(3) has adopted the assessed income as computed u/s 143(1) of the Act and that does not mean that the grounds raised by the assessee challenging the validity of the order passed u/s 143(1) and the additional ground for allowance of deduction u/s 80JJAA will not survive. Therefore, in my considered view the Addl./JCIT (Appeals) failed to adjudicate the grounds raised by the assessee in the appeal filed against the order u/s 143(1) of the Act probably on a misunderstanding of the provision.
Therefore, since the Addl./JCIT(Appeals) did not adjudicate any of the grounds raised by the assessee this appeal has to go back to the file of the Ld. Addl./JCIT(Appeals) for adjudicating the grounds raised by the assessee in an appeal against order passed u/s 143(1) of the Act. Thus, this appeal is restored to Addl./JCIT(Appeals) with a direction to dispose of the grounds raised by the assessee in accordance with law after providing adequate opportunity to the assessee. Grounds raised by the assessee are allowed for statistical purpose.
In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on 13/12/2024