DBS Technology Services India Private Limited, Hyderabad V. DCIT., Circle-8(1), Hyderabad

CO 2/Hyd/2023

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax against the order of the CIT(Appeals), which had partly allowed the appeal of DBS Technology Services India Private Limited regarding the disallowance of deduction claimed under section 10AA of the Income Tax Act for the assessment year 2019-20. The primary legal issue was whether the CIT(A) was justified in deleting the disallowance of the deduction under section 10AA despite the non-filing of Form 56F along with the audit report within the specified date under section 139(1) of the Act, which is necessary to claim the deduction. The Tribunal examined the compliance with procedural requirements under sections 139 and 143 of the Act, particularly focusing on the mandatory nature of filing the audit report in Form 56F for claiming deductions under section 10AA.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133198 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-07-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 10-07-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 11-04-2023
• Other Referred Cases: Macquarie Global Services (P.) Ltd [2019] 102 taxmann.com 272 (Delhi), Bajaj Tempo Limited Vs. CIT (1992) 196 ITR 188 (SC), DIC Fine Chemicals Private Limited vs DCIT [2019] 107 taxmann.com 213, GM. Knitting Industries (P) Ltd. (2015) (376 TTR 456), PCIT vs Wipro Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Search and seizure; Opportunity of being heard; Additional depreciation; Tax effect; Revised return; Set aside
• Section: 32; 54; 90; 139; 54B; 54F; 10AA; 153A; 139(5); 10B; 143(1); 80HH; 191; 139(1); 54EC; 44AB; 72; 13; 22

Judgement Text

आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B” , HYDERABAD BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA No.151/Hyd/2023 Assessment Year: 2019-20 Deputy Commissioner of Income Tax, Circle – 8(1), Hyderabad. Vs. M/s. DBS Technology Services India Private Limited, Hyderabad. PAN : AAFCD5584N (Appellant) (Respondent) C.O.No.2/HYD/2023 Assessment Year 2019-20 DBS Technology Services India Private Limited, Hyderabad. PAN : AAFCD5584N Vs. Deputy Commissioner of Income Tax, Circle – 8(1), Hyderabad. (Cross Objector / Respondent) (Appellant/Revenue) Assessee by: Sri M. P. Lohia, C.A. Revenue by: Shri Jeevan Lal Lavidiya, CIT-DR Date of hearing: 11.07.2023 Date of pronouncement: 21.07.2023 आदेश / O R D E R PER LALIET KUMAR, JM: The appeal and cross-objection filed by the Revenue for A.Y. 2019-20 arise from the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi DBS Technology Services India Private Limited. Page 2 of 23 dated 25.01.2023 invoking proceedings under section 143(1) of the Income Tax Act, 1961 (in short, “the Act”). 2. As the facts of the case in both the appeal and cross- objections are identical, we are reproducing the facts in ITA No.151/Hyd/2023 for A.Y. 2019-20 for the sake of brevity. 3. The grounds raised by the Revenue in ITA 151/Hyd/2023 reads as under : “1. The ld.CIT(A) erred in law and on facts of the case in giving relief to the assessee. 2. Whether the ld.CIT(A) is justified in deleting disallowance of deduction claimed u/s 10AA even though form 56F along with audit report was not filed within specified date u/s 139(1) of the IT Act, which is necessary to claim deduction.” 4. The grounds raised by the assessee in C.O. No.2/Hyd/2023 read as under : “1. The learned Assessing Officer has erred in objecting the order of ld.CIT(A) granting relief on claim of exemption under section 10AA of the Act, which was disallowed in the intimation issued under section 143(1) of the Act. 2. The Assessing Officer erred in objecting the order of ld.CIT(A) without appreciating the fact that no opportunity of being heard as required by first proviso to section 143(1) of the Act was given to appellant before disallowing the claim of exemption of Rs.100,20,63,008 under section 10AA of the Act in the intimation issued under section 143(1) of the Act, basis which relief was granted by the ld.CIT(A) and accordingly, the order of ld.CIT(A) should be upheld.” 5. The brief facts of the case are that assessee is a company engaged in the business of electronic data processing, technology and product support services etc. Assessee filed its return of income on 26.11.2019 declaring total income at Rs.20,98,120/-. In DBS Technology Services India Private Limited. Page 3 of 23 this case, ACIT, CPC, Bangalore had completed summary assessment u/s 143(1) of the Act dated 22.10.2019 at income of Rs.1,00,43,93,499/- by disallowing of Rs.1,00,20,63,008/- u/s 10AA of the Act and employees’ contribution of Rs.1,21,942/- due to non-credit of employees contribution within the specified date and passed order on 10.06.2020 u/s 143(1) of the Act. 6. Aggrieved with the order of ACIT, CPC, Bangalore, assessee filed an appeal which was subsequently migrated to CIT(A), NFAC, Delhi, wherein the appeal was partly allowed in favour of the assessee. 6.1. Feeling aggrieved with the order of CIT(A), NFAC, Delhi, Revenue is now in appeal before us. 7. Before us, at the outset, ld.DR had drawn our attention to Paras 5 and 6 of the order passed by the CIT(Appeals), NFAC, to the following effect : “5. Decision: I have given my careful consideration to the rival submissions, perused the material on record and duly considered the factual matrix of the case as well as the applicable legal position for arriving at the 'following decision. 6. Grounds No. I &2 of the appeal are against not allowing deduction u/s I0AA in respect of profits earned by SEZ unit. Further, It was stated that no opportunity of being heard was given. The appellant has stated that deduction u/s I0AA was first claimed and allowed in A.Y. 2017-18 and the present year is 3rd year of such claim. The appellant has placed reliance on following decisions; Delhi High Court ruling in case of Macquarie Global Services (P.) Ltd [2019] 102 taxmann.com 272 (Delhi) wherein the appeal was dismissed holding the ITAT order which allowed claim of 10AA DBS Technology Services India Private Limited. Page 4 of 23 stating that once the claim of deduction u/s 10AA has been accepted in the first year of the operations and also in the second year/ then in the third year same cannot be withdrawn by examining the factors which were required to be seen in the first year of the claim. Hon'ble Supreme Court in the case of Bajaj Tempo Limited Vs. CIT (1992) 196 ITR 188 (SC), the formative conditions in connection with the setup of the SEZ unit needs to be tested only in the year of formation i.e., in the present case AY 2017-18. In this case though the claim u/s 10AA has been allowed u/s 143(1) in the 1 st year i.e. 2017-18 but subsequently vide order u/s 143(3) dated 26.12.2019, the same has been disallowed. But here the issue is whether such a debatable issue can be disallowed u/s 143(1) of the Act, that too without given any opportunity to the appellant of being heard. In my opinion it was beyond the jurisdiction of AO to disallow deduction claimed u/s 10AA vide order u/s 143(1) of the Act. In this case return was filed on 26.11.2019 and Form 56F was filed 16.12.2019. In this regard the appellant has relied on the following decisions; • DIC Fine Chemicals Private Limited vs DCIT [2019] 107 taxmann.com 213 wherein it was held that deduction under section IOAA could not be denied for non-filing of the audit report in Form 56F along with the return of income even in the era of filing audit report in electronic format • GM. Knitting Industries (P) Ltd. (2015) (376 TTR 456), wherein the Apex court has allowed deduction u/s.80-1B and additional depreciation u/s 32 even though the taxpayer claiming such deduction in its ROL failed to furnish certificate in Form I0CCB (for s.80-1B) and Form 3AA (for additional depreciation u/s 32 along with such ROI, but filed the same before the final assessment order was made. Thus, these decisions support the contention of the appellant. Further, the appellant has submitted that no adjustment can be made unless intimation is given to the appellant about such adjustment. In this case appellant has not been intimated. In view of these facts of the case and past history of the case and the various decisions relied upon by the appellant the AO is directed to allow the deduction u/s 10AA of the Act. The Grounds of Appeal are 'Allowed'. DBS Technology Services India Private Limited. Page 5 of 23 8. Ld.DR further submitted that the order passed by the CIT(Appeals), NFAC is not sustainable in the eyes of the law, and ld.DR had filed the following written submissions in support of his case : “1. The Assessee M/s. DBS Technology Services India Private Limited is engaged in the business of Electronic Data Processing, information Technology Enabled Services, Technology and Product support Services, Business Process Outsource Services, Back office operations and Management both in India and overseas. During the year under consideration, DBS and carrying out the business from a SEZ unit. For the A.Y. 2019-20 the appellant had failed its return of income under the provisions of MAT declaring a book profit of Rs. 86,42,32,636/- and tax liability Rs. 18,62,31,763/-. 2. The return was processed of by CPC as summary assessment u/s. 143(1), dated 22.10.2019 at income Rs. 1,00,20,63,008/- by disallowing the deduction of 10AA of the IT Act amounting to Rs. 1,00,20,63,008/- Aggrieved by the above order, the appellate has prepared appeal before the NAFC, Delhi. 3. During the appellate proceedings the appellate filed written submissions by submitting that the deduction has been claimed with respect to profits earned by the SEZ units which is availing tax holiday benefit u/s 10AA since F.Y. 2016-17 and produced form 56 has evidence during the appellate proceedings. The assessee further relied on the case laws of Delhi High Court ruling in case of Macquarie Global Services (P) Ltd. (2019) 102 taxmann.com 272 (Delhi) and Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. Vs. Commissioner of Income Tax (1992) 196 ITR 188(SC) and submits that a SEZ units satisfice the format conditions of as laid out in section 10AA of the Act and requested the claim of the section 10AA should be allowed. 4. The Ld.CIT(A) erred in deleting the disallowance made by the AO u/s. 10AA of the IT Act for Rs. 1,00,20,63,008/-. 5. It is humbly submitted that the ld.CIT(A) is not justified in deleting disallowance deduction claimed u/s. 10AA of the IT Act even though form 56F along with audit report within specified date u/s. 139(1) of the IT Act 1961 which is necessary to claim deduction in this contest it is humbly submitted that it is purportedly done while processing u/s. 143(1) it self but u/s. 139(1) and 143(1) any disallowance shall precede by an intimation / enquiry to the assessee i.e. opportunity therefore filing of form 56 along with audit report is mandatory as in this case the assessee has failed in doing DBS Technology Services India Private Limited. Page 6 of 23 so within the specified date u/s. 139(1) of the Act, which is necessary to claim deduction. 6. Reliance is placed on Hon'ble ITAT A Bench, Chennai in the case of Mr. Mahendra Kumar Dammani Vs. ADIT, CPC Bangalore vide ITA Nos. 805 & 806/Chny/2022 for the A.Ys. 2016-17 & 2019- 20 were on similar facts are emanating as the assessee did not file audit report in form no. 56 along with return income filed u/s. 139(1) of the Act or before compilation of assessment proceeding u/s. 143(1). The provisions of Sec. 10AA of the Act, deals with deduction towards total income of newly established units in Special Economic Zones. As per sub-section 8 of 10AA of the Act, the provisions of sub-Sec.(5) of 1 O of the Act, shall apply in relation to deduction specified in Sec. 1OAA(1) of the Act. Sec. 10A(5) of the Act, deals with furnishing of Audit Report from an Accountant along with return of income for claiming deduction u/s. 1 O of the Act, and said section is made applicable to sec. 10AA of the Act also. Therefore, from the plain reading of provisions of Sec. 1OAA(8) of the Act, it is very clear that deduction shall not be admissible unless, the assessee furnishes the report of the Accountant in the prescribed form along with return of income certifying the deduction has been correctly claimed in accordance with the provisions. The Hon'ble Supreme Court in the case of Pr.CIT vs Wipro Ltd., had considered an identical issue in light of deduction claimed u/s. lOB of the Act, and after considering relevant provisions including provisions of Sec. 1OB(8) of the Act, very categorically held that filing of Audit report as required under the law is mandatory in nature, but not directory for claiming any deduction under the provisions. 7. The decision rendered by the Hon'ble Supreme Court in the case of Pr.CIT vs. Wipro Ltd., which was rendered with reference to sec. 10B(8) of the Act, squarely applicable to the facts and circumstances of the case. The plain language used in sec. 10A(5) of the Act, is also clear and unambiguous that the condition of filing Audit Report in Form No.56F along with return of income is mandatory for allowing any deduction. In this case, there is no dispute with regard to the fact that the assessee did not satisfy the mandatory condition prescribed u/s. 10AA(8) of the Act r.w.s. 1OA(5) of the Act. Since, the assessee did not file the Audit Report in Form No.56F as required under the law, in our considered view, the AC has rightly disallowed deduction claimed u/s. 10AA of the Act. The Ld. CIT(A) after considering relevant facts has rightly upheld the additions made by the AO. 8. In the light of the case laws cited and respectively following the decision of the Hon'ble Supreme Court in the case of Pr.CIT Wipro Ltd. it may be considered view that the assessee is not entitled to the deduction u/s. 10AA of the IT Act, for Non filing of audit report in form no. 56F as required u/s. 10AA(8) of the Act. DBS Technology Services India Private Limited. Page 7 of 23 9. Therefore, the decision of the CIT(A) can not be accepted and it is humbly preyed the Hon'ble ITAT to confirm the addition made by the AO towards disallowance u/s. 10AA of the IT Act for Rs. 1,00,20,63,008/-and pass the orders in favour of the revenue.” 9. The ld.DR had also relied upon the decision of Hon’ble Supreme Court in the case of PCIT Vs. Wipro Limited dt.11.07.2022, which is to the following effect: “5. We have heard Shri Balbir Singh, learned ASG appearing on behalf of the Revenue and Shri S. Ganesh, learned Senior Advocate appearing on behalf of the assessee at length and perused the material on record. The short question which is posed for consideration of this Court is, whether, for claiming exemption under Section 10B (8) of the IT Act, the assessee is required to fulfil the twin conditions, namely, (i) furnishing a declaration to the assessing officer in writing that the provisions of Section 10B (8) may not be made applicable to him; and (ii) the said declaration to be furnished before the due date of filing the return of income under sub-section (1) of Section 139 of the IT Act. 6. In the present case, the High Court as well as the ITAT have observed and held that for claiming the so-called exemption relief under Section 10B (8) of the IT Act, furnishing the declaration to the assessing officer is mandatory but furnishing the same before the due date of filing the original return of income is directory. In the present case, when the assessee submitted its original return of income under Section 139(1) of the IT Act on 31.10.2001, which was the due date for filing of the original return of income, the assessee specifically and clearly stated that it is a company and is a 100% export-oriented unit and entitled to claim exemption under Section 10B of the IT Act and therefore no loss is being carried forward. Along with the original return filed on 31.10.2001, the assessee also annexed a note to the computation of income clearly stating as above. However, thereafter the assessee filed the revised return of income under Section 139(5) of the IT Act on 23.12.2002 and filed a declaration under Section 10B (8) which admittedly was after the due date of filing of the original return under Section 139(1), i.e., 31.10.2001. 7. It is the case on behalf of the Revenue that as there was a non- compliance of twin conditions under Section 10B (8) of the IT Act, namely, the declaration under Section 10B (8) was not submitted along with the original return of income, the assessee shall not be DBS Technology Services India Private Limited. Page 8 of 23 entitled to the exemption/benefit under Section 10B (8) of the IT Act. According to the Revenue, furnishing of declaration under Section 10B (8) before the due date of filing original return of income is also mandatory. On the other hand, it is the case on behalf of the assessee, which has been accepted by the High Court, that the requirement of submission of declaration under Section 10B (8) is mandatory in nature, but the time limit within which the declaration is to be filed is directory in nature. 8. While considering the issue involved, whether the time limit within which the declaration is to be filed as provided under Section 10B (8) is mandatory or directory, Section 10B (8) is required to be referred to, which reads as under: “10B (8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of income under sub-section (1) of Section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years.” On a plain reading of Section 10B (8) of the IT Act as it is, i.e., “where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of Section 10B may not be made applicable to him, the provisions of Section 10B shall not apply to him for any of the relevant assessment years”, we note that the wording of the Section 10B (8) is very clear and unambiguous. For claiming the benefit under Section 10B (8), the twin conditions of furnishing the declaration to the assessing officer in writing and that the same must be furnished before the due date of filing the return of income under sub-section (1) of section 139 of the IT Act are required to be fulfilled and/or satisfied. In our view, both the conditions to be satisfied are mandatory. It cannot be said that one of the conditions would be mandatory and the other would be directory, where the words used for furnishing the declaration to the assessing officer and to be furnished before the due date of filing the original return of income under sub-section (1) of section 139 are same/similar. It cannot be disputed that in a taxing statute the provisions are to be read as they are and they are to be literally construed, more particularly in a case of exemption sought by an assessee. 9. In such a situation, filing a revised return under section 139(5) of the IT Act claiming carrying forward of losses subsequently would not help the assessee. In the present case, the assessee filed its original return under section 139(1) and not under section 139(3). Therefore, the Revenue is right in submitting that the revised return filed by the assessee under section 139(5) can only substitute its original return under Section 139(1) and cannot transform it into a return under Section 139(3), in order to avail the benefit of carrying forward or set-off of any loss under Section 80 of the IT Act. The DBS Technology Services India Private Limited. Page 9 of 23 assessee can file a revised return in a case where there is an omission or a wrong statement. But a revised return of income, under Section 139(5) cannot be filed, to withdraw the claim and subsequently claiming the carried forward or set- off of any loss. Filing a revised return under Section 139(5) of the IT Act and taking a contrary stand and/or claiming the exemption, which was specifically not claimed earlier while filing the original return of income is not permissible. By filing the revised return of income, the assessee cannot be permitted to substitute the original return of income filed under section 139(1) of the IT Act. Therefore, claiming benefit under section 10B (8) and furnishing the declaration as required under section 10B (8) in the revised return of income which was much after the due date of filing the original return of income under section 139(1) of the IT Act, cannot mean that the assessee has complied with the condition of furnishing the declaration before the due date of filing the original return of income under section 139(1) of the Act. As observed hereinabove, for claiming the benefit under section 10B (8), both the conditions of furnishing the declaration and to file the same before the due date of filing the original return of income are mandatory in nature. 10. Even the submission on behalf of the assessee that it was not necessary to exercise the option under section 10B (8) of the IT Act and even without filing the revised return of income, the assessee could have submitted the declaration in writing to the assessing officer during the assessment proceedings has no substance and the same cannot be accepted. Even the submission made on behalf of the assessee that filing of the declaration subsequently and may be during the assessment proceedings would have made no difference also has no substance. The significance of filing a declaration under section 10B (8) can be said to be co-terminus with filing of a return under section 139(1), as a check has been put in place by virtue of section 10B (5) to verify the correctness of claim of deduction at the time of filing the return. If an assessee claims an exemption under the Act by virtue of Section 10B, then the correctness of claim has already been verified under section 10B (5). Therefore, if the claim is withdrawn post the date of filing of return, the accountant’s report under section 10B (5) would become falsified and would stand to be nullified. 11. Now so far as the reliance placed upon the decision of this Court in the case of G.M. Knitting Industries Pvt. Ltd. (supra), relied upon by the learned counsel appearing on behalf of the assessee is concerned, Section 10B (8) is an exemption provision which cannot be compared with claiming an additional depreciation under section 32(1) (ii-a) of the Act. As per the settled position of law, an assessee claiming exemption has to strictly and literally comply with the exemption provisions. Therefore, the said decision shall not be applicable to the facts of the case on hand, while considering the exemption provisions. Even otherwise, Chapter III and Chapter VIA of the Act operate in different realms and principles of Chapter III, DBS Technology Services India Private Limited. Page 10 of 23 which deals with “incomes which do not form a part of total income”, cannot be equated with mechanism provided for deductions in Chapter VIA, which deals with “deductions to be made in computing total income”. Therefore, none of the decisions which are relied upon on behalf of the assessee on interpretation of Chapter VIA shall be applicable while considering the claim under Section 10B (8) of the IT Act. 12. Even the submission on behalf of the assessee that the assessee had a substantive statutory right under Section 10B (8) to opt out of Section 10B which cannot be nullified by construing the purely procedural time requirement regarding the filing of the declaration under Section 10B (8) as being mandatory also has no substance. As observed hereinabove, the exemption provisions are to be strictly and literally complied with and the same cannot be construed as procedural requirement. 13. So far as the submission on behalf of the assessee that against the decision of the Delhi High Court in the case of Moser Baer (supra), a special leave petition has been dismissed as withdrawn and the revenue cannot be permitted to take a contrary view is concerned, it is to be noted that the special leave petition against the decision of the Delhi High Court in the case of Moser Baer (supra) has been dismissed as withdrawn due to there being low tax effect and the question of law has specifically been kept open. Therefore, withdrawal of the special leave petition against the decision of the Delhi High Court in the case of Moser Baer (supra) cannot be held against the revenue. 14. In view of the above discussion and for the reasons stated above, we are of the opinion that the High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under Section 10B (8) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in Section 10B (8) of the IT Act. We hold that for claiming the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. Accordingly, the question of law is answered in favour of the Revenue and against the assessee. The orders passed by the High Court as well as ITAT taking a contrary view are hereby set aside and it is held that the assessee shall not be entitled to the benefit under Section 10B (8) of the IT Act on non- compliance of the twin conditions as provided under Section 10B (8) of the IT Act, as observed hereinabove. The present Appeal is accordingly Allowed. However, in the facts and circumstances of the case, there shall be no order as to costs.” DBS Technology Services India Private Limited. Page 11 of 23 10. The learned DR had also submitted that if we carefully examine the provisions of Section 139 along with Rule 12, it becomes abundantly clear that the filing of the audit report is essential along with the filing of the income tax return, particularly for claiming a deduction under section 10AA of the Act. In the present case, the assessee has failed to file the audit report along with the income tax return and hence, the non-filing of the audit report becomes fatal. According to the learned DR, the facts of the present case are squarely covered by the decision of the Hon’ble Supreme Court in the case of Wipro (supra). Therefore, the order passed by the CPC, Bangalore while processing the return of income was correct, and the order passed by the CIT(Appeals), NFAC is incorrect. 11. On the other hand, the ld.AR for the assessee had submitted that as per the mandatory provision of clause (1) of section 143 read with the explanation, it is necessary for the NFAC to issue the intimation to the assessee in case any adjustments are made. In support of the case of assessee, ld.AR has relied upon the decision of Ahmedabad Bench of the Tribunal in the case of Arham Pumps Vs. DCIT reported in (2022) 140 taxmann.com 204 wherein, the Tribunal had held as under : “7. On going through the above section and proviso attached therein, the total income or loss shall be computed after making following adjustment mainly of any arithmetical error in the return. Incorrect claim, if such incorrect claim is apparent from any information in the return, etc. Thus, it is clear that a return can be processed u/s.143(1) by making adjustments on six types of adjustments only. The first proviso to section 143(1)(a) make it very clear 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. Apparently in the case of the assessee, no DBS Technology Services India Private Limited. Page 12 of 23 intimation had been given to the assessee for making any adjustment or disallowance either in writing or in electronic mode. Thus, the CPC center has not followed the first proviso to section 143(1)(a) of the Act. This position was not controverted by the ld.DR also. Assuming a moment, if such an intimation is given to the assessee as per first proviso, then the second proviso stipulates that if any response is received from the assessee, the same should be considered before making any adjustment or disallowance, and also in a case where NO response is received, then within thirty days of the issue of such intimation, department is free to make such adjustment. 8. On going through the above intimation made under section 143(1), CPC has not followed the above provisos by giving proper opportunity to the assessee to defend its case as per the first proviso to section 143(1)(a) . Further, the NFAC order is also silent about the intimation to the assessee. Therefore, we find that intimation issued under section 143(1) dated 19.10.2019 is against first proviso to section 143(1)(a), and therefore, the entire 143(1) proceedings is invalid in law. 9. We also observe that the ld.NAFC has not looked into this fundamental principle of "audi alterm partem", which has not been provided to the assessee as per the 1st proviso of section 143(1) of the Act, but proceeded with the case on merits and also confirmed the addition made by the CPC. The ld.NAFC is thus erred in conducting the faceless appeal proceedings in a more mechanical manner without application of mind. We therefore hereby quash the ITA No.206/Ahd/2021 intimation issued by the CPC and allow the appeal filed by the assessee. 10. In the result, appeal of the assessee is allowed.” 12. We have heard the rival contentions and perused the material available on record. Before we deal with the issue, it is essential to reproduce section 139(1) and Rule 12, which require the filing of the return of income in the following manner : Return of income. 74 139. 75 [(1) Every person,— (a) being a company 76 [or a firm]; or (b) being a person other than a company 76 [or a firm], if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year 77 exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed 78 form and verified DBS Technology Services India Private Limited. Page 13 of 23 in the prescribed manner and setting forth such other particulars as may be prescribed : Provided that a person referred to in clause (b), who is not required to furnish a return under this sub-section and residing in such area as may be specified by the Board in this behalf by notification in the Official Gazette, and who 79 [during the previous year incurs an expenditure of fifty thousand rupees or more towards consumption of electricity or] at any time during the previous year fulfils any one of the following conditions, namely :— XXX shall furnish a return, of his income 81 [during any previous year ending before the 1st day of April, 2005], on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed : Provided further that the Central Government may, by notification in the Official Gazette, specify the class or classes of persons to whom the provisions of the first proviso shall not apply : Providedalso that every company 82 [or a firm] shall furnish on or before the due date the return in respect of its income or loss in every previous year : 83 [Provided also that a person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6, who is not required to furnish a return under this sub-section and who at any time during the previous year,— (a) holds, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India; or (b) is a beneficiary of any asset (including any financial interest in any entity) located outside India, shall furnish, on or before the due date, a return in respect of his income or loss for the previous year in such form and verified in such manner and setting forth such other particulars as may be prescribed: Provided also that nothing contained in the fourth proviso shall apply to an individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India where, income, if any, arising from such asset is includible in the income of the person referred to in clause (a) of that proviso in accordance with the provisions of this Act:] 84 [Provided also that every person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year, without giving effect to the provisions of 85 [clause (38) of section 10 or] section 10A or section 10B or section 10BA 86 [or section 54 or section 54B or section 54D or section 54EC or section 54F or section 54G or section 54GA or section 54GB] or Chapter VI-A exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed:] DBS Technology Services India Private Limited. Page 14 of 23 Rule 12 – [Return of income and return of fringe benefits. 12. (1) The return of income required to be furnished under sub- section (1) or sub- section (3) or sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) [or sub-section (4E)] [or sub- section (4F)] of section 139 or clause (i) of sub-section (1) of section 142 1[or section 148] or section 153A [***] relating to the assessment year commencing [on the 1st day of April, 1a[2023]] shall,— [(a) in the case of a person being 2[an individual who is a resident other than not ordinarily resident and] where the total income includes income chargeable to income-tax, under the head,— (i) "Salaries" or income in the nature of family pension as defined in the Explanation to clause (iia) of section 57; or (ii) "Income from house property", where assessee does not own more than one house property and does not have any brought forward loss 3[or loss to be carried forward] under the head; or (iii) xxxxx 4[(I) has assets (including financial interest in any entity) located outside India; (IA) has signing authority in any account located outside India; (IB) has income from any source outside India; (IC) has income to be apportioned in accordance with provisions of section 5A;] 4a[(ID) has claimed deduction under section 57, other than deduction claimed under clause (iia) thereof; (IE) is a director in any company; (IF) has held any unlisted equity share at any time during the previous year; (IG) is assessable for the whole or any part of the income on which tax has been deducted at source in the hands of a person other than the assessee;] DBS Technology Services India Private Limited. Page 15 of 23 (II) has claimed any relief of tax under section 90 or 90A or deduction of tax under section 91; 6[***] [(III) has agricultural income, exceeding five thousand rupees;]] 7[(IV) has total income, exceeding fifty lakh rupees; (V) has income taxable under section 115BBDA; 7a[***] 6a[***] (VI) has income of the nature referred to in section 115BBE;] 7aa[(VII) is a person in whose case tax has been deducted under section 194N; or (VIII) is a person in whose case payment or deduction of tax has been deferred under sub-section (2) of section 191 or sub- section (1C) of section 192; ] (b) 8[***] (ba) 9[***] 10[(c) in the case of a person being an individual [not being an individual to whom clause (a) applies] or a Hindu undivided family where the total income does not include income 11[under the head] business or profession, be in Form No. ITR-2 and be verified in the manner indicated therein; ] [(ca) in the case of a person being an individual or 11a[a Hindu undivided family, who is a resident other than not ordinarily resident, or a firm, other than limited liability partnership firm, which is a resident] deriving 12["income under the head Profits or gains of business or profession" and such income is computed in accordance with special provisions referred to in section 44AD, section 44ADA and section 44AE of the Act for computation of such income, be in Form SUGAM (ITR-4)] and be verified in the manner indicated therein:] [Provided that the provisions of this clause shall not apply to a person who,— xxxxx [(2) The return of income required to be furnished in Form SAHAJ (ITR-1) or Form No. ITR-2 or Form No. ITR-3 or 18[Form SUGAM (ITR- 4)] or Form No. ITR-5 or Form No. ITR-6 [or Form No. ITR-7] shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax, if any, claimed to have been deducted or collected at source or the advance DBS Technology Services India Private Limited. Page 16 of 23 tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income under any of the provisions of the Act:] [Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A[, section 10AA], clause (b) of sub-section (1) of section 12A, section 44AB [, section 44DA, section 50B], section 80-IA, section 80-IB, section 80-IC, section 80-ID, section 80JJAA, section 80LA, section 92E, [section 115JB, 5[section 115JC] or section 115VW] [or to give a notice under clause (a) of sub-section (2) of section 11] of the Act, he shall furnish the same electronically.] [(3) The return of income referred to in sub-rule (1) shall be furnished by a person mentioned in column (ii) of the Table below to whom the conditions specified in column (iii) apply, in the manner specified in column (iv) thereof:— TABLE Sl. Person Condition Manner of furnishing return of income (i) (ii) (iii) (iv) 19[1 Individual or Hindu undivided family (a) Accounts are required to be audited under section 44AB of the Act; Electronically under digital signature; 19a[(b) Where total income assessable under the Act during the previous year of a person, being an individual of the age of eighty years or more at any time during the previous year, and who furnishes the return in Form number SAHAJ (ITR-1) or Form number SUGAM (ITR-4) ]. (A). Electronically under digital signature; or (B) Transmitting the data electronically in the return under electronic verification code; or (C) Transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V; or (D) Paper form; (c) In any other case A) Electronically under digital signature; or (B) Transmitting the data electronically in the return under electronic verification code; or (C) Transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V;] 2 Company In all cases Electronically under digital signature 3 A person required to furnish the return in Form ITR-7 (a) In case of a political party; (b) In any other case Electronically under digital signature; Electronically under digital signature; or (B) Transmitting the data in DBS Technology Services India Private Limited. Page 17 of 23 the return electronically under electronic verification code; or (C) Transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V. 4 Firm or limited liability partnership or any person (other than a person mentioned in Sl. 1 to 3 above) who is required to file return in Form ITR-5 Accounts are required to be audited under section 44AB of the Act; (b) In any other case. Electronically under digital signature; (A) Electronically under digital signature; or (B) Transmitting the data in the return electronically under electronic verification code; or (C) Transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V. Explanation.—For the purposes of this sub-rule "electronic verification code" means a code generated for the purpose of electronic verification of the person furnishing the return of income as per the data structure and standards specified by Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems).] (4) The [Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems)] shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the returns >[in the manners (other than the paper form) specified in column (iv) of the Table in sub-rule (3)][and the report of audit [or notice] in the manner specified in proviso to sub-rule (2)]. 13. From the conjoint reading of the aforementioned statutory provisions of the Act and Rule, it is abundantly clear that the assessee was required to file electronically the audit report as required u/s 10AA of the Act along with the return of income. In our view, the filing of audit report along with return of income is essential and is mandatory in nature. Non-filing of the audit report along with income tax return leads to automatically disallowance of deduction claimed under section 10AA of the Act, as there is a clear violation on the part of the assessee to fulfil the necessary DBS Technology Services India Private Limited. Page 18 of 23 mandatory conditions. Our above-said conclusion is based on the above reading of Act and the rule framed thereunder. It is further supported by the decision of the Hon’ble Supreme Court in the case of Wipro (supra) wherein the Hon'ble Supreme Court had held as under : “14. In view of the above discussion and for the reasons stated above, we are of the opinion that the High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under section 10B(8) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in section 10B(8) of the IT Act. We hold that for claiming the benefit under section 10B(8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. Accordingly, the question of law is answered in favour of the Revenue and against the assessee. The orders passed by the High Court as well as ITAT taking a contrary view are hereby set aside and it is held that the assessee shall not be entitled to the benefit under section 10B(8) of the IT Act on non-compliance of the twin conditions as provided under section 10B(8) of the IT Act, as observed hereinabove. The present Appeal is accordingly Allowed. However, in the facts and circumstances of the case, there shall be no order as to costs.” 14. Section 10AA(8) of the Act is required to be read with Section 10A(5) and (6) of the Act. Section 10A(5) provides as under : (5) The deduction under 13[this section] shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, 14[***] the report of an accountant, as defined in the Explanation below sub-section (2) of section 28815[before the specified date referred to in section 44AB], certifying that the deduction has been correctly claimed in accordance with the provisions of this section. (6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year,— DBS Technology Services India Private Limited. Page 19 of 23 (i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of the relevant assessment years 16[ending before the 1st day of April, 2001], in relation to any building, machinery, plant or furniture used for the purposes of the business of the undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of sub- section (1) of section 36, as the case may be, shall not apply in relation to any such allowance or deduction; (ii) no loss referred to in sub-section (1) of section 72 or sub- section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward or set off where such loss relates to any of the relevant assessment years 16[ending before the 1st day of April, 2001]; (iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and (iv) in computing the depreciation allowance under section 32, the written down value of any asset used for the purposes of the business of the undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment year. Similarly, Section 10AA(8) provides as under : 10AA(8) The provisions of sub-sections (5) and (6) of section 10A shall apply to the articles or things or services referred to in sub-section (1) as if— (a) for the figures, letters and word "1st April, 2001", the figures, letters and word "1st April, 2006" had been substituted; (b) for the word "undertaking", the words "undertaking, being the Unit" had been substituted. DBS Technology Services India Private Limited. Page 20 of 23 15. From the reading of the above, it is clear that the deduction under section 10AA shall not be admissible unless the assessee furnishes in the prescribed from the report of an accountant. Admittedly, there is a failure on the part of the assessee to comply with the provision of section 10AA(8) read with 10(5) of the Act. As there is a failure on the part of the assessee to comply with the mandatory condition, therefore, the deduction claimed under section 10AA is not admissible to the assessee. 16. The only grievance of the assessee before us is that the requisite notice as contemplated under section 143(1) has not been given to the assessee before making the adjustments on account of the deduction claimed under section 10AA of the Act. 17. In our view, the assessee is not eligible to relief which is contrary to law, Section 10AA(8) read with 10A(5), Section 139(1) of the Income Tax Act, Rule 12 of the Income Tax Rules, 1963 and also by the judgment of the Hon’ble Supreme Court in the case of Wipro (supra). However, the grievance of the assessee is that the notice should have been issued while making adjustments to the deduction and due to failure thereof, by the CPC, Bangalore, the assessee is entitled to deduction u/s 10AA of the Act. The above said proposition cannot be accepted being contrary to law as per the judgment passed in the case of Wipro (supra). 18. In the present case, admittedly, the Revenue had issued a notice only for the purpose of disputing the assessee’s claim of deduction related to PPF and supernation, among others. In our considered opinion, per se, it is difficult to agree with the DBS Technology Services India Private Limited. Page 21 of 23 proposition that the assessee should be given a notice in cases where the deduction is not admissible under the law. However, to give a quietus to the controversy, we are of the opinion that there is no harm for the ACIT, CPC, Bangalore in issuing a notice to the assessee even for a claim that is otherwise not admissible. 19. In the light of the above, we are of the opinion that let the matter be restored back to ACIT, CPC, Bangalore with a direction to issue a fresh notice for making the disallowance under section 10AA of the Act after affording the opportunity of hearing and seeking the explanation of the assessee. Thus, the matter is restored back to ACIT, CPC, Bangalore. 20. The judgments relied upon by the learned AR for the assessee are not applicable to the facts of the case, as none of the judgments have discussed the scope of the mandatory filing of the audit report along with income tax return under section 139(1) of the Act read with rule 12 thereof. Furthermore, all the judgments have failed to consider the law laid down by the Hon’ble Supreme Court in the case of Wipro Limited (supra) wherein the Hon’ble Supreme Court has held that the filing of the audit report along with income tax return is mandatory in nature. In the light of the above, the appeal of the revenue is allowed and the appeal passed by the CIT(Appeals), NFAC is cancelled. Thus, the appeal of the Revenue is allowed. 21. In the result, the appeal of the Revenue is allowed. DBS Technology Services India Private Limited. Page 22 of 23 22. Now we will deal with the Cross-Objection filed by the assessee vide C.O.No.2/Hyd/2023. 23. Since we have decided the appeal of the revenue and held that the order of the CIT(Appeals),NFAC, Delhi is not in accordance with the law, the Cross-Objection filed by the assessee becomes infructuous, and accordingly, the same is dismissed. 24. In the result, the C.O. of the assessee is dismissed. 25. To sum up, the appeal of Revenue is allowed, and the Cross-Objection of the assessee is dismissed. A copy of the same may be placed in respective case files. Order pronounced in the Open Court on 21 st July, 2023. Sd/- Sd/- (R.K. PANDA) VICE PRESIDENT (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 21 st July, 2023. TYNM/SPS DBS Technology Services India Private Limited. Page 23 of 23 Copy to: S.No Addresses 1 M/s. DBS Technology Services India Private Limited, Hyderabad, 17 th Floor, Skyview, 20, Building No.83/1, Raidurg Village, Serilingampally Mandal, Madhapur, Hyderabad – 5000081, Telangana. 2 The Deputy Commissioner of Income Tax, Circle – 8(1), Hyderabad. 3 DR, ITAT Hyderabad Benches 4 Guard File By Order