Loading judgment…
Facts
The assessee, NSE Clearing Limited, appealed against the CIT(A) order for AY 2020-21. The CIT(A) had allowed the appeal against the assessment order for statistical purposes, remanding the case to the AO for re-verification. The assessee's grievance was that the CIT(A) should have deleted certain additions/disallowances directly rather than remanding them for verification.
Held
The Tribunal held that the CIT(A) did not exceed its powers by directing the AO to verify certain claims, especially when facts were not fully available. The directions were for verification and potential deletion of additions if found to be double or unwarranted, not for a fresh assessment. The CIT(A)'s order was aimed at ensuring proper effect was given to the assessee's claims.
Key Issues
Whether the CIT(A) exceeded its jurisdiction by directing the Assessing Officer to verify certain claims instead of deciding the issue directly, and whether the additions made under section 143(1) should have been deleted by the CIT(A).
Sections Cited
143(1), 143(3), 143(2), 144B, 139(1), 43B, 36(1)(va), 2(24)(x), 251, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI RAJ KUMAR CHAUHAN, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI
BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI RAJ KUMAR CHAUHAN, JM
ITA No. 3719/MUM/2023 A.Y.2020-21 NSE Clearing Limited Deputy Commissioner of Exchange Plaza, Bandra Income Tax-Circle 7(1)(1), Kurla Complex, Bandra East, Mumbai Mumbai Vs.
(Appellant) (Respondent) PAN AAACN2642L Assessee by Shri Shailesh Shah Revenue by Shri Ashok Kumar Ambastha, Senior Departmental Representative Date of hearing 6 August 2024 7th August 2024 Date of pronouncement
O R D E R PER PRASHANT MAHARISHI, AM:
This appeal is filed by NSE Clearing Limited (the assessee-appellant) for A.Y. 2020-21 against the appellate order passed by the National faceless appeal Centre (NFAC), Delhi (the learned CIT-A) dated 18.8.2023 wherein appeal filed by the assessee against the assessment order passed under section 143(3) of the Income tax Act [ The Act] dated 23.9.2022 was allowed for statistical purposes .
The assessee is aggrieved with the above and has preferred following grounds of appeal:-
1.(a) The Id. CIT(A), NFAC ought to have deleted the following additions/disallowances of Rs. 19,48,55,580/- made by the learned Assessing Officer (Id. AO) being additions/disallowances made vide intimation u/s. 143(1) dated 20.09.2021 while determining the total assessed income in the assessment order passed u/s 143(3) r.w.s 144B of the Act:
(i) amount of Rs. 1,03,93,212/- added twice to the returned income of the appellant;
(ii) amount of Rs. 5,71,518/- employee's contribution to PF deposited within the due date of relevant Fund and Rs. 9,581/- paid before due date of filing of return of income u/s. 139(1) of the Act;
(iii) amount of Rs. 18,38,81,269/- being expenses claimed as per clause 26(i)(B)(a) of appellants tax audit report have been paid on or before the due date for filing the return of income and as such allowable u/s. 43B of the Act.
(b) The Id. CIT(A), NFAC erred in remanding back and directing the ld. AO to re- verify the facts whether:
(i) an amount of Rs. 1,03,93,212/- has been added twice and if so, recompute total income after giving effect as claimed by the appellant;
(ii) an amount of Rs. 5,81,099/- being employees' contribution to PF has been deposited in time or not and if the same has been done before due date so then recompute the total income as claimed by the appellant.
(iii) an amount of Rs. 18,38,81,269/- after checking that all the expenses claimed as per clause 26(i)(B)(a) of appellants tax audit report have been paid on or before the due date for
filing the return of income, and recompute the total income of the appellant accordingly which is beyond the scope and jurisdictional power of ld. CIT(A), NFAC.
(d) The Id. CIT(A), NFAC ought to have deleted the addition/disallowances amounting to Rs. 19,48,55,580/- having accepted the appellant's claim and not doing so is wrong and incorrect.”
The brief facts of the case shows that the assessee is a company formerly known as National Security Clearing Corporation Limited, [ Assessee / Appellant ] filed its return of income on 11.02.2021 declaring total income of Rs. 3,07,91,65,620/- as per normal computation provisions. This return was processed under section 143(1) of the Act on 20.09.2021, wherein the total income of the assessee was determined as Rs. 3,27,40,21,200/-. Certain adjustments were made by the CPC.
Meanwhile, the case of the assessee was picked up for scrutiny by issue of notice under section 143(2) of the Act on 29.6.2021. The case of the assessee was selected for complete scrutiny on eight different aspects. During the course of scrutiny assessment, it was found that the assessee has claimed deduction of health and education cess of Rs.2,75,19,366/-. The learned Assessing Officer disallowed the same and computed the total income of the assessee at Rs. 330,15,40,566/-. The computation of income started by learned Assessing Officer from total income computed under section 143(1)(a) of the act determined at Rs. 3,27,40,21,200/-.
The assessee preferred an appeal before the learned CIT (A) wherein the assessee contested that the learned Assessing Officer during the course of hearing of assessment proceedings reiterated the addition which were already made in the intimation under section 143(1) of the Act as ld Ao computed the income starting
from income determined u/s 143(1) (a) of the Act. The claim of the assessee was that a
sum of Rs.1,03,93,212/- being the amount of income from usage charges under the head ‘Revenue from Operation’ has been added to the total income of the assessee twice.
The second contention was that a sum of Rs.5,71,518/- being contribution to the fund was added on account of provisions of section 36(1)(va) read with section 2(24)(x) of the Act without appreciating the fact that such amount is deposited before the due date of the respective fund and there was no delay in depositing the employees contribution.
The third contention was with respect to the addition under section 43B of the Act amounting to Rs.18,38,81,269/- which are paid on or before the due date of the filing of the return of income.
The assessee was heard on these point by the learned CIT (A). As per ground no. 3 before him, the assessee contested that addition made by the intimation dated 20.09.2021 passed under section 143(1) are also made by the learned Assessing Officer for the reason that the computation of total income was initiated by the learned Assessing Officer as per income determined in the intimation. Thus, an addition of Rs. 19,48,55,580/- already made in the intimation was repeated in the assessment order without looking at the fact that same are not disallowable.
The learned CIT (A) examined the each of the issue and considered the reply furnished by the assessee 9.08.2023.
The learned CIT (A) noted that
i. sum of Rs. 1,03,93,212/- user charges are already included in the income offered by the assessee under the head ‘Other Operating Revenue’ totaling to Rs. 1,86,29,85,845/- whereas the Central Processing Centre has calculated the other operating Revenue of Rs. 1,87,33,79,057/-. Thus there is a difference of Rs 1,03,93,212/-. Thus, there is a double addition of Revenue of Rs. 1,03,93,212/-. The learned CIT (A) vide paragraph no. 6.3 directed the Assessing Officer to verify whether the above amount has been added twice and if so then re-compute the total income after giving effect as claimed by the assessee.
ii. On second issue of disallowance of employees' contribution to the Provident Fund amounting to Rs. 5,71,518/- which has been added by the CPC, assessee submitted that the contribution of the above sum for the month of March, 2020 was deposited on 8.04.2020 wherein the due date for deposit of the same was 15.05.2020, therefore, the addition was wrongly made. The learned CIT (A) held that this is a matter of fact and the Assessing Officer is directed to verify and if the employees contribution to Provident Fund has been deposited in time, then re-compute the total income as claimed by the assessee.
iii. On the third issue, the assessee submitted that the learned CPC made disallowance under section 43B of the Act of Rs. 19,76,22,524/-. The assessee itself has made disallowance of Rs.1,37,41,255/- and balance sum of Rs.18,38,81,269/- has already been deposited before the due date of furnishing of the return of income. The learned CIT (A) held that Assessing Officer is directed to verify the claim of the assessee and verify if all the payments amounting to
Rs.18,38,81,269/- are paid before the due date of the filing of the return of income. The addition is required to be deleted and income requires to be re-computed. Further, a sum of Rs. 1,37,41,255/- which has already been disallowed by the assessee is required to be deleted if the same is disallowed by the assessee.
Thus, on all the claims of the assessee, the learned CIT (A) directed the Assessing Officer to verify the claim of the assessee and grant deduction if there is a double disallowance. The appellate order was passed on 18.08.2023.
The assessee is aggrieved with the above appellate order. The grievance of the assessee is that the learned CIT (A) has set aside this issue to the file of the learned Assessing Officer for verification. It was submitted that the learned First Appellate Authority has not power to set aside but to decide the issue. Here the learned CIT (A) has exceeded his power by directing the Assessing Officer to verify the fact and grant deduction. The learned Authorized Representative submitted that the learned CIT (A) should have deleted the addition and could not have directed the learned Assessing Officer for verification. To support his case, he referred to the decision of the Hon'ble Calcutta High Court in the case of Arun Kumar Bose vs. ITO 158 taxman.com 282 stating that Hon'ble Calcutta High Court covers the issue in favour of the assessee.
The learned Departmental Representative vehemently submitted that learned CIT (A) has not set aside the issue back to the file of the learned Assessing Officer but has directed to learned Assessing Officer to re-compute the total income, if there is a double disallowance. He submitted that there are many judgments of the various Courts including the Hon'ble High Courts, wherein the direction to the verification of the facts by the Assessing Officer is not violative of powers under section 251 of the Act. He otherwise
submitted that the assessee has challenged the addition which were not part of the assessment proceedings under section 143(3) of the Act but were part of adjustment under section 143(1)(a) of the Act. As complete details were not available before the learned CIT (A), he did not have any other option but to direct the Assessing Officer for verification of the same.
The learned Authorized Representative vehemently submitted that the Hon'ble Calcutta High Court has considered the issue of verification. Therefore, even for verification, the CIT (A) could not have directed the Assessing Officer under section 251 of the Act.
We have considered the rival contention and perused the order of the learned lower authorities. We have also carefully considered the judicial precedent cited before us.
The fact of the case shows that in the present case, the return filed by the assessee on 11.02.2021 was processed under section 143(1) of the Act on 20.09.2021 and income returned by the assessee of Rs. 307,91,65,620/- was adjusted to Rs. 327,40,21,200/-. Thereafter the assessment proceeding by issue of notice under section 143(2) was made. Before us, the addition made in the in the assessment proceedings under section 143(3) are not in dispute, but the additions disputed are covered in adjustment made u/s 143 (1) (a) of the Act. The computation of income made by the learned Assessing Officer commenced with the total income as computed under section 143(1)(a) of Rs. 327,40,21,200/-. Before the learned CIT (A), assessee agitated the difference between returned income of Rs. 307,91,65,620/- against assessed income under section 143(1)(a) of Rs. 327,40,21,200/-. The claim of the assessee was that addition made by the Central Processing Centre was a double addition which are already disallowed or are not disallowable. The assessee submitted that income from usage charges of Rs. 1,03,93,212/- was already included in the Other Operating Revenue
of Rs. 186,29,85,845/- whereas CPC has determined the Other Operating Revenue of Rs. 187,33,79,057/- resulting into a difference of Rs. 1,03,93,212/-. Therefore, it was claimed that this is a double addition of the income which is already offered by the assessee. Ld CIT (A) directed ld AO to verify and delete the addition. The second issue was the Provident Fund employee’s contribution amounting to Rs. 5,71,518/- of March, 2020 which were deposited on 8.4.2020 whereas the due date was 15.5.2020 has been added by the CPC. Thus, there is no delay and same should not have been added by CPC. The learned CIT (A) directed the Assessing Officer to verify that if such payment is made on the dates specified by the assessee, the addition should be deleted. On the issue of section 43B disallowance, it was submitted that Rs. 19,76,22,524/- were outstanding as on the last day of the accounting year. However, before the due date of the furnishing of the return, Rs.18,38,81,269/- was already deposited and therefore, there could not have been disallowance on that count. Further, assessee itself has disallowed Rs. 1,37,41,255/- under section 43B of the Act. Therefore, Rs. 19,76,22,524/- is wrongly added to the total income. The learned CIT (A) directed the Assessing Officer to delete the disallowance of Rs. 18,38,81,269/- if deposited before the due date of filing of the return of income and also to delete the balance disallowance of Rs. 1,37,41,255/- if already disallowed by the assessee in its computation of total income.
Therefore, in principle, the learned CIT (A) agreed with the contention of the assessee that if there is a double disallowance, such disallowance deserves to be deleted however, as the disallowance relates to the processing of the return and not arising in assessment order under section 143(3) of the Act, he directed ld AO to verify the facts.
According to section 251 of the Act, with effect from 1/06/2001 , the learned CIT (A) is not empowered to set aside the issue back to
the file of the learned Assessing Officer. However, when the facts are not available before the learned CIT (A) or in any case, certain verifications are required to be done, the learned CIT (A) is not prohibited in directing the Assessing Officer to verify the factual aspect and allow the claim of the assessee. We find that all the above additions contested by the assessee are part of order under section 143(1) of the Act. Admittedly, assessee did not file any appeal against such intimation. The appeal of the assessee is against the assessment order passed under section 143(3) of the Act where these additions were not questioned. Same were also not contested by the assessee before ld AO. When the Assessing Officer computed the total income, naturally he started the computation by taking the income already determined under section 143(1)(a) of the Act. In the present case, the learned CIT (A), as Assessing Officer was not aware about such additions, directed him to verify and grant deduction. To our mind, there is no error in the order of the learned CIT (A). He merely entertained the contention of the assessee of the double addition and asked the Assessing Officer to verify and then delete. In the present case, assessee opted to press for deletion of the addition which were part of intimation under section 143(1)(a) of the Act and not part of the issues in assessment proceedings u/s 143 (3) of the Act. Thus, we do not find that the learned CIT (A) has set aside the assessment but in fact he allowed the appeal of the assessee, subject to contention raised by the assessee before him to be verified by the Assessing Officer. We find that the findings of the learned CIT (A) are categorical to delete the addition, if whatever assessee says is correct on verification.
Reliance on the decision of the Hon'ble Calcutta High Court by the assessee is misplaced because in that case, as per Paragraph No.1 (ii), the learned CIT (A) directed the Assessing Officer to delete the addition as being unsustainable but subject to enquiries conducted by the Assessing Officer. Therefore, in that case, there was a
remand of the case back to the Assessing Officer with a direction to make enquiries, as may be necessary. In the present case, there is no enquiry to be made but to delete the addition after verification. Thus, the facts of the case before us are distinguishable. Further, there are several judicial precedents of the Hon'ble High Courts wherein mere verification by the Assessing Officer is not violative of provisions of section 251 of the Act. The leading amount of such judicial precedent is of Hon'ble Gujarat High Court in CIT vs. Shri Rama Multi Tech Limited in 35 taxman.com 513.
Amendment to section 251 of the Act was made by the Finance Act 2001 which was explained in Circular No. 14-Income Tax Dated 9- 11-2001 as under :-
Powers of the Commissioner (Appeals) not to include powers to set aside the assessment
78.1 Under the existing provision contained in sub-section (1) of section 251 of the Income-tax Act, in an appeal filed before a Commissioner (Appeals) against an order of assessment, the Commissioner (Appeals) may confirm, reduce, enhance or annul the assessment, or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by him, after making such further enquiry as may be necessary. With a view to help bringing about an early finalisation to the assessment and to avoid prolonging the process of litigation, the Act has amended section 251 so as to provide that, in an appeal filed before the Commissioner (Appeals), against an order of assessment, the Commissioner (Appeals) may not set aside the assessment and refer the case back to the Assessing Officer for making fresh assessment. The Commissioner
(Appeals) continues to have the powers under section 250 of making further inquiry, or directing the Assessing Officer to make further inquiry and report the result of the same to him, which can be made use of in appeals needing further enquiry or gathering of additional facts or evidence.
78.2 This amendment will take effect from 1st June, 2001.
The issue before us is not that ld CIT (A) has directed the ld AO to make a fresh assessment but verification only.
However, the real grievance of the assessee is that though the learned CIT (A) has passed the order on 18.08.2023 but still the Assessing Officer has not conducted any such verification and has not passed the order giving effect of the appellate order of the learned CIT (A). Therefore, in the interest of justice, Assessee is directed to furnish the information before the ld AO within 30 days of the date of this order to demonstrate that the addition/ disallowance are double addition or not warranted and we direct the Assessing Officer to pass an order giving effect to the order of the learned CIT (A) within 30 days thereafter.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 7/08/2024.
S Sd/- Sd/- jdjdj (RAJ KUMAR CHAUHAN) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 7.08.2024 sh(on tour) Copy of the Order forwarded to :
The Appellant, The Respondent, The CIT, The DR ITAT & Guard File BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai