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This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 20/12/2023 pertaining to Assessment Year 2020-21.
2. In this appeal, the sole ground raised by the assessee relates to non- adjudication of grounds of appeal by the ld CIT(A) which were taken by the assessee in its appeal, namely Ground No. 3, 4, & 5 pertaining to computation of deemed income under section 115JB and MAT credit under section 115JAA of the Act.
3. In this regard, briefly the facts of the case are that the assessee filed its return of income on 26/10/2020 declaring total income of Rs. 12,12,02,26,080/- under normal provisions of the Act and book profit of Rs. 19,05,26,62,664/- under the provisions of Section 115JB of the Act. The return of income was processed by the AO/CPC vide intimation dt. 22/12/2021 under section 143(1) of the Act accepting the returned income under normal provisions of the Act. However declared book profit of Rs. 19,05,26,62,664/- under section 115JB were enhanced by Rs. 201,15,58,023/- on account of provision for deferred tax and book profits were accordingly enhanced to Rs. 21,06,42,20,687/-. Further, as against the MAT credit of Rs. 90,64,10,581/- claimed by the assessee in the return of income, the MAT credit of only Rs. 55,49,51,164/- was allowed by the AO/CPC.
4. Thereafter, the case of the assessee was selected for complete scrutiny under CASS by issuance of notice under section 143(2) dt. 29/06/2021. Thereafter notice under section 142(1) was issued and after calling for the information, explanation from the assessee, the assessment proceedings were completed by the AO passing the order under section 143(3) dt. 19/09/2022 by making an addition of Rs. 14,18,437/- and determining the income under the normal provisions of the Act at Rs 12,26,20,697/- and accepting the book profits of Rs. 19,05,26,62,664/- under section 115JB as so declared by the assessee. However, in the computation of tax demand attached, demand of Rs. 275,30,33,942/- was determined by the AO.
5. The assessee thereafter moved a rectification application under Section 154 dt. 10/10/2022 requesting for rectification of demand by contending that as per the computation attached, demand of Rs. 275,30,33,942/- was erroneously determined and the following mistakes were pointed out by the assessee:
“In the computation of income, deemed income u/s 115JB has been taken wrongly at Rs. 21,06,42,20,687/- instead of Rs. 19,05,26,62,664/- as assessed in the assessment order.
Total tax payable u/s 115JB should have been Rs. 3,32,88,81,221/- on the assessed income of Rs. 19,05,26,62,664/- instead of Rs. 3,68,03,40,638/-.
Deduction u/s 80IA has not been considered while working out the Gross Total Income as per normal provisions of Income Tax.
4. Credit u/s 115JAA has been taken as Rs. 55,49,51,164/- instead of Rs. 90,64,10,578/-.
6. The application so filed by the assessee u/s 154 was considered and partly allowed by the AO vide order dt. 09/05/2023 and his findings in this regard read as under:
“4. In respect of [point No. (1) & (2) above] charging tax by taking deemed income u/s 115JB at Rs. 21,06,42,20,687/-, it is observed from the records that while processing the return-of-income u/s 143(1) the CPC had disallowed an amount of Rs. 201,15,58,023/- on the 'Provisions for Deferred tax' and added back the same to the deemed income u/s 115JB of the Act. As on 'provision for deferred taxes' no deduction is allowable while computing Book Profit under the provisions of section 115JB of the Act, the CPC had rightly made the disallowance. It is further observed from the assessment order that in the assessment order the deemed income u/s 115JB has been wrongly taken at Rs. 19,05,26,62,664/- in place of correct assessable Book Profit Rs. 21,06,42,20,687/-. Therefore, the contention of the assessee is not accepted. However, the mistake apparent from the assessment order in respect of wrongly taken Book Profit at Rs. 19,05,26,62,664/- in place of Rs. 21,06,42,20,687/- is being rectified as under.
5. Regarding the contention of the assessee that deduction u/s 80IA Rs. 5,76,65,01,309/- was not considered in the computation, it is observed from the records that deduction u/s 80IA as claimed was allowed by the CPC u/s 143(1) and also no disallowance of the same was made in the assessment order by the AO NaFAC. However, in the computation-of-income attached with the assessment order the deduction u/s 80IA was remained to be allowed inadvertently. Therefore, the contention of the assessee is accepted and mistake apparent from the records is being rectified as under.
On the issue raised by the assessee that Credit u/s 115JAA was taken as Rs. 55,49,51,164/- instead of Rs. 90,64,10,578/- claimed by the assessee, it is mentioned here that as per provisions to section 115JAA of the Act MAT Credit can be allowed only of the difference of the tax on normal income and tax on book profit. Thus in the case of the assessee, credit u/s 115JAA has been correctly calculated.”
Separately, the assessee moved an appeal before the Ld. CIT(A) on 14/10/2022 and has challenged the action of the AO and has taken the following grounds of appeal, as part of its grounds of appeal before the ld CIT(A):
“3. The Ld. AO has erred in determining the deemed income under section 115JB at Rs. 21,06,42,20,687/- instead of Rs. 19,05,26,62,664/- in the computation sheet.
The Ld. AO has wrongly and arbitrarily worked out the quantum under section 115JAA as Rs. 55,49,51,164/- instead of Rs. 90,64,10,578/-.
That the Ld. AO has made umpteen mistakes in the computation sheet and has wrongly worked out and has issued high pitched demand of Rs. 2,75,30,33,940/- under section 156.”
As per ld. CIT(A), the issue raised by the assessee through Ground No. 3, 4 & 5 are arising out of the adjustment made by the CPC under section 143(1) of the Act and are not emanating from the order passed under section 143(3) of the Act and therefore, the same is beyond the scope of his jurisdiction while adjudicating the appeal filed against the order passed under section 143(3) of the Act. As per the Ld. CIT(A), there is no discussion in the body of the assessment order relating to the book profits or MAT credit therefore the grounds of appeal raised cannot be allowed in the present appeal filed against the assessment order passed under section 143(3) of the Act. At the same time, liberty was granted to the assessee to prefer an appeal against the order under section 143(1) with the condonation of delay in terms of Section 249(3) of the Act if there was misconception that the relevant issues were considered in the assessment order and the order so passed by the AO.
9. Against the said findings and the directions of the Ld. CIT(A), the assessee is in appeal before us.
During the course of hearing, the Ld. AR submitted that the assessee is aggrieved against the order so passed by the AO under section 143(3) of the Act wherein the book profits have been wrongly determined u/s 115JB at higher figure by the AO than as computed by the assessee as so provided in the statute. Further the assessee is aggrieved by non- grant of appropriate MAT credit under section 115JAA of the Act. It was submitted that once the regular assessment proceedings have been initiated and the order has been passed under section 143(3), the earlier proceedings in terms of processing of the return of income as well as the intimation under section 143(1) clearly merges into the assessment order and therefore where certain mistakes has occurred while processing the return of income and the same has been considered by the AO, the mistake continues in the determination of final income and consequent tax liability and therefore while passing the assessment order wherein the AO takes the income as so computed by CPC under section 143(1), the assessee is clearly aggrieved with such action on the part of the AO and therefore the grounds of appeal so taken by the assessee before the ld CIT(A) are clearly emanating from the order so passed by the AO even though there is no specific discussion in the body of the assessment order.
11. It was further submitted that the AO has wrongly determined the deemed income under section 115JB at Rs. 21,06,42,20,687/- instead of Rs. 19,05,26,62,664/- which has been stated in the body of the assessment order. However while computing the tax liability, the same has been wrongly considered at higher figure. It was submitted that the AO has erred by determining the book profit by adding the deferred tax amounting to Rs. 201,15,58,023/- to profit before tax. It was submitted that the assessee has worked out the adjusted book profit on the basis of profit before tax and not on the basis of profit after tax and in this regard, our reference was drawn to the statement of Profit & Loss account alongwith the computation of adjusted book profit and the fact that the same has been verified by the Tax Auditor and duly certified in Form No. 29B of the Act. It was submitted that since the assessee company has determined the book profit prior to any adjustment on account of deferred tax, there is no occasion to add back the deferred tax to profit before tax and therefore the profit before tax without making any adjustment on account of deferred tax as so declared by the assessee company amounting to Rs. 19,05,26,62,664/- needs to be accepted for determining the book profit under section 115JB of the Act. It was further submitted that the AO has erred in not allowing the proposed MAT credit of Rs. 90,64,10,578/- instead of Rs. 55,49,51,164/-.
The Ld. DR is heard who has relied on the order passed by the lower authorities.
We have heard the rival contentions and pursued the material available on record. From the perusal of the assessment order passed u/s 143(3), the AO has determined and assessed the deemed income u/s 115JB at Rs. 19,05,26,62,664/-, however, while determining the tax liability, the deemed income has been taken at Rs 21,06,42,20,687/-. Subsequently, the AO while passing the rectification order u/s 154 has determined the deemed income at Rs 21,06,42,20,687/- and determined tax liability thereon by following the initial determination as so done by CPC u/s 143(1). The intimation u/s 143(1) thus merges with the assessment order passed u/s 143(3) which further merges with the rectification so passed u/s 154 of the Act. Though the statute provides for filing appeal against each of the separate orders so passed by the AO where the assessee feels so aggrieved at each of these stages, however, once the initial order merges with the latter and the latter order comes up for adjudication before the appellate authority, the appellate authority is bound to consider the appeal so filed by the assessee as the assessee continues to be aggrieved with such action of the AO and cannot be left remediless. In light of these admitted facts and legal position, we see no reason for the ld CIT(A) to decide against adjudication of the grounds of appeal so taken by the assessee contesting such action on part of the AO in determining the deemed income at Rs 21,06,42,20,687/- in terms of section 143(3) of the Act.
14. Further, during the course of hearing, our attention was drawn to the profit and loss account of the assessee company and the computation of book profit for the purposes of determining the MAT liability u/s 115JB and we find that for the purposes of determination of adjusted book profit of Rs 19,05,26,62,664/-, the assessee has taken the base profit figure as “profit before tax” of Rs 19,59,36 lacs and not “profit after tax” of Rs 16,51,89 lacs, which has been determined after taking into consideration reversal of provision of deferred tax of Rs. 20,116 lacs. Therefore, even from the perusal of the financial statements and computation of income and which are very much part of the assessment records and forms the basis of the assessment order, the question of any adjustment on account of provision for deferred tax for the purposes of determining the adjusted book profits doesn’t seems to arise for consideration at first place and hence, the same seems to have been wrongly done by the CPC and continued to be followed by the AO while passing the assessment order followed by the rectification order and the ld CIT(A) ought to have decided the grounds so taken by the assessee against such action of the AO. Similarly, the question of allowability of MAT credit u/s 115JAA ought to have been decided by the ld CIT(A) as clearly emanatining from the assessment order so passed by the AO.
In light of the aforesaid discussions and in the entirety of facts and circumstances of the case, we hereby direct the ld CIT(A) to admit the grounds of appeal so taken by the assessee and decide the same by way of a speaking order as per law after providing necessary opportunity to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.