INNOVSOURCE SERVICES PRIVATE LIMITED,MUMBAI V. DCIT, 14(1)(1), MUMBAI

ITA 3424/MUM/2024

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Innovsource Services Pvt. Ltd. appealed against the order of the Commissioner of Income-tax (Appeals) - Madurai, which confirmed the action of the Centralized Processing Center in restricting the deduction under Section 80JJAA of the Income-tax Act, 1961. The Tribunal noted that the appeal against the intimation under Section 143(1) became infructuous following the subsequent assessment order under Section 143(3). The Tribunal also observed that the deduction under Section 80JJAA was linked to the business income and not the gross total income, as argued by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 32008 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: misc
• Other Referred Cases: NTPC Ltd. vs. CIT, Jute Corporation of India Ltd. vs. CIT, CIT vs. Reliance Energy Ltd, Orient Craft Ltd. vs. Dy. CIT, Areca Trust vs. CIT, CESC Ltd. vs. DCIT, Tamil Nadu Magnesite Ltd. vs. CIT, National Stock Exchange of India Ltd. vs. DCIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADNYA GHOLAP
• Assessee Lawyers: NITESH JOSHI
• Keywords: Business income; Rectification of order; FORM 26AS
• Section: 143(3); 154; 143(1); 11; 115JB; 264; 10B; 10AA; 80IA

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 3424/MUM/2024 Assessment Year: 2021-22 Innovsource Services Pvt. Ltd., 501, Jolly Board Tower 1, I-Think Techno Campus Kanjurmarg-East, Mumbai-400042. Vs. DCIT, 14(1)(1), Aayakar Bhavan, Maharshi Karve Road, New Marine Lines, Churchgate, Mumbai-400020. PAN NO. AAECI 0979 D Appellant Respondent Assessee by : Mr. Nitesh Joshi Revenue by : Ms. Pradnya Gholap, Sr. DR Date of Hearing : 06/01/2025 Date of pronouncement : 29/01/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 09.05.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – Madurai [in short ‘the Ld. CIT(A)’] for assessment year 2021-22 arising from order passed by the Central Processing Centre (CPC) Bengluru dated 22.09.2022 u/s 143(1) of the Income-tax Act, 1961 (in short ‘the Act’). The grounds raised by the assessee are reproduced as under: 1. Whether on facts and in the circumstances of the case and in law, the learned Additional/Joint Commission (Appeals), Madurai ought to have appreciated that the appeal before him against 22 September 2022 ought to be owing to the fact an assessment order was passed on 29 December 2022. 2. Whether on facts and in the circumstances of the case and in law, the learned Additional/Joint Commissioner of Income (Appeals), Madurai has erred in confirming the action of the Centralized Processing Center in restricting the amount of deduction under section 80JJAA of the Act of Rs. 30,10,31,823 up to business income of Rs. 6,22,44,206 instead of gross total income of Rs. 11, 12,68,378. 2. Thereafter, the assessee vide letter dated 30.08.2024 filed following additional ground 3. That the deduction allowable under section 80JJAA of the Act giving an intimation 1st proviso below section 143(1)(a) is illegal and bad in law. 4. That the CPC was not ju for deduction under section 80JJAA in the under section 143(1) without specifying the sub per which the said adjustment has been made. 5. Assuming without admitting that sub sub-section (1) of section 143 has been applied in the present case, the quantum of deduction claimed by the appellant could not be regarded as 'an incorrect claim' and certainly not 'incorrect claim as apparent from any information in the 3. We have heard rival submissions of the parties admissibility of the additional ground. The additional ground raised being purely legal in nature, not requiring investigation of the fresh Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 1961 (in short ‘the Act’). The grounds raised by the assessee are reproduced as under: Whether on facts and in the circumstances of the case and in law, the learned Additional/Joint Commissioner of Income (Appeals), Madurai ought to have appreciated that the appeal before him against the intimation under Section 143(1) date 22 September 2022 ought to be dismissed as infructuous owing to the fact an assessment order was passed on 29 r 2022. 2. Whether on facts and in the circumstances of the case and in law, the learned Additional/Joint Commissioner of Income (Appeals), Madurai has erred in confirming the action of the Centralized Processing Center in restricting the amount of uction under section 80JJAA of the Act of Rs. 30,10,31,823 up to business income of Rs. 6,22,44,206 instead of gross total income of Rs. 11, 12,68,378. Thereafter, the assessee vide letter dated 30.08.2024 filed following additional grounds: adjustment as made by the CPC reducing the deduction allowable under section 80JJAA of the Act giving an intimation in respect of the same in accordance with 1st proviso below section 143(1)(a) is illegal and bad in law. 4. That the CPC was not justified in reducing the appellant's claim for deduction under section 80JJAA in the Intimation issued under section 143(1) without specifying the sub per which the said adjustment has been made. 5. Assuming without admitting that sub-clause ii) of clause (a) of section (1) of section 143 has been applied in the present case, the quantum of deduction claimed by the appellant could not be regarded as 'an incorrect claim' and certainly not 'incorrect claim as apparent from any information in the return' We have heard rival submissions of the parties admissibility of the additional ground. The additional ground raised being purely legal in nature, not requiring investigation of the fresh Innovsource Services Pvt. Ltd. 2 ITA No. 3424/MUM/2024 1961 (in short ‘the Act’). The grounds raised by the assessee are Whether on facts and in the circumstances of the case and in er of Income-tax (Appeals), Madurai ought to have appreciated that the appeal the intimation under Section 143(1) dated dismissed as infructuous owing to the fact an assessment order was passed on 29 2. Whether on facts and in the circumstances of the case and in law, the learned Additional/Joint Commissioner of Income-tax (Appeals), Madurai has erred in confirming the action of the Centralized Processing Center in restricting the amount of uction under section 80JJAA of the Act of Rs. 30,10,31,823 up to business income of Rs. 6,22,44,206 instead of gross total Thereafter, the assessee vide letter dated 30.08.2024 filed adjustment as made by the CPC reducing the deduction allowable under section 80JJAA of the Act without in respect of the same in accordance with 1st proviso below section 143(1)(a) is illegal and bad in law. stified in reducing the appellant's claim Intimation issued under section 143(1) without specifying the sub-clause as f clause (a) of section (1) of section 143 has been applied in the present case, the quantum of deduction claimed by the appellant could not be regarded as 'an incorrect claim' and certainly not 'incorrect claim We have heard rival submissions of the parties on the admissibility of the additional ground. The additional ground raised being purely legal in nature, not requiring investigation of the fresh facts, same were admitted for adjudication in view of the decision of the Hon’ble Supreme Court in the case of (SC) and Jute Corporation of India Ltd. 187 ITR 688 (SC) 4. Briefly stated facts of the case are that the assessee is a domestic private limited company and was engaged in the business of providing manpower services other entities. For the year under consideration, the assessee filed return of income on 30.03.2022 declaring total income at Rs. Nil. the said return of income, the assessee head ‘profit and gains of business or profession’ ( i.e. income from business of manpower supply) at Rs. 6,22,44,207/ under the head ‘income from other sources’( i.e. income business income may be in the nature of interest etc.) at Rs. 4,90,24,172/-). After adding income from both these heads worked out gross total income to Rs. 11,12,68,378/ assessee computed amounting to Rs.30,10,31,823/ incurred, but restricted the claim to the extent of the income’ of Rs.11,12,68,378/ return of income filed by the assessee was processed the Act on 22.09.2022 u/s 143(1) of the Act claimed u/s 80JJAA was restricted to Rs.6,22,44,207/- Rs.11,12,68,378/- as claimed by the assessee. Aggrieved, the Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 same were admitted for adjudication in view of the decision of the Hon’ble Supreme Court in the case of NTPC Ltd. 229 ITR 283 Jute Corporation of India Ltd. 187 ITR 688 (SC) Briefly stated facts of the case are that the assessee is a ic private limited company and during year under reference was engaged in the business of providing manpower services . For the year under consideration, the assessee filed return of income on 30.03.2022 declaring total income at Rs. Nil. the said return of income, the assessee declared income under the head ‘profit and gains of business or profession’ ( i.e. income from business of manpower supply) at Rs. 6,22,44,207/ under the head ‘income from other sources’( i.e. income business income may be in the nature of interest etc.) at Rs. ). After adding income from both these heads worked out gross total income to Rs. 11,12,68,378/-. Thereafter, deduction eligible u/s 80JJAA of the A amounting to Rs.30,10,31,823/- for the additional employee cost restricted the claim to the extent of the of Rs.11,12,68,378/- resulting into ‘Nil’ total income. The return of income filed by the assessee was processed the Act on 22.09.2022 u/s 143(1) of the Act, wherein the deduction claimed u/s 80JJAA was restricted to ‘business income as against ‘gross total income as claimed by the assessee. Aggrieved, the Innovsource Services Pvt. Ltd. 3 ITA No. 3424/MUM/2024 same were admitted for adjudication in view of the decision of NTPC Ltd. 229 ITR 283 Jute Corporation of India Ltd. 187 ITR 688 (SC). Briefly stated facts of the case are that the assessee is a during year under reference was engaged in the business of providing manpower services to . For the year under consideration, the assessee filed return of income on 30.03.2022 declaring total income at Rs. Nil. In declared income under the head ‘profit and gains of business or profession’ ( i.e. income from business of manpower supply) at Rs. 6,22,44,207/- and income under the head ‘income from other sources’( i.e. income other than business income may be in the nature of interest etc.) at Rs. ). After adding income from both these heads worked . Thereafter, the u/s 80JJAA of the Act for the additional employee cost restricted the claim to the extent of the ‘gross total total income. The return of income filed by the assessee was processed u/s 143(1) of wherein the deduction business income’ of gross total income’ of as claimed by the assessee. Aggrieved, the assessee filed appeal before the Ld. CIT(A) but could not succeed. Before the Ld. CIT(A), the assessee against order u/s 143(1) of the Act assessment order u/s 143(3) of the Act submission filed during ongoing appeal proceedings against the said assessment order. The Ld. CIT(A) after considering the submission of the assessee dismissed the appeal observing as under: OBSERVATION AND DECISION: The appellant admits that the order u/s143(3) is passed on29 December 2022. The appellant has requested that In view of the above, we request your Honour to kindly merge captioned Appeal filed against the rectification order (Appeal no: NFAC/2020 latest appeal filed against the Assessment Order (Appeal no: NFAC/2020-21/10201653 dated 27 January 2023) and consider detailed submission filed vide letter dated 23 February 2024 during ongoing appeal proceeding against th assessment order. The appeal against the 143(3) order lies with CIT(A) and against 143(1) lies with JCIT(A). Hence combining this appeals is not possible. 5.2 Ground 1 is against CPC restricting the claim under Section 80JJAA of the Act amounting to IN the of Rs 6,22,44,207/ Section 80JJAAto the gross total income of INR 11,12,68,378/ . In the 143(3) order the claim under Section 80JJAA itself is disallowed and a finding is given However, the interp unless stated otherwise. In the extant case, the amendment is applicable with effect from 01 above issue, the assessee has claimed deduction u/s 80JJAA Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 essee filed appeal before the Ld. CIT(A) but could not succeed. Before the Ld. CIT(A), the assessee urged for merging against order u/s 143(1) of the Act with the appeal file u/s 143(3) of the Act and to consider submission filed during ongoing appeal proceedings against the said assessment order. The Ld. CIT(A) after considering the submission of the assessee dismissed the appeal observing as OBSERVATION AND DECISION: The appellant admits that the order u/s143(3) is passed on29 December 2022. The appellant has requested that In view of the above, we request your Honour to kindly merge captioned Appeal filed against the rectification order (Appeal no: NFAC/2020- 21/10192468 dated 21 October 2022) with latest appeal filed against the Assessment Order (Appeal no: 21/10201653 dated 27 January 2023) and consider detailed submission filed vide letter dated 23 February 2024 during ongoing appeal proceeding against th assessment order. The appeal against the 143(3) order lies with CIT(A) and against 143(1) lies with JCIT(A). Hence combining this appeals is not possible. 5.2 Ground 1 is against CPC restricting the claim under Section 80JJAA of the Act amounting to INR 30,10,31,823 to the of Rs 6,22,44,207/- and not restricting the claim under Section 80JJAAto the gross total income of INR 11,12,68,378/ . In the 143(3) order the claim under Section 80JJAA itself is disallowed and a finding is given However, the interpretation of law is always Prospective unless stated otherwise. In the extant case, the amendment is applicable with effect from 01- 04-2019. While as per the above issue, the assessee has claimed deduction u/s 80JJAA Innovsource Services Pvt. Ltd. 4 ITA No. 3424/MUM/2024 essee filed appeal before the Ld. CIT(A) but could not succeed. merging the appeal with the appeal filed against and to consider detailed submission filed during ongoing appeal proceedings against the said assessment order. The Ld. CIT(A) after considering the submission of the assessee dismissed the appeal observing as The appellant admits that the order u/s143(3) is passed on29 In view of the above, we request your Honour to kindly merge captioned Appeal filed against the rectification order (Appeal 2468 dated 21 October 2022) with latest appeal filed against the Assessment Order (Appeal no: 21/10201653 dated 27 January 2023) and consider detailed submission filed vide letter dated 23 February 2024 during ongoing appeal proceeding against the The appeal against the 143(3) order lies with CIT(A) and against 143(1) lies with JCIT(A). Hence combining this appeals 5.2 Ground 1 is against CPC restricting the claim under R 30,10,31,823 to and not restricting the claim under Section 80JJAAto the gross total income of INR 11,12,68,378/- . In the 143(3) order the claim under Section 80JJAA itself is retation of law is always Prospective unless stated otherwise. In the extant case, the amendment is 2019. While as per the above issue, the assessee has claimed deduction u/s 80JJAA of over Rs.30,10,31,823/ appointments as shown to be taken place in FY 2017 respect to above amendment, appointments made in F.Y. 2018-19 would be eligible for the said provision of, \"Provided further that where an employee is employed during the previous year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of two hundred and forty days or one hundred and fifty days, as the case may be, in the immediately succeeding year been employed in the succeeding year and the provisions of this section shall apply accordingly\". Please note as per provisions of law, deduction u/s 80JJAA is allowable only for three years including the year of appointment an there is no question of taking it to FY 2020 assessee. Since income declared is of Rs. 11,12,68,378/ assessee, disallowance of Rs.11,12,68,378/ u/s 80JJAA as claimed by the assessee. 5.3 In the 143(3) ord not eligible for deduction u/s Section 80JJAA for this assessment year. But the issue whether the appellant is eligible for deduction under Section 80JJAAon the gross total income of INR 11,12,68,378/ business income of Rs 6,22,44,207/ appellate authority in the appeal filed against the 143(3) order decide in favour of the appellant. Hence this issue is discussed in this order. 5.4 The claim of the appellant Section 80A(4) of the Act provides that where the amount of profit and gain is claimed and allowed as deduction i.e., profit linked deduction, the deduction under those section shall be restricted to the business income earned only. However, it i pertinent to note that under Section 80JJAA of the Act, the Appellant is eligible to claim deduction of the additional employee cost incurred in the course of business and not does not provide for deduction of profit and gain from a business. Hence, provision of Section 80A(4) of the Act shall not be Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 of over Rs.30,10,31,823/- inter-alia, taking into account appointments as shown to be taken place in FY 2017- respect to above amendment, appointments made in F.Y. 19 would be eligible for the said provision of, \"Provided further that where an employee is employed during the us year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of two hundred and forty days or one hundred and fifty days, as the case may be, in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year and the provisions of this section shall apply accordingly\". Please note as per provisions of law, deduction u/s 80JJAA is allowable only for three years including the year of appointment and therefore, there is no question of taking it to FY 2020-21 as done by Since income declared is of Rs. 11,12,68,378/- assessee, disallowance of Rs.11,12,68,378/- is being done u/s 80JJAA as claimed by the assessee. 5.3 In the 143(3) order a finding is given that the appellant is not eligible for deduction u/s Section 80JJAA for this assessment year. But the issue whether the appellant is eligible for deduction under Section 80JJAAon the gross total income of INR 11,12,68,378/- or is to be restricted to the business income of Rs 6,22,44,207/- will be relevant if the appellate authority in the appeal filed against the 143(3) order decide in favour of the appellant. Hence this issue is discussed 5.4 The claim of the appellant is that Section 80A(4) of the Act provides that where the amount of profit and gain is claimed and allowed as deduction i.e., profit linked deduction, the deduction under those section shall be restricted to the business income earned only. However, it i pertinent to note that under Section 80JJAA of the Act, the Appellant is eligible to claim deduction of the additional employee cost incurred in the course of business and not does not provide for deduction of profit and gain from a business. ision of Section 80A(4) of the Act shall not be Innovsource Services Pvt. Ltd. 5 ITA No. 3424/MUM/2024 aking into account -18. With respect to above amendment, appointments made in F.Y. 19 would be eligible for the said provision of, \"Provided further that where an employee is employed during the us year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of two hundred and forty days or one hundred and fifty days, as the case may be, in the , he shall be deemed to have been employed in the succeeding year and the provisions of this section shall apply accordingly\". Please note as per provisions of law, deduction u/s 80JJAA is allowable only for d therefore, 21 as done by by the is being done er a finding is given that the appellant is not eligible for deduction u/s Section 80JJAA for this assessment year. But the issue whether the appellant is eligible for deduction under Section 80JJAAon the gross total e restricted to the will be relevant if the appellate authority in the appeal filed against the 143(3) order decide in favour of the appellant. Hence this issue is discussed Section 80A(4) of the Act provides that where the amount of profit and gain is claimed and allowed as deduction i.e., profit linked deduction, the deduction under those section shall be restricted to the business income earned only. However, it is pertinent to note that under Section 80JJAA of the Act, the Appellant is eligible to claim deduction of the additional employee cost incurred in the course of business and not does not provide for deduction of profit and gain from a business. ision of Section 80A(4) of the Act shall not be applicable for claiming deduction under Section 80JJAA of the Act since the amount is the claimed as a deduction is the additional employee cost and not the profit from business. Further, sub-section 4 of Se vide Finance Act (No. 2) Act, 2019. The intention of introduction the said sub-section was to prevent abuse of tax incentive. The relevant extract of the Memorandum to Finance Bill 2009 wherein the intention is mentioned The profit linked deductions in Chapter VIA are prone to considerable misuse. Further, since the scope of the deductions under various provisions of Chapter VIA overlap, the taxpayers, at times, claim multiple deductions for the same profits. With a view to preventing such misuse, it is proposed to amend the provisions of section 80A of the Income provide the following, namely: (i) deduction in respect of profits and gains shall not be allowed under any provisions of sectio or section 10B or section 10BA or under any provisions of Chapter VIA under the heading \"C. certain incomes\" in any assessment year, if a deduction in respect of same amount under any of the aforesaid has been allowed in the same assessment year; (ii) (ii) the aggregate of the deductions under the various provisions referred to in (i) above, shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible business, as the case may be (iii) no deductions under the various provisions referred to in (i) above, shall be allowed if the deduction has not been claimed in the return of income; These amendments will take effect retrospectively from the 1st April 2003, and will accordingly a assessment year 2003 7.13. Hence, reading Section 80A(4) of the Act along with the intention, it is submitted that the restriction under Section 80A(4) is applicable for profit linked deduction and given that Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 applicable for claiming deduction under Section 80JJAA of the Act since the amount is the claimed as a deduction is the additional employee cost and not the profit from business. section 4 of Section 80A of the Act was introduced vide Finance Act (No. 2) Act, 2019. The intention of introduction section was to prevent abuse of tax incentive. The relevant extract of the Memorandum to Finance Bill 2009 wherein the intention is mentioned is provided below: The profit linked deductions in Chapter VIA are prone to considerable misuse. Further, since the scope of the deductions under various provisions of Chapter VIA overlap, the taxpayers, at times, claim multiple deductions for the same With a view to preventing such misuse, it is proposed to amend the provisions of section 80A of the Income-tax Act to provide the following, namely:- (i) deduction in respect of profits and gains shall not be allowed under any provisions of section 10A or section 10AA or section 10B or section 10BA or under any provisions of Chapter VIA under the heading \"C.-Deductions in respect of certain incomes\" in any assessment year, if a deduction in respect of same amount under any of the aforesaid has been allowed in the same assessment year; (ii) (ii) the aggregate of the deductions under the various provisions referred to in (i) above, shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible business, as the case may be; (iii) no deductions under the various provisions referred to in (i) above, shall be allowed if the deduction has not been claimed in the return of income; These amendments will take effect retrospectively from the 1st April 2003, and will accordingly apply in relation to assessment year 2003-2004 and subsequent years 7.13. Hence, reading Section 80A(4) of the Act along with the intention, it is submitted that the restriction under Section 80A(4) is applicable for profit linked deduction and given that Innovsource Services Pvt. Ltd. 6 ITA No. 3424/MUM/2024 applicable for claiming deduction under Section 80JJAA of the Act since the amount is the claimed as a deduction is the additional employee cost and not the profit from business. ction 80A of the Act was introduced vide Finance Act (No. 2) Act, 2019. The intention of introduction section was to prevent abuse of tax incentive. The relevant extract of the Memorandum to Finance Bill 2009 The profit linked deductions in Chapter VIA are prone to considerable misuse. Further, since the scope of the deductions under various provisions of Chapter VIA overlap, the taxpayers, at times, claim multiple deductions for the same With a view to preventing such misuse, it is proposed to tax Act to (i) deduction in respect of profits and gains shall not be n 10A or section 10AA or section 10B or section 10BA or under any provisions of Deductions in respect of certain incomes\" in any assessment year, if a deduction in respect of same amount under any of the aforesaid has been (ii) (ii) the aggregate of the deductions under the various provisions referred to in (i) above, shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible (iii) no deductions under the various provisions referred to in (i) above, shall be allowed if the deduction has not been claimed These amendments will take effect retrospectively from the 1st pply in relation to 7.13. Hence, reading Section 80A(4) of the Act along with the intention, it is submitted that the restriction under Section 80A(4) is applicable for profit linked deduction and given that Section 80JJAA is not a profit linked deduction, the deduction under Section 80JJAA of the Act shall be allowed up to gross total income as per provision of Section 80A(2) of the Act. 5.5 It is correct that section 80JJAA is not a profit linked deduction and is linked with expenditure. The sections uses the words “gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business and thus is applicable only to undertakings that have profits from business. T business and is eligible for deduction if other conditions are satisfied. In the 143(3) order AO has given a finding that conditions are not satisfies and hence is not eligible for deduction. 5.6 Section 80A(4) is as under (4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading \"C. Deductions in respect of certain incomes\", where, in the case of an assessee, any undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shal allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be. The section is very clear that “any prov under the heading \"C. incomes”, and section 80H to 80VV comes under heading \"C. Deductions in respect of certain incomes. Hence the provisions under section 80A(4) and shall in no case exceed the prof and gains of such undertaking or unit or enterprise or eligible business,is applicable to section 10A or section 10AA or section 10B or section 10BA and section 80H to 80VV. The action of CPC restricting the deduction under section 80JJAAto the business income of Rs 6,22,44,207/ and facts. Ground 1 Is dismissed. Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 Section 80JJAA is not a profit linked deduction, the deduction under Section 80JJAA of the Act shall be allowed up to gross total income as per provision of Section 80A(2) of the Act. 5.5 It is correct that section 80JJAA is not a profit linked and is linked with expenditure. The sections uses the words “gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business and thus is applicable only to undertakings that have profits from business. The appellant has profit from business and is eligible for deduction if other conditions are satisfied. In the 143(3) order AO has given a finding that conditions are not satisfies and hence is not eligible for 5.6 Section 80A(4) is as under ) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading \"C. Deductions in respect of certain incomes\", where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be. The section is very clear that “any provisions of this Chapter under the heading \"C.—Deductions in respect of certain incomes”, and section 80H to 80VV comes under heading \"C. Deductions in respect of certain incomes. Hence the provisions under section 80A(4) and shall in no case exceed the prof and gains of such undertaking or unit or enterprise or eligible business,is applicable to section 10A or section 10AA or section 10B or section 10BA and section 80H to 80VV. The action of CPC restricting the deduction under section 80JJAAto s income of Rs 6,22,44,207/- is correct as per law and facts. Ground 1 Is dismissed. Innovsource Services Pvt. Ltd. 7 ITA No. 3424/MUM/2024 Section 80JJAA is not a profit linked deduction, the deduction under Section 80JJAA of the Act shall be allowed up to gross total income as per provision of Section 80A(2) of the Act. 5.5 It is correct that section 80JJAA is not a profit linked and is linked with expenditure. The sections uses the words “gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business and thus is applicable only to undertakings that he appellant has profit from business and is eligible for deduction if other conditions are satisfied. In the 143(3) order AO has given a finding that conditions are not satisfies and hence is not eligible for ) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading \"C.— Deductions in respect of certain incomes\", where, in the case of amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, l not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible isions of this Chapter Deductions in respect of certain incomes”, and section 80H to 80VV comes under heading \"C.— Deductions in respect of certain incomes. Hence the provisions under section 80A(4) and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business,is applicable to section 10A or section 10AA or section 10B or section 10BA and section 80H to 80VV. The action of CPC restricting the deduction under section 80JJAAto is correct as per law 5. Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 74 including the intimation order u/s 143(1) of the Act dated 22.09.2022. 6. Firstly, we take up the additional ground No. 3 raised by the assessee. In the additional ground intimation letter proposing adjustment intimation order u/s 143(1)(a) of the Act and therefore, the intimation order issued is illegal and bad in law. 6.1 We have heard rival submissions of the parties and perused the relevant materials on record 143(1)(a) provides that before issuing intimation order u/s 143(1)(a) of the Act, the assessee shall be intimated the proposed adjustment. For ready reference, said proviso is reproduced under: “143. 55[(1) Where a return has been made under under sub-section (1) of section 142 manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely: (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; 57[(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub- (iv) disallowance of expenditure Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 74 including the intimation order u/s 143(1) of the Act dated 22.09.2022. tly, we take up the additional ground No. 3 raised by the assessee. In the additional ground, it is submitted that no intimation letter proposing adjustment was issued prior to issue of intimation order u/s 143(1)(a) of the Act and therefore, the n order issued is illegal and bad in law. We have heard rival submissions of the parties and perused the relevant materials on record. The proviso below the section 143(1)(a) provides that before issuing intimation order u/s 143(1)(a) assessee shall be intimated the proposed adjustment. For ready reference, said proviso is reproduced( bold portion) [(1) Where a return has been made under section 139, or in response to a notice section 142, such return shall be processed in the following the total income or loss shall be computed after making the following namely:— any arithmetical error in the return; 56[***] an incorrect claim, if such incorrect claim is apparent from any information in the return; disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified -section (1) of section 139; disallowance of expenditure 58[or increase in income] indicated in the Innovsource Services Pvt. Ltd. 8 ITA No. 3424/MUM/2024 Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 74 including the intimation order u/s 143(1) tly, we take up the additional ground No. 3 raised by the submitted that no issued prior to issue of intimation order u/s 143(1)(a) of the Act and therefore, the We have heard rival submissions of the parties and perused The proviso below the section 143(1)(a) provides that before issuing intimation order u/s 143(1)(a) assessee shall be intimated the proposed adjustment. ( bold portion) as r in response to a notice , such return shall be processed in the following the total income or loss shall be computed after making the following an incorrect claim, if such incorrect claim is apparent from any disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified [or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under of the provisions of Chapter VI respect of certain incomes\", if] the return is furnished beyond the due date specified under sub (vi) addition of income appearing in which has not been included in computing the total income in the return: Provided that no such adjustments shall be ma is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where received within thirty days of the issue of such intimation, such adjustments shall be made:] 60[Provided also that no adjustment shall be made under sub relation to a return furnished for the 1st day of April, 2018;]” 6.2 The ld counsel argued that any intimation order passed u/s 143(1)(a) of the Act without issuing intimation letter proposing adjustment, thus, would be in violation of principle justice and void-ab-initio Ld. counsel for the assessee submitted that trace any intimation issued as per the said proviso below section 143(1)(a) of the Act with respect to the the affidavit dated 30.08.2024 mentioned that despite thorough search, the said intimation letter couldn’t be located/traced in their records. the affidavit it is not mentioned what is the designation of Shri Amit Chitale and in what capacity said deposition Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 audit report but not taken into account in computing the total income in disallowance of deduction claimed under 59[section 10AA o of the provisions of Chapter VI-A under the heading \"C. respect of certain incomes\", if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or addition of income appearing in Form 26AS or Form 16A which has not been included in computing the total income in the return: that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where received within thirty days of the issue of such intimation, such adjustments that no adjustment shall be made under sub relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;]” The ld counsel argued that any intimation order passed u/s 143(1)(a) of the Act without issuing intimation letter proposing adjustment, thus, would be in violation of principle initio. But, during the course of the hearing, the Ld. counsel for the assessee submitted that assessee trace any intimation issued as per the said proviso below section 143(1)(a) of the Act with respect to the adjustment dated 30.08.2024 filed by one ‘Shri Amit Chitale mentioned that despite thorough search, the said intimation letter be located/traced in their records. It is noted by us that not mentioned what is the designation of Shri Amit Chitale and in what capacity said deposition had been Innovsource Services Pvt. Ltd. 9 ITA No. 3424/MUM/2024 audit report but not taken into account in computing the total income in [section 10AA or under any A under the heading \"C.—Deductions in respect of certain incomes\", if] the return is furnished beyond the due ; or Form 16A or Form 16 which has not been included in computing the total income in the return: de unless an intimation is given to the assessee of such adjustments either in writing or in that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments that no adjustment shall be made under sub-clause (vi) in the assessment year commencing on or after The ld counsel argued that any intimation order passed u/s 143(1)(a) of the Act without issuing intimation letter proposing adjustment, thus, would be in violation of principle of natural uring the course of the hearing, the assessee was unable to trace any intimation issued as per the said proviso below section adjustment carried out. In Shri Amit Chitale’, it is mentioned that despite thorough search, the said intimation letter It is noted by us that in not mentioned what is the designation of Shri Amit had been given. We are of the opinion that since it is t additional ground challenging the fact that no intimation letter proposing adjustment was issued to the assessee, the assessee to file an affidavit from the Principal Officer of the company or any other authorized person stating that such intimation letter was never issued to the assessee has filed affidavit stating that said intimation letter traceable in the record of the assessee, and the authority of the person making affidavit is also not clear. filed an application before the Income Information Act for collecting that any such intimation letter was Authorities. Since assessee is asserting the fact that said i letter was never issued that said intimation letter was never issued. If assessee succeed in proving that said intimation letter was never issued would shift on to Revenue to substantiate th was ever issued and then accordance with law as to whether non issue of intimation letter would be in the nature of ‘illegality’ of the order or a curable ‘irregularity’. But in absence of any suc that no intimation letter was issued, the serial No. 3, cannot be decided we dismiss the same as Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 of the opinion that since it is the assessee, who challenging the fact that no intimation letter proposing adjustment was issued to the assessee, then onus is on the assessee to file an affidavit from the Principal Officer of the company or any other authorized person stating that such as never issued to the assessee. But the assessee stating that said intimation letter e in the record of the assessee, and the authority of the person making affidavit is also not clear. The assessee application before the Income-tax Authority under Right to Information Act for collecting said intimation letter that any such intimation letter was never issued by the Income Authorities. Since assessee is asserting the fact that said i letter was never issued, the onus lies on the assessee to establish that said intimation letter was never issued. If assessee succeed in proving that said intimation letter was never issued would shift on to Revenue to substantiate that any such intimation was ever issued and then issue in dispute could be accordance with law as to whether non issue of intimation letter would be in the nature of ‘illegality’ of the order or a curable But in absence of any such confirmation of the fact that no intimation letter was issued, the additional ground raised cannot be decided in favour of assessee. A the same as infructuous. Innovsource Services Pvt. Ltd. 10 ITA No. 3424/MUM/2024 , who has raised challenging the fact that no intimation letter then onus is on the assessee to file an affidavit from the Principal Officer of the company or any other authorized person stating that such . But the assessee stating that said intimation letter was not e in the record of the assessee, and the authority of the The assessee could have tax Authority under Right to said intimation letter or confirming issued by the Income-tax Authorities. Since assessee is asserting the fact that said intimation the onus lies on the assessee to establish that said intimation letter was never issued. If assessee succeed in proving that said intimation letter was never issued, the burden at any such intimation issue in dispute could be decided in accordance with law as to whether non issue of intimation letter would be in the nature of ‘illegality’ of the order or a curable h confirmation of the fact ground raised at in favour of assessee. Accordingly, 7. In additional ground again raised the issue that the Assessing Officer has not specified the sub-clause of section 143(1) of the Act while making adjustment. The Ld. Departmental Representative (DR) in this regard submitted that as per the practice said sub specified in the intimation letter proposing the adjustment. But since the intimation letter issued proposing the adjustment has not been traceable at the raised by the assessee is also dismissed as infructuous 8. In additional ground issue that quantum of deduction claimed by the assessee could not be recorded as ‘incorrect claim the return. Before adjudication of this ground, we may li regular ground No.1 of the assessee itself is requesting that appeal against the order passed under section 143(1) of the Act should be held as infructuous as subsequent to the order u/s 143(1) of the A assessment order u/s 143(3) of the Act has been passed. ground No. 2 , the assessee has challenged the merit of the addition for restricting the deduction u/s 80JJAA of the Act to the extent of the business income instead of gross total inco submitted that section 80A(4) of the Act would apply to a profit linked deduction and can have no application to a case of present type , where deduction is linked to a certain percentage of the Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 In additional ground raised at Serial No. 4, the as again raised the issue that the Assessing Officer has not specified clause of section 143(1) of the Act while making adjustment. The Ld. Departmental Representative (DR) in this regard submitted that as per the practice said sub specified in the intimation letter proposing the adjustment. But since the intimation letter issued proposing the adjustment has not the end of the assessee, this additional raised by the assessee is also dismissed as infructuous In additional ground at S. No. 5, the assessee has raised the issue that quantum of deduction claimed by the assessee could not incorrect claim’ apparent from the information in Before adjudication of this ground, we may li No.1 of the assessee (reproduced above), the assessee itself is requesting that appeal against the order passed under section 143(1) of the Act should be held as infructuous as subsequent to the order u/s 143(1) of the A assessment order u/s 143(3) of the Act has been passed. the assessee has challenged the merit of the addition for restricting the deduction u/s 80JJAA of the Act to the extent of the business income instead of gross total income. submitted that section 80A(4) of the Act would apply to a profit linked deduction and can have no application to a case of present type , where deduction is linked to a certain percentage of the Innovsource Services Pvt. Ltd. 11 ITA No. 3424/MUM/2024 No. 4, the assessee has again raised the issue that the Assessing Officer has not specified clause of section 143(1) of the Act while making adjustment. The Ld. Departmental Representative (DR) in this regard submitted that as per the practice said sub-clause is specified in the intimation letter proposing the adjustment. But since the intimation letter issued proposing the adjustment has not additional ground raised by the assessee is also dismissed as infructuous. No. 5, the assessee has raised the issue that quantum of deduction claimed by the assessee could not apparent from the information in Before adjudication of this ground, we may like to refer (reproduced above), in which the assessee itself is requesting that appeal against the order passed under section 143(1) of the Act should be held as infructuous as subsequent to the order u/s 143(1) of the Act, assessment order u/s 143(3) of the Act has been passed. In regular the assessee has challenged the merit of the addition for restricting the deduction u/s 80JJAA of the Act to the extent of me. The ld counsel submitted that section 80A(4) of the Act would apply to a profit linked deduction and can have no application to a case of present type , where deduction is linked to a certain percentage of the expenditure incurred by the assessee. decision of hon’ble Supreme Court in the case of CIT Vs Reliance Energy Ltd in Civil Appeal No. 1328 of 2021 and others and submitted that scope of sub section (5) of section 08IA of the Act is limited to determination of quantum (1) of section 80IA of the Act by treating ‘eligible business’ as the ‘only source of income’ and subsection (5) can’t be pressed into service for reading limitation of deduction under subsection (1) only to ‘business income’ authored by sh AC Sampath Iyengar to emphasize that deduction u/s 80JJAA of the Act is quantified or computed based on expenditure incurred by the assessee for the purpose of creating employment opportunities. 8.1 The brief facts qua the issue in dispute are that after the intimation order by the assessee was scrutiny assessment, the Assessing Officer examined the deduction u/s 80JJAA of the Act. In the queries raised, the Assessing Officer raised question for taking into account appointment of the employees in the financial year 2017 Assessing Officer further questioned that assessee was engaged in supply of the manpower services and those employees had worked for different entities and not work Assessing Officer further questioned that the assessee has not Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 expenditure incurred by the assessee. The ld counsel decision of hon’ble Supreme Court in the case of CIT Vs Reliance Energy Ltd in Civil Appeal No. 1328 of 2021 and others and scope of sub section (5) of section 08IA of the Act is limited to determination of quantum of deduction under subsection (1) of section 80IA of the Act by treating ‘eligible business’ as the ‘only source of income’ and subsection (5) can’t be pressed into service for reading limitation of deduction under subsection (1) only to ‘business income’. The ld counsel also referred to commentary authored by sh AC Sampath Iyengar to emphasize that deduction u/s 80JJAA of the Act is quantified or computed based on expenditure incurred by the assessee for the purpose of creating employment opportunities. The brief facts qua the issue in dispute are that after dated 22/09/2022, the return of income by the assessee was selected for scrutiny assessment and scrutiny assessment, the Assessing Officer examined the deduction u/s 80JJAA of the Act. In the queries raised, the Assessing Officer raised question for taking into account appointment of the employees in the financial year 2017 Assessing Officer further questioned that assessee was engaged in supply of the manpower services and those employees had worked different entities and not worked for the assessee company. The Assessing Officer further questioned that the assessee has not Innovsource Services Pvt. Ltd. 12 ITA No. 3424/MUM/2024 ld counsel referred to the decision of hon’ble Supreme Court in the case of CIT Vs Reliance Energy Ltd in Civil Appeal No. 1328 of 2021 and others and scope of sub section (5) of section 08IA of the Act is of deduction under subsection (1) of section 80IA of the Act by treating ‘eligible business’ as the ‘only source of income’ and subsection (5) can’t be pressed into service for reading limitation of deduction under subsection (1) only . The ld counsel also referred to commentary authored by sh AC Sampath Iyengar to emphasize that deduction u/s 80JJAA of the Act is quantified or computed based on expenditure incurred by the assessee for the purpose of creating The brief facts qua the issue in dispute are that after issue of , the return of income filed selected for scrutiny assessment and during scrutiny assessment, the Assessing Officer examined the claim of deduction u/s 80JJAA of the Act. In the queries raised, the Assessing Officer raised question for taking into account appointment of the employees in the financial year 2017-18. The Assessing Officer further questioned that assessee was engaged in supply of the manpower services and those employees had worked for the assessee company. The Assessing Officer further questioned that the assessee has not brought anything on record to prove that deduction u/s 80JJAA the Act in respect of those persons had not been claimed by those entities. The assessee did not respond Assessing Officer and therefore, he issued a final show cause notice on 20.09.2022. In responded to query regarding considering appointment financial year 2017- granted to the assessee in assessment year 2018 but the ld DR pointed out that in those years, assessment was carried out. After examining the part documents filed by the assessee, the Assessing Officer in the order u/s 143(3) dated 29.12.2022 rejected the entire claim of deduction u/s 80JJAA of the Act holding that not only legally but on the claim had serious anomalies. A copy of the assessment order is placed on Paper Book page 36 to 54 of the Paper Book. 8.2 We have heard rival submissions of the parties on the issue of the merger of the intimation order u/s 143(1)(a) of the A assessment order u/s 143(3) of the Act. We find that assessee filed rectification against the intimation order dated 22.09.2022 which was disposed off by the 21.10.2022. The Ld. CIT(A) has cited the submission of t in the impugned order wherein the assessee has requested to merge the appeal against the rectification order with the appeal filed against the assessment order. In our opinion, the assessee itself is Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 brought anything on record to prove that deduction u/s 80JJAA the Act in respect of those persons had not been claimed by those . The assessee did not respond to the queries issued by the Assessing Officer and therefore, he issued a final show cause notice on 20.09.2022. In response to final show cause, responded to query regarding considering appointment 18. The assessee claimed that deduction was granted to the assessee in assessment year 2018-19 and 2020 the ld DR pointed out that in those years, was carried out. After examining the part documents filed by the assessee, the Assessing Officer in the order u/s 143(3) dated 29.12.2022 rejected the entire claim of deduction u/s 80JJAA of the Act holding that not only legally but on the claim had serious anomalies. A copy of the assessment order is placed on Paper Book page 36 to 54 of the Paper Book. We have heard rival submissions of the parties on the issue of the merger of the intimation order u/s 143(1)(a) of the A u/s 143(3) of the Act. We find that assessee filed rectification against the intimation order dated 22.09.2022 which was disposed off by the AO vide rectification order dated 21.10.2022. The Ld. CIT(A) has cited the submission of t in the impugned order wherein the assessee has requested to merge the appeal against the rectification order with the appeal filed against the assessment order. In our opinion, the assessee itself is Innovsource Services Pvt. Ltd. 13 ITA No. 3424/MUM/2024 brought anything on record to prove that deduction u/s 80JJAA of the Act in respect of those persons had not been claimed by those to the queries issued by the Assessing Officer and therefore, he issued a final show cause notice response to final show cause, the assessee responded to query regarding considering appointment made in he assessee claimed that deduction was 19 and 2020-21 the ld DR pointed out that in those years, no scrutiny was carried out. After examining the part documents filed by the assessee, the Assessing Officer in the order u/s 143(3) dated 29.12.2022 rejected the entire claim of deduction u/s 80JJAA of the Act holding that not only legally but on the facts also the claim had serious anomalies. A copy of the assessment order is placed on Paper Book page 36 to 54 of the Paper Book. We have heard rival submissions of the parties on the issue of the merger of the intimation order u/s 143(1)(a) of the Act with u/s 143(3) of the Act. We find that assessee filed rectification against the intimation order dated 22.09.2022 which rectification order dated 21.10.2022. The Ld. CIT(A) has cited the submission of the assessee in the impugned order wherein the assessee has requested to merge the appeal against the rectification order with the appeal filed against the assessment order. In our opinion, the assessee itself is accepting that the issue of adjustment made Act and the rectification order merged with the assessment order. the ground no. 1 raised before us also, the assessee is praying to this effect. In background of these facts and circumstances, we are of the opinion that , o gets merged with the assessment order, infructuous. The irrespective of the assessee, the law itself is clear intimation and the a Hon’ble Courts and the Benches of the Tribunal. The Hon’ble High Court of Madras in the case of Commissioner of Income Tax held that after passing of an order u/s 143(3) of the Act, the intimation u/s 143(1) of the Act get merged with the order u/s 143(3) of the Act and intimation order u/s 143(1)(a) of the Act does not survive independently Hon’ble High Court of Calcutta in the case of (2004) 134 Taxman 647 (Cal) the intimation has been reversed in the regular assessment and the assessee has preferred appeal which is pending, the theory of merger is bound to apply in the present case for the reason that the intimation issued u/s 143(1)(a) of the Act is no longer operative Co-ordinate Bench of the ITO (2024) 163 taxmann.com claimed u/s 11 of the Act was denied vide the intimation u/s 143(1) Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 accepting that the issue of adjustment made u/s 143(1)(a) of the Act and the rectification order merged with the assessment order. the ground no. 1 raised before us also, the assessee is praying to In background of these facts and circumstances, we are of the opinion that , once, the issue involved in intimation order with the assessment order, the present appeal becomes . The irrespective of the fact of admission by the assessee, the law itself is clear on the concept of merger between an intimation and the assessment has been dealt with by various Hon’ble Courts and the Benches of the Tribunal. The Hon’ble High Court of Madras in the case of Tamil Nadu, Magnesite Ltd. Vs. Commissioner of Income Tax Writ Petition No. 17819/2001 that after passing of an order u/s 143(3) of the Act, the intimation u/s 143(1) of the Act get merged with the order u/s 143(3) of the Act and intimation order u/s 143(1)(a) of the Act does not survive independently for rectification by the Assessing Officer Hon’ble High Court of Calcutta in the case of CESC Ltd. v. DCIT (2004) 134 Taxman 647 (Cal) held that when assessee accepted in the intimation has been reversed in the regular assessment and the erred appeal which is pending, the theory of merger is bound to apply in the present case for the reason that the intimation issued u/s 143(1)(a) of the Act is no longer operative ordinate Bench of the Delhi Tribunal in South India taxmann.com 479 (Delhi) held claimed u/s 11 of the Act was denied vide the intimation u/s 143(1) Innovsource Services Pvt. Ltd. 14 ITA No. 3424/MUM/2024 u/s 143(1)(a) of the Act and the rectification order merged with the assessment order. In the ground no. 1 raised before us also, the assessee is praying to In background of these facts and circumstances, we are involved in intimation order the present appeal becomes admission by the concept of merger between an ssessment has been dealt with by various Hon’ble Courts and the Benches of the Tribunal. The Hon’ble High Magnesite Ltd. Vs. tion No. 17819/2001 that after passing of an order u/s 143(3) of the Act, the intimation u/s 143(1) of the Act get merged with the order u/s 143(3) of the Act and intimation order u/s 143(1)(a) of the Act does not rectification by the Assessing Officer. The CESC Ltd. v. DCIT that when assessee accepted in the intimation has been reversed in the regular assessment and the erred appeal which is pending, the theory of merger is bound to apply in the present case for the reason that the intimation issued u/s 143(1)(a) of the Act is no longer operative. The Tribunal in South India Club v. held that exemption claimed u/s 11 of the Act was denied vide the intimation u/s 143(1) of the Act and subsequently the matter was picked up for scrutiny and the Assessing Officer also denied the same exemption in the assessment order u/s 143(3) of the Act. The Co Tribunal held that intimation order u/s 143(1) of the Act merges with the assessment order u/s 143(3) of the Act and the said intimation becomes inoperative and the appeal filed against such int could also become infructuous. adjustment u/s 143(1) of the Act and section 143(3) are different then said concept of the merger may not apply. In the case of Trust v. CIT(A), NFAC (ITAT[Bang]), the Bengluru Bench the assessee filed return of income declaring total income at Rs. Nil which was processed by the Assessing Officer and in the intimation u/s 143(1) of the Act, the Assessing Officer of Rs.23,29,62,417/- Act. The assessee filed a rectification application against the said intimation u/s 154 of the Act. Subsequently, the case of the assessee was selected for scrutiny and of the Act was passed whereby assessing total income at Rs.23,29,63,417/- as per the intimation letter issued u/s 143(1) of the Act. The Assessing Officer merely repeated the figure of the income which was mentioned in the intim preferred appeal against the order u/s 143(3) of the Act before the Ld. CIT(A), the Ld. CIT(A) held that appeal filed by the assessee against the order u/s 143(3) of the Act was not maintainable since Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 of the Act and subsequently the matter was picked up for scrutiny and the Assessing Officer also denied the same exemption in the order u/s 143(3) of the Act. The Co-ordinate Bench of the Tribunal held that intimation order u/s 143(1) of the Act merges with the assessment order u/s 143(3) of the Act and the said intimation becomes inoperative and the appeal filed against such int could also become infructuous. But if the subject matter of adjustment u/s 143(1) of the Act and section 143(3) are different then said concept of the merger may not apply. In the case of Trust v. CIT(A), NFAC reported in (2024) 117 ITR Bengluru Bench of the Tribunal observed that the assessee filed return of income declaring total income at Rs. Nil which was processed by the Assessing Officer and in the intimation u/s 143(1) of the Act, the Assessing Officer considered an amount - as income chargeable to tax u/s 115JB of the Act. The assessee filed a rectification application against the said intimation u/s 154 of the Act. Subsequently, the case of the assessee was selected for scrutiny and assessment order u/s 143(3) of the Act was passed whereby assessing total income at as per the intimation letter issued u/s 143(1) of the Act. The Assessing Officer merely repeated the figure of the income which was mentioned in the intimation order, the assessee preferred appeal against the order u/s 143(3) of the Act before the Ld. CIT(A), the Ld. CIT(A) held that appeal filed by the assessee against the order u/s 143(3) of the Act was not maintainable since Innovsource Services Pvt. Ltd. 15 ITA No. 3424/MUM/2024 of the Act and subsequently the matter was picked up for scrutiny and the Assessing Officer also denied the same exemption in the ordinate Bench of the Tribunal held that intimation order u/s 143(1) of the Act merges with the assessment order u/s 143(3) of the Act and the said intimation becomes inoperative and the appeal filed against such intimation But if the subject matter of adjustment u/s 143(1) of the Act and section 143(3) are different then said concept of the merger may not apply. In the case of Areca (2024) 117 ITR (Trib) 264 of the Tribunal observed that the assessee filed return of income declaring total income at Rs. Nil which was processed by the Assessing Officer and in the intimation considered an amount as income chargeable to tax u/s 115JB of the Act. The assessee filed a rectification application against the said intimation u/s 154 of the Act. Subsequently, the case of the assessment order u/s 143(3) of the Act was passed whereby assessing total income at as per the intimation letter issued u/s 143(1) of the Act. The Assessing Officer merely repeated the figure of the ation order, the assessee preferred appeal against the order u/s 143(3) of the Act before the Ld. CIT(A), the Ld. CIT(A) held that appeal filed by the assessee against the order u/s 143(3) of the Act was not maintainable since the Assessing Officer merely concluded the assessment by incorporating adjustment from the intimation u/s 143(1) of the Act. Similarly, the Co Bench of the Tribunal in the case of Orient Craft Ltd. v. Dy. CIT (2024) 158 taxmann.com 1124 (Del finding of the Co-ordinate Bench of the Tribunal in the case of Areca Trust (supra). From the above decisions, it is clear that an intimation order u/s 143(1) of the Act will not automatically merged with the assessment order u/s issues dealt in the intimation different and in the assessment order u/s 143(3) of the Act the income adopted under the intimation order u/s 143(1) of the Act has been accepted a The ld counsel referred bench of Mumbai in the case of Limited vs DCIT in ITA No. 732/Mum/2023 submitted that no appea that in said case the adjustment which was made in intimation order, was not made in the assessment order passed after discussion. Thus, facts of that case are different from the facts of instant case before us. 8.3 In light of the above discussion, upon examining the facts of the present case, it is evident that the adjustment proposed in the order issued under Section 143(1) of the Act pertains to the Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 Assessing Officer did not adjudicate the matter on merits and merely concluded the assessment by incorporating adjustment from the intimation u/s 143(1) of the Act. Similarly, the Co Tribunal in the case of Orient Craft Ltd. v. Dy. CIT (2024) 158 taxmann.com 1124 (Delhi-Trib.) also affirm the ordinate Bench of the Tribunal in the case of Areca Trust (supra). From the above decisions, it is clear that an intimation order u/s 143(1) of the Act will not automatically merged with the assessment order u/s 143(3) of the Act in case where the issues dealt in the intimation order and the assessment order are different and in the assessment order u/s 143(3) of the Act the income adopted under the intimation order u/s 143(1) of the Act has been accepted and no addition has been made separately referred before us to the decision of the Coordinate in the case of National Stock Exchange of India Limited vs DCIT in ITA No. 732/Mum/2023 for AY 2020 submitted that no appeal lied against assessment order, case the adjustment which was made in intimation order, was not made in the assessment order passed after discussion. Thus, facts of that case are different from the facts of instant case before us. In light of the above discussion, upon examining the facts of the present case, it is evident that the adjustment proposed in the order issued under Section 143(1) of the Act pertains to the Innovsource Services Pvt. Ltd. 16 ITA No. 3424/MUM/2024 te the matter on merits and merely concluded the assessment by incorporating adjustment from the intimation u/s 143(1) of the Act. Similarly, the Co-ordinate Tribunal in the case of Orient Craft Ltd. v. Dy. CIT also affirm the ordinate Bench of the Tribunal in the case of Areca Trust (supra). From the above decisions, it is clear that an intimation order u/s 143(1) of the Act will not automatically merged 143(3) of the Act in case where the and the assessment order are different and in the assessment order u/s 143(3) of the Act merely the income adopted under the intimation order u/s 143(1) of the no addition has been made separately. the decision of the Coordinate National Stock Exchange of India for AY 2020-21 and l lied against assessment order, but we find case the adjustment which was made in intimation order, was not made in the assessment order passed after discussion. Thus, facts of that case are different from the facts of In light of the above discussion, upon examining the facts of the present case, it is evident that the adjustment proposed in the order issued under Section 143(1) of the Act pertains to the deduction claimed under Section 80JJAA of the Act. same issue has also been addressed in the order issued under Section 143(3) of the Act, which is currently under appeal before the Learned First Appellate Authority. order under Section 143(1)(a) is whether the deduction under Section 80JJAA should be restricted to the business income or extended to the gross total income. The assessee contends that the deduction, being calculated based on t should not be limited to the business income. However, in the assessment order, the assessee did not provide complete responses to the queries raised by the Assessing Officer. Consequently, the Assessing Officer denied the entire d ₹30,10,31,823. Given that the issue of deduction is identical in both the order under Section 143(1) and the order under Section 143(3) of the Act, the former order effectively merges with the latter. 8.4 We further observe that under Section 80JJAA of the Act should be restricted to the extent of the business income or extended to the gross total income is intrinsically linked to the larger issue of the assessee's eligibility under Section 80JJAA filed against the order under Section 143(3) of the Act before the Learned First Appellate Authority. In the event that the First Appellate Authority upholds the findings of the Assessing Officer, adjudicating this issue Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 deduction claimed under Section 80JJAA of the Act. same issue has also been addressed in the order issued under Section 143(3) of the Act, which is currently under appeal before the Learned First Appellate Authority. The primary question in the order under Section 143(1)(a) is whether the deduction under Section 80JJAA should be restricted to the business income or extended to the gross total income. The assessee contends that the deduction, being calculated based on the expenditure incurred, should not be limited to the business income. However, in the assessment order, the assessee did not provide complete responses to the queries raised by the Assessing Officer. Consequently, the Assessing Officer denied the entire deduction claim amounting to Given that the issue of deduction is identical in both the order under Section 143(1) and the order under Section 143(3) of the Act, the former order effectively merges with the latter. We further observe that the question of whether the deduction under Section 80JJAA of the Act should be restricted to the extent of the business income or extended to the gross total income is intrinsically linked to the larger issue of the assessee's eligibility 0JJAA , which is presently sub-judice in the appeal filed against the order under Section 143(3) of the Act before the Learned First Appellate Authority. In the event that the First Appellate Authority upholds the findings of the Assessing Officer, ating this issue by us at this stage would lead to Innovsource Services Pvt. Ltd. 17 ITA No. 3424/MUM/2024 deduction claimed under Section 80JJAA of the Act. Notably, the same issue has also been addressed in the order issued under Section 143(3) of the Act, which is currently under appeal before The primary question in the order under Section 143(1)(a) is whether the deduction under Section 80JJAA should be restricted to the business income or extended to the gross total income. The assessee contends that the he expenditure incurred, should not be limited to the business income. However, in the assessment order, the assessee did not provide complete responses to the queries raised by the Assessing Officer. Consequently, the eduction claim amounting to Given that the issue of deduction is identical in both the order under Section 143(1) and the order under Section 143(3) of the Act, the former order effectively merges with the latter. the question of whether the deduction under Section 80JJAA of the Act should be restricted to the extent of the business income or extended to the gross total income is intrinsically linked to the larger issue of the assessee's eligibility judice in the appeal filed against the order under Section 143(3) of the Act before the Learned First Appellate Authority. In the event that the First Appellate Authority upholds the findings of the Assessing Officer, at this stage would lead to complications and an anomalous situation for the subordinate authorities tasked with implementing the appellate orders. 8.5 Accordingly, we hold the Act as inoperative assessment completed u/s 143(3) of the Act. the appeal is accordingly adjudicated as prayed by the assessee. view of merger of intimation order with case, we are not required to adjudicate additional ground no. 5 and regular ground no. 2 of the appeal. both the assessee as well as to Revenue limiting the deduction u/s 80JJAA to the extent gross total income vis-à-vis business income Ld. First Appellate Authority in appeal pending against the order u/s 143(3) of the Act which may be decided Authority in accordance with law. by the assessee are adjudicated as discussed above 9. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on Sd/ (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 29/01/2025 Rahul Sharma, Sr. P.S. Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 complications and an anomalous situation for the subordinate authorities tasked with implementing the appellate orders. Accordingly, we hold that the intimation order u/s 143(1) of ve and infructuous in the light of the scrutiny assessment completed u/s 143(3) of the Act. The ground no. 1 of the appeal is accordingly adjudicated as prayed by the assessee. of intimation order with assessment order in the not required to adjudicate additional ground no. 5 and regular ground no. 2 of the appeal. However, we grant the liberty to as well as to Revenue to raise limiting the deduction u/s 80JJAA to the extent gross total income vis business income by way of additional ground before the Ld. First Appellate Authority in appeal pending against the order u/s 143(3) of the Act which may be decided by the ld First Appellate accordance with law. Accordingly, the ground adjudicated as discussed above. In the result, the appeal of the assessee is dismissed. nounced in the open Court on 29/01/2025. Sd/- Sd/ (RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Innovsource Services Pvt. Ltd. 18 ITA No. 3424/MUM/2024 complications and an anomalous situation for the subordinate authorities tasked with implementing the appellate orders. the intimation order u/s 143(1) of infructuous in the light of the scrutiny The ground no. 1 of the appeal is accordingly adjudicated as prayed by the assessee. In assessment order in the not required to adjudicate additional ground no. 5 and However, we grant the liberty to to raise this issue of limiting the deduction u/s 80JJAA to the extent gross total income by way of additional ground before the Ld. First Appellate Authority in appeal pending against the order by the ld First Appellate he grounds raised . In the result, the appeal of the assessee is dismissed. /01/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Innovsource Services Pvt. Ltd. ITA No. 3424/MUM/2024 Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Innovsource Services Pvt. Ltd. 19 ITA No. 3424/MUM/2024 BY ORDER, (Assistant Registrar) ITAT, Mumbai "