AON CONSULTING PRIVATE LIMITED,NEW DELHI V. DCIT, CIRCLE-1(1), DELHI

ITA 739/DEL/2022

AI Insights

The case involves AON Consulting P. Ltd., which appealed against the assessment order concerning Transfer Pricing adjustments and certain corporate tax disallowances. The primary contention was regarding the selection of comparable companies for benchmarking the arm's length price of international transactions in software development services. The Tribunal found merit in including Sasken Communication Technologies Ltd. as a comparable and excluded others like Wipro Ltd. and Tata Elxsi Ltd. due to functional differences. Additionally, the Tribunal addressed the disallowance under section 14A read with rule 8D, directing a re-computation by the Assessing Officer. However, it dismissed the appeal concerning the adjustments made under section 143(1) and the initiation of penalty proceedings under section 270A.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298802 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2017-2018
• Other Referred Cases: PCIT vs. Oracle (OFSS) BPO Services P. Ltd., Assistant CIT vs. Vireet Investments (P) Ltd., Agilent Technologies (International) P. Ltd. vs DCIT, Emerson Electric Company (India) P. Ltd. vs. ACIT, Globallogic India P Ltd. Vs DCIT, Intuit India Product Development Centre P Ltd vs DCIT, Microsoft India (R&D) P. Ltd. vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S RAJESH KUMAR; RAJESH KUMAR DHANESTA
• Assessee Lawyers: DARPAN KIRPALANI
• Keywords: Transfer pricing; International transaction; Depreciation; TDS; Earning of tax free income; Initiation of penalty proceedings; Validity of assessment; Rule 8D
• Section: 143(3); 154; 143(1); 32; 13; 14A; 43B

Judgement Text

"आयकर अपीलीय अिधकरण िदʟी पीठ “आई”, िदʟी ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं ŵी Ůदीप क ुमार क ेिडया, लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER आअसं.739/िदʟी/2022(िन.व. 2017-18) ITA No. 739/DEL/2022(A.Y.2017-18) M/s AON Consulting P. Ltd., Aon Centre, 9th to 11th, Building No.2, Unitech Realty Projects Ltd., (SEZ), Village Tikri, Sector 48, Gurgaon, Haryana 122001 PAN: AAHCA-0739-J ...... अपीलाथᱮ/Appellant बनाम Vs. Deputy Commissioner of Income Tax, Circle 1(1), Delhi ..... ᮧितवादी/Respondent Assessee by : Shri Darpan Kirpalani, Advocate Department by : S/Shri Rajesh Kumar & Rajesh Kumar Dhanesta, Sr. DR सुनवाई कᳱ ितिथ/ Date of hearing : 17/01/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : : 09/04/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed the assessment order dated 22.02.2022 passed u/s. 143 r.w.s. 144C(13) r.w.s 144B of the Income Tax Act,1961(hereinafter referred to as ‘the Act’). 2. The assessee in appeal has assailed Transfer Pricing adjustment made in respect of Software Development Services segment. The assessee has also assailed some additions on corporate issue, viz. disallowance made u/s. 14A r.w.s. 8D and additions based on intimation u/s. 143(1) of the Act. 2 ITA No.739/Del/2022 (AY 2017-18) 3. The assessee by way of application dated 01.09.2023 has raised additional ground of appeal challenging validity of assessment order without DIN. Shri Darpan Kirpalani, appearing on behalf of the assessee at the outset made statement at Bar that the assessee does not want to press Application for admissions of Additional ground of appeal. Thus, in light of above statement made by the ld. Counsel for the assessee, the application (supra) for admission of additional ground is dismissed. 4. The facts of the case in brief as emanating from records on merits are: The assessee is engaged in providing risk management services, insurance and re- Insurance, brokerage and Human Resources services, etc. under software development service segment. The assessee is also providing back office support services to its Associates Enterprises (AE’s) all over the globe. The assessee/appellant is captive services provider. During the period relevant to assessment year under appeal the assessee entered into several international transactions with its AE’s. The Transfer Pricing Officer (TPO) accepted all international transactions except international transaction of Software Development and Training Services and IT Enabled Services (ITeS). The assessee filed objections against the TP adjustment made by the TPO, before the Dispute Resolution Panel (DRP). The DRP vide directions dated 17.01.2022 upheld TP adjustments qua Software Development and Training Services and deleted adjustment made by TPO under ITeS segment. 5. Shri Darpan Kirpalani, appearing on behalf of the assessee submits that the assessee had entered into international transaction aggregating to Rs.93,40,78,783/- under Software Development & Training Segment. The 3 ITA No.739/Del/2022 (AY 2017-18) assessee applied Transactional Net Method (TNMM) to bench mark international transaction. The Profit Level Indicator-operating profit/total cost (OP/TC) is 15.38%. The assessee selected ten companies as comparables having average margin of 10.43%. The TPO accepted TNMM as the most appropriate method to bench mark international transaction, however, the TPO rejected six companies from list of comparables selected by the assessee and introduced nine fresh companies as comparables. Thus, taking the total count of comparable companies to thirteen having average margin of 23.66%. Thus, the TPO made adjustment of Rs.6,24,36,385/- in respect of Software Development and Training Services segment. The list of comparable companies finally selected by the TPO is as under:- S.No Company Name OP/OC 1 Akshay Software Technologies Ltd. -3.13% 2 Evoke Technologies P. Ltd. 4.93% 3 E- Zest Solutions Ltd. 10.86% 4 C G-V AK Software & Exports Ltd. 14.18% 5 Larsen & Tourbo Infotech Ltd. 19.32% 6 Exilant Technologies P Ltd. 19.55% 7 Tata Elxsi Ltd. 23.66% 8 Wipro Ltd. 24.05% 9 Infobeans Technologies Ltd. 24.74% 10 Infosys Ltd. 36.39% 11 Cybage Software Pvt. Ltd. 64.91% 12 Cybercom Datamatics Information Solutions Ltd. 73.08% 13 E-Infochips Pvt. Ltd. 76.37% 6. The ld. Counsel for the assessee submits that the assessee is seeking exclusion of Larsen & Toubro Infotech Ltd., Tata Elxsi Ltd., Wipro Ltd., Infosys Ltd. and Cybercorn Datamatics Information Solutions Ltd. and inclusion of Sasken Technologies Ltd., the company originally selected by the assessee in TP study report, in the final list of comparable companies. 4 ITA No.739/Del/2022 (AY 2017-18) 7. The ld. Counsel for the assessee submits that the TPO had excluded Sasken Technologies Ltd. from the list of comparables on account of functional disparity. The DRP while deciding objections of the assessee held that part of services provided by the company can be considered to be in the nature software support services and directed the AO/TPO to verify, if the segmental information in respect of company is available and if the company passes all the filters, the AO/TPO shall pass speaking order in this regard. Thus, in principle the DRP accepted that activities of Sasken are not functionally different from that of the assessee. The TPO while giving effect to directions of the DRP without even looking at the financials of Sasken Technologies Ltd. and in violation of directions of the DRP excluded the company from the list of comparables holding the company as functionally dissimilar. The ld. Counsel submits that segmental financial results of Sasken Technologies Ltd. are available in public domain. The DRP had directed the TPO/AO to verify segmental information. Referring to segmental data of Sasken Technologies Ltd. at page 33 of the paper book containing Annual Reports of the comparable companies, he submitted that the TPO has not complied with the directions of DRP. The ld. Counsel thus, prayed for including Sasken in the list of comparables. 8. The ld. Counsel for the assessee also made submissions for exclusion of certain companies from the list of comparables finalized by the TPO. The submission of the ld. Counsel for exclusion of companies are as under:- Wipro:- 8.1. The activities of the company are diversified: Range of service include digital strategy advisory, customer centric designing, IT consulting, custom 5 ITA No.739/Del/2022 (AY 2017-18) application design, re-engineering and maintenance, system integration, global infrastructure services, business process services, hardware and software design, etc. The company does not provide segmental information of IT services and software development. He further submitted that during the period relevant to assessment year under appeal there was a peculiar economic circumstances i.e. extraordinary event-the company had acquired Appirio, a leader in cloud application services. The ld. Counsel further pointed that in AY 2007-08, the Tribunal in assessee’s appeal in ITA No. 5736/Del/2011 vide order dated 31.05.2022 had held that Wipro Ltd. is not functionally comparable with the assessee. Tata Elxsi Ltd:- 8.2. The ld. Counsel pointed that the DRP vide directions dated 17.01.2022 had observed that the said company is broadly similar in functions and hence, it can be considered as a good comparable provided segmental data in respect of ITeS segment is available and directed AO/TPO to verify and pass order accordingly. The TPO, while giving effect to the directions of the DRP, has not given any observations with regard to availability of segmental data. The ld. Counsel referred to financials of Tata Elxsi Ltd. at page 67 and 68 of the paper book and pointed that segmental information is available only limited to the extent of two broad business segments i.e. (i) System Integration and Support; and (ii) Software Development and Services. The segment of software development services in the case of Tata Elxsi includes hardware design, hence, it is not comparable to a simple software development services, the functions performed by the assessee. 6 ITA No.739/Del/2022 (AY 2017-18) Infosys Ltd:- 8.3. The ld. Counsel referring to the DRP directions submitted that the DRP held that the company can be considered as a good comparable under TNMM. However, the TPO and the DRP failed to take note of fact that the company provides IT services comprising of application development and maintenance, independent validation, infrastructure management, engineering services including product engineering and life cycle solutions and business process management, etc. As regards segmental details only Revenue from Software Services is reported. Given the fact, that the company has diversified portfolio in software services, segment information pertaining to software development is not available in the audited financial results. The ld. Counsel placed reliance on the decision rendered in the case of Intuit India Product Development Centre P Ltd vs DCIT in IT (TP)A No. 956/Bang/2022 for AY 2017-18, wherein the Tribunal vide order dated 29.04.2024 has rejected the said company as comparable to a company engaged in the provision of software development services. Larsen & Toubro Infotech Ltd:- 8.4. The ld. Counsel for assessee submits that the company is engaged in diversified activities which include application development, maintenance and outsourcing enterprises solutions, infrastructure management services, testing digital solutions and platform base solution. No segmental information pertaining to software development services is available in Audited financial results of the company. The said company reported two business segments i.e. Service Cluster and Industrial Cluster. Service cluster includes banking and financial services, 7 ITA No.739/Del/2022 (AY 2017-18) insurance, media and entertainment, travel and logistics and health care and others. Therefore, the said company is functionally different. Cybercom Datamatics Informational Solutions Ltd:- 8.5. The ld. Counsel for the assessee submits that the company acts as consultant and advisor on information internet systems surveyors of information services. The said company also markets and manufactures IT products, software & hardware system for telecom and other industries. The business profit mentioned by TPO in his order is sourced from a third party website. A perusal of audited financials of the company would make it clear that the company provides technical and software services and also markets IT products, software and hardware systems to the telecom and other industries. He referred to Balance Sheet and Profit and Loss account of the company as on 31.03.2017 at pages 258 and 259 of the paper book. The ld. Counsel submitted that due to lack of segmental details, the revenue from software development services is not available in the Audited Financial Statements. He further pointed that the said company has earned super normal profits during the relevant period as the margin earned by Cybercom Datamatics Informational Solutions Ltd. as computed by the TPO is 74.23% which is substantially higher than the other comparables. The ld. AR referred to the decisions rendered in the case of Globallogic India P Ltd. Vs DCIT, in ITA no 868/Del/2021 for AY 2016-17, where the said company has been excluded from the list of comparables. He further referred to the decision rendered in the case of Agilent Technologies (International) P. Ltd. vs DCIT, in ITA no. 6727/Del/2019 and in the case of Emerson Electric Company (India) P. Ltd. vs. ACIT, 116 taxmann.com 614(Mum) in support of his contentions. 8 ITA No.739/Del/2022 (AY 2017-18) 9. Per contra, Shri Rajesh Kumar CIT(DR) representing the department vehemently defending the impugned order prayed for dismissing appeal of the assessee. The ld. DR submits that Wipro Ltd. is providing software services and its segmental details are available. He referred to the Annual Report of the company at page no. 137 and 138 of the paper book. As regards extraordinary events in the life cycle of the company during the relevant period, the ld. DR submits that the assessee has failed to substantiate that acquisition of a company by Wipro has made any impact on the financials of the company. 9.1. With regard to Tata Elxsi Ltd., the ld. DR submits that segmental data is available. The said company is providing purely software development services. Referring to the decision of Tribunal in the preceding assessment year in assessee's own case, the ld. DR submits that if DRP directions are not followed, the issue can be restored to the AO. As regards Infosys and L & T, the DR placed reliance on findings of the TPO and the DRP. Findings on Transfer Pricing Issue:- 10. We have heard the submissions made by rival sides and have examined the orders of the authorities below. We have also considered various documents including Annual Reports of the companies on which the ld. Counsel for the assessee has vehemently placed reliance to buttress his arguments for exclusion of companies from the list of comparables. In so far as selection of TNMM as the most appropriate method, there is no dispute. The TPO has accepted the same. The bone of contention between the rival sides is only the companies selected by the TPO as comparable. Our observations with regard to inclusion/exclusion of said companies is as under:- 9 ITA No.739/Del/2022 (AY 2017-18) Inclusion of Sasken Communication Technologies Ltd:- The assessee is seeking inclusion of company in the final list of comparable Companies. The primary contention of the assessee is that the DRP has given a finding that part of the services provided by the company can be considered to be in the nature of software support services, similar to functions of the assessee. The DRP directed the AO/TPO to verify if, the segmental information in respect of the company is available and if, the company passes all the filters, to pass the order accordingly. We find that while giving effect, the TPO did not follow DRP directions. Contrary to the findings of DRP, the TPO held that the company has a different functional profile. As per directions of the DRP the TPO was required to examine segmental revenue information. In so far as functional compatibility, the DRP had decided the issue in favour of the assessee. The assessee has placed before us Annual Report of the company for the Financial Year 2016-2017. A perusal of financial statement at page 33 of the paper book shows that segmental information is available with regard to revenue of the company. A perusal of segmental profit and loss statement shows that the company has shown revenue from two segments i.e. Software Services and Software Products. Likewise segmental profits from Software Services and Software Products are also reflected in the segmental statement of profit and loss account of the company. Considering directions of the DRP and the fact that segmental information is available, we find merit in the submissions of the assessee. Ergo, Sasken Communication Technologies Ltd. is directed to be included in the final list of comparables. 10 ITA No.739/Del/2022 (AY 2017-18) Assessee seeking exclusion of:- Wipro Ltd:- A. The TPO and the DRP have held that Wipro Ltd. is functionally comparable to the assessee. The said company is engaged in providing range of services which included digital strategy advisory, customer centric design, technology consulting, IT consulting, custom application design, development, re-engineering and maintenance, system integration, package implementation, global infrastructure services, business process service, cloud mobility and analytic services, research & development and hardware & software design. Thus, the said company is engaged in providing ITeS as well as software development services. A perusal of segmental information disclosed by the company in its Annual Report at page 137 of the paper book reveals that the company has broadly categorized its revenue from two segments i.e. IT Services and IT Products. There is further categorization in IT Services. However, no segmental details of software development services is available in the financial results of the company. Further, Wipro Ltd. enjoys brand value and has incurred significant expenditure on advertising and brand building. The Hon’ble Delhi High Court in the case of PCIT vs. Oracle (OFSS) BPO Services P. Ltd. reported as 416 ITR 54 (Delhi) has held that brand value of entity has a significant role in its ability to garner profits and negotiate contracts thus, even though functionally two entities may be similar but brand does play its own role in price or cost determination and hence, they would be incomparable. Considering, lack of availability of segmental information and a substantial 11 ITA No.739/Del/2022 (AY 2017-18) difference in brand value of the company, we are of considered view that Wipro Ltd. is not a good comparable to the assessee/appellant. Tata Elxsi:- B. The TPO and the DRP has held Tata Elxsi Ltd. as good comparable to the assessee/appellant. However, the DRP has observed that if segmental data in respect of ITeS segment is available, the TPO after verification include/exclude the said company in list of comparables. The TPO while giving effect to the directions of the DRP, without deliberating on segmental data has included Tata Elxsi Ltd. in the final list of comparables. No finding was given by the TPO with regard to availability of segmental information. The assessee has placed on record Annual Report of Tata Elxsi Ltd. for Financial Year 2016-17. A perusal of segmental information at page 67 and 68 of paper book reveals that the company has broadly split its Revenue in two segments i.e. System Integration Support and Software Development Services. As per Note 16 (notes forming part of the financial statements), under the head revenue from operations, the software development services segment comprising of product design and graphic animation and gaming, system integration and support are mentioned. The services rendered by Tata Elxsi Ltd. under service segment are not comparable to the assessee which is providing software development service to its AE’s as captive service provider. In addition to the above Tata Elxsi Ltd. has substantial brand value, in light of decision in the case of PCIT vs. Oracle (OFSS) BPO Services P. Ltd. (supra) the said company is liable to be rejected on this score alone. For aforesaid reasons, Tata Elxsi Ltd. is directed to be excluded from the list of comparables. 12 ITA No.739/Del/2022 (AY 2017-18) Infosys Ltd:- C. The TPO and the DRP have held that software development services provided by Infosys Ltd. are similar to that of the assessee, hence, it can be considered as a good comparable. The assessee has placed on record extracts of annual report of the company at page 145 of the paper book. A perusal of the same revels that Infosys Ltd. is engaged in providing host of comprehensive hand to hand business solution which includes: •Business application services - Enterprise system implementation and services, digital solutions and services, data analytics and business process management •Technology services - Application development, modernization and management, cloud infrastructure and security, engineering services, enterprise mobility, Internet of Things (loT) and software testing •Outsourcing services - Application outsourcing, business process outsourcing including customer service, finance and accounting, human resources, sourcing and procurement process outsourcing •Products and platform solutions include the Edge suite of products, Skava, Panaya and Finacle, an industry-leading universal banking solution. The said company has reported segmental profitability under the heads financial services, manufacturing, energy and utilities, communications and services, retail, consumer packaged goods and logistics, life sciences, healthcare & insurance and combined revenue of all other segments. There is no segmental data available for Software Development Services. Therefore, in our considered 13 ITA No.739/Del/2022 (AY 2017-18) view Infosys Ltd. cannot be considered as good comparable of the assessee. Functional disparity is evident from segmental reporting. Further, assessee is captive service provider, whereas, Infosys Ltd. is a giant company operating in the areas of development of software assuming risk leading to higher profits. In light of above observations, the TPO is directed to exclude Wipro Ltd. from the list of comparables in the instant case. Larsen & Toubro Infotech Ltd:- D. The assessee is seeking exclusion of company on account of functional differences and non availability of segmental data. A perusal of Annual Report of company for Financial Year 2016-17 at pages 188 to 242 of the paper book reveals that the said company is providing extensive range of IT services like application development, maintenance & outsourcing, enterprise solutions, infrastructure management services & testing, digital solutions and platform base solution. The company enjoys high brand value. As regards segmental reporting of revenue is concerned, the company has primarily two business segments i.e. Service Cluster which includes banking and financial services, insurance, media entertainment, travel and logistics, healthcare and others. Whereas, the other segment Industrial Cluster includes hi-tech and consumer electronics, consumer, retail and pharma, energy and process, automobile and aerospace, plant equipment industrial machinery, etc. Thus, from examination of Annual Report of the company it is evident that the segmental data available in public domain is not sufficient to compare revenue in the relevant segment of Software Development. Hence, the said company is not a good comparable to the assessee company. Hence, the same is directed to be excluded from list of comparables. 14 ITA No.739/Del/2022 (AY 2017-18) 11. Thus, with above inclusion and exclusion of companies, the final list of comparables for the purpose determining Arms Length Price is drawn under:- S.No Company Name 1 Akshay Software Technologies Ltd. 2 Evoke Technologies P. Ltd. 3 E- Zest Solutions Ltd. 4 C G-V AK Software & Exports Ltd. 5 Exilant Technologies P Ltd. 6 Infobeans Technologies Ltd. 7 Cybage Software Pvt. Ltd. 8 Cybercom Datamatics Information Solutions Ltd. 9 E-Infochips Pvt. Ltd. 10 Sasken Technologies Ltd. In light of our above findings, ground no. 2 and 3 of appeal are partly allowed. Corporate Tax Grounds. Disallowance u/s. 14A r.w.r 8D:- 12. The ground no. 4 to 7 of appeal relate to disallowance u/s. 14A r.w.r. 8D. The contention of assessee is that during the period relevant to assessment year under appeal, the assessee has earned tax free dividend income of Rs.5,60,29,971/- by way of dividend on Mutual Funds. No exempt income has been earned from investments in subsidiaries. The assessee has made suo-moto disallowance of Rs.14,14,000/- and no borrowed were utilized by the assessee for making investments in Mutual Funds. Hence, the case of the assessee is squarely covered by the decision of Hon’ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. 366 ITR 505 (Bom.) 15 ITA No.739/Del/2022 (AY 2017-18) 13. The ld. DR has not disputed the fact that borrowed funds are not utilized for making investments and no exempt income has been earned by the assessee on investment made in subsidiary companies. However, the ld. DR vehemently supported the impugned order and prayed for dismissing ground no. 4 to 7 of appeal. The ld. DR submits that the assessee has earned substantial tax free income in the form of dividend. The AO in a reasoned order has recorded satisfaction as envisaged u/s. 14A(2) r.w.r. 8D of the Act rejecting assessee’s disallowance made u/s. 14A of the Act. The ld. DR prayed for upholding findings of the AO on this issue. 14. Both sides heard. It is an undisputed fact that during the period relevant to assessment year under appeal, the assessee has earned dividend income of Rs.5.60 crores from investments made in Mutual Funds. The assessee has made suo-moto disallowance of Rs.14,14,000/- for earning of aforementioned exempt income. The contention of the assessee is that the assessee has not utilized borrowed funds for investment in mutual funds. This fact has not been rebuted by the Revenue. It is a well settled law, that where assessee is having mixed bag of ‘own interest free funds’ and ‘interest bearing borrowed funds’, it shall be presumed that investments are made from assessee’s own non-interest bearing funds. The assessee is having sufficient non-interest bearing funds to cover investment made in Mutual Funds. Hence, no disallowance with regard to interest expenditure under Rule 8D(2)(ii) is warranted. [Ref: CIT vs HDFC Bank Ltd.(supra)] 15. The assessee has also made investments in subsidiaries, however, no exempt income has been earned on such investments. Thus, for disallowance under Rule 8D(2)(iii), aforesaid investments cannot be taken into account. The Special Bench of Tribunal in the case of Assistant CIT vs. Vireet Investments (P) 16 ITA No.739/Del/2022 (AY 2017-18) Ltd. 165 ITD 27 (SB-Delhi) has held that for the purpose of making disallowance Rule 8D(2)(iii), only dividend yielding investments are to be considered. 16. We deem it appropriate to restore this issue back to the AO for re- computation of disallowance under Rule 14A r.w.r. 8D in light of above observations. In the result, ground no. 4 to 7 of appeal are allowed for the statistical purpose. 17. The assessee in ground no. 8 to 13 of appeal has assailed adjustment made in the income returned by the assessee in intimation issued u/s. 143(1) of the Act and short credit of TDS. The contention of the assessee is that return of assessee was processed by the Central Processing Centre (CPC) and intimation u/s. 143(1) of the Act was issued. The assessee had filed return of income declaring total income of Rs. 42,31,91,900/-. After processing u/s. 143(1) of the Act, addition of Rs.7,45,35,229/- was made resulting into net taxable income of Rs.49,77,27,130/-. The adjustment was made after rejecting claim of depreciation made by the assessee as per fifth proviso to section 32 of the Act. Further, disallowance u/s. 43B of the Act was made and the credit of TDS deducted was not granted in full. The contention of the assessee is that the adjustments made by CPC were beyond the scope of section 143(1) of the Act. 18. Per contra, the ld. DR placing reliance on the decision of Tribunal in the case of Microsoft India (R&D) P. Ltd. vs. DCIT in ITA 1483 and 1640/Del/2022 for AY 2017-18 and 2018-19, decided on 28.03.2024 submitted that once scrutiny assessment is made, the error, if any in intimation passed u/s. 143(1) of the Act can only be rectified u/s. 154 of the Act. The assessee cannot agitate the issue in appeal which is against the order passed u/s. 143(3) of the Act. 17 ITA No.739/Del/2022 (AY 2017-18) 19. We have heard the submissions made by rival sides on this issue and have examined the orders of authorities below. The assessee in ground no. 8 to 13 of appeal has assailed adjustment made, while processing return of income u/s. 143(1) of the Act. The CPC has made adjustment qua: (i) assessee’s claim of depreciation pursuant to merger of Aon Services India P Ltd. (ASIPL) and Aon Spatiality Services P Ltd. (ASSPL) with the assessee w.e.f. 01.10.2016. The entire business of ASIPL and ASSPL has been transferred to the assessee on going concern basis. Further, there was demerger of division of the assessee to Aon HR Services India P. Ltd. the assessee has claimed depreciation in the ratio of number of days assets used by the predecessor and successor; ii. claim of certain liabilities on payment basis u/s. 43B of the Act Rs.6,41,01,443/- has been disallowed; and iii. short grant of TDS credit. 19.1. The assessee’s grievance against adjustments made u/s. 143(1) cannot be redressed under the present proceedings. The assessee has to seek remedy available under the Act in separate proceedings against adjustment made u/s. 143(1) of the Act. The Co-ordinate Bench in the case of Microsoft India (R&D) P. Ltd. vs DCIT (supra) in similar circumstances held as under: “5. Ground no. 4 and its sub-grounds relate to the addition /disallowance made by the AO which have been added /disallowed while processing the return u/s 143(1) of the Act. 18 ITA No.739/Del/2022 (AY 2017-18) 5.1 The representatives of both the sides were heard at length. The case records were carefully perused and the relevant documentary evidences brought on record were duly considered in the light of Rule 18(6) of the ITAT, Rules. 5.2 At the very outset, we have to state that the intimation passed u/s 143(1) of the Act goes into oblivion once this scrutiny assessment is framed. The intimation passed u/s 143(1) of the Act can be questioned u/s 154 of the Act by way of a rectification application. The assessee can also file an appeal against the said intimation before the First Appellate Authority. In the case under consideration, we find that though the assessee has preferred rectification application before the CPC / AO but has not received any plausible reply / order. We are of the considered view that the remedy is available elsewhere and as the assessee has triggered the available remedy it would be appropriate to consider the remedy there. In our humble opinion, the remedy sought by the assessee is not available from this forum as per the relevant provision of the Act. 5.3 We, therefore decline to interfere with the findings of the DRP. Ground no. 4 with its sub-grounds are dismissed. However, we expect Revenue Authority to consider the grievance of the assessee and dispose the rectification application expeditiously.” Thus, in light of above, ground no. 8 to 13 of appeal are dismissed. 20. In ground no. 14 of appeal, the assessee has assailed initiation of penalty proceedings u/s. 270A of the Act. Challenge to penalty proceedings at this stage is premature, hence, same is dismissed. 21. In the result, appeal of the assessee is partly allowed in the terms aforesaid. Order pronounced in the open court on Wednesday the 09th day of April, 2025. Sd/- Sd/- (PRADIP KUMAR KEDIA) (VIKAS AWASTHY) लेखाकार सद᭭य/ACCOUNTANT MEMBER ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी/Delhi, ᳰदनांक/Dated 09/04/2025 NV/- 19 ITA No.739/Del/2022 (AY 2017-18) ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, DELHI "