M/S KOLTE-PATIL INTEGRATED TOWNSHIPS LIMITED,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7, PUNE, PUNE

Facts of the case, in brief, are that the assessee is a company engaged in business of real estate. It filed its return of income on 12.03.2022 declaring total income of Rs.106,62,47,730/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the CPC on 01.04.2022 raising a demand of Rs.2,92,18,160/- on account of short grant of TDS.

Subsequently, the assessee filed a rectification application before the CPC. The CPC in the rectification order dated 11.04.2023 instead of giving any credit for short grant of TDS raised a demand of Rs.16,09,01,080/-.

The assessee filed an appeal before the Ld. CIT(A) / NFAC. It was submitted that the assessee filed its return of income declaring total income at Rs.106,62,47,730/-. The assessee had opted for taxation u/s 115BAA of the Act which was accepted by the CPC in the intimation issued u/s 143(1) of the Act. The assessee filed the rectification application u/s 154 of the Act on account of short grant of TDS. However, the CPC instead of granting any benefit for short deduction of TDS, worked out the tax liability at Rs.16,09,01,080/- by not granting the benefit of section 115BAA of the Act.

It was submitted that the rectification order passed by the CPC without giving any opportunity to the assessee and without assigning any reason for rejection of the option exercised by the assessee to compute its tax liability as per provisions of section 115BAA of the Act is invalid in law. It was argued that the CPC in the preceding assessment year had allowed the option exercised by the assessee u/s 115BAA of the Act. Therefore, when the assessee has not withdrawn the option exercised earlier u/s 115BAA of the Act, the CPC without assigning any reason and without giving any opportunity could not have computed the tax under the normal rate without computing the tax as per section 115BAA.

On the basis of arguments advanced by the assessee, the Ld. CIT(A) / NFAC called for a remand report from the Assessing Officer. However, despite four reminders, the Assessing Officer did not submit any remand report. The Ld. CIT(A) / NFAC, therefore, restored the issue to the file of the Assessing Officer with a direction to verify the claim and pass necessary order by recording as under:

This submission was forwarded to the AO and a remand report was called for on the claim of the appellant vide letter dated 20.04 2024. As there was no response from the AO, reminders dated 06.05.2024, 22.05.2024, 06.06.2024 and 25.06.2024 were issued. However, the AO did not submit any remand report.

On the other hand, the issues raised by the appellant are rectifiable by the AO by calling for the information. Hence, the AO is directed to verify the claim and pass necessary rectification order. The grounds taken by the appellant are partly allowed.”

Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: The following grounds are taken without prejudice to each other- On facts and in law, 1] The Learned CIT(A) erred in directing the A.O. to verify the claim of the assessee company and thereafter passed necessary rectification order without appreciating that the order passed u/s 154 by the learned CPC was totally incorrect in law and hence, the learned CIT(A) himself should have held that the rectification order passed u/s 154 by the learned CPC was invalid in law.

The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the copy of Form No.10-IC filed on 31.01.2021 for the assessment year 2020-21 which is placed at pages 66 to 67 of the paper book. Referring to the copy of the intimation for assessment year 2021-22 he submitted that the CPC has accepted the return filed by the assessee and has accepted the option of the assessee to tax the income at lower rate as per section 115BAA of the Act. However, in the order passed u/s 154 of the Act the CPC without assigning any reason and without giving any opportunity to the assessee has computed the tax liability at normal rate and raised a huge demand of Rs.16.09 crore. He submitted that for assessment year 2020-21 the CPC has accepted the lower rate of tax as per provisions of section 115BAA. Hence, when the assessee filed the application u/s 154 for giving the benefit of short credit of TDS, the CPC instead of giving credit for short deduction of TDS, has determined the tax liability by computing the tax at normal rate. He submitted that when the assessee has not withdrawn the option exercised earlier for assessment year 2020-21, the CPC could not have withdrawn the option exercised for the impugned assessment year without assigning any reason and without giving opportunity to the assessee. He submitted that although the CIT(A) / NFAC has indirectly agreed with the submissions of the assessee, however, instead of deciding the issue, he has restored the issue to the file of the Assessing Officer for verification which is not justified.

So far as the order of the Ld. CIT(A) / NFAC that the issue is rectifiable by the Assessing Officer by calling for information is concerned, he submitted that when the Assessing Officer has himself done injustice to the assessee in the rectification order, there is no point in restoring the issue again to the Assessing Officer without deciding the issue. So far as the issue of granting of less credit for TDS is concerned, he submitted that he has no objection if the matter is restored to the file of the Assessing Officer for giving due credit of TDS after verification.

The Ld. DR on the other hand supported the order of the Ld. CIT(A) / NFAC. He submitted that the assessee should not have any grievance since the Ld. CIT(A) / NFAC had directed the Assessing Officer to verify the claim and pass necessary rectification order.

We have heard the rival arguments made by both the sides and perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC. We find the assessee in the instant case has exercised the option u/s 115BAA of the Act to tax its income at lower rate. The CPC for the assessment year 2020-21 has accepted the option exercised by the assessee and the assessee was taxed at lower rate as per provisions of section 115BAA. For the current year in the original intimation, the CPC has accepted the computation made by the assessee, according to which, net tax payable was computed at Rs.26,83,53,229/-. However, since the CPC had given short credit, the assessee filed an application u/s 154 of the Act. We find the CPC without assigning any reasons and without giving opportunity to the assessee enhanced the tax liability by determining the tax at normal rate as against u/s 115BAA.

We find the provisions of section 115BAA read as under:

There is also no dispute to the fact that for assessment year 2020-21 the option exercised by the assessee u/s 115BAA was accepted by the CPC. Therefore, for the impugned assessment year as per the said provisions, once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year. Since the assessee has not withdrawn its option and not violated any of the provisions, therefore, the CPC in our opinion, was not justified in raising the demand by taxing the assessee at normal rate as against the provisions of section 115BAA. Since all the details were available before the Ld. CIT(A) / NFAC, therefore, the Ld. CIT(A) / NFAC, in our opinion, should not have restored the matter to the file of the Assessing Officer without deciding the issue himself especially when the Assessing Officer did not respond to four reminders issued by him for submission of the remand report. We, therefore, hold that the rectification order passed by the CPC u/s 154 of the Act was invalid in law to the extent of taxing the assessee at normal rate as against the provisions of section 115BAA of the Act. Thus, the grounds of appeal No.1 to 4 raised by the assessee are allowed.

So far as the ground of appeal No.5 is concerned, the same relates to the order of the Ld. CIT(A) / NFAC in restoring the matter to the file of the Assessing Officer for verification of the TDS claim. Since it requires verification at the level of the Assessing Officer, therefore, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC in directing the Assessing Officer to verify the claim and give necessary credit of TDS. We accordingly uphold the order of the Ld. CIT(A) / NFAC on this issue. The ground No.5 raised by the assessee is accordingly dismissed.

In the result, the appeal filed by the assessee is partly allowed.