Jhajjar Power Limited, Jhajjar V. DCIT CIRCLE , Rohtak

ITA 126/DEL/2023

AI Insights

The case involves Jhajjar Power Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre, Delhi, concerning an intimation order passed by the Assessing Officer under Section 143(1) of the Income Tax Act, 1961, for the Assessment Year 2020-21. The primary contention was regarding the adjustments made by the Centralized Processing Center (CPC), Bengaluru, related to Income Computation and Disclosure Standards (ICDS) adjustments, which the assessee argued were incorrectly quantified and not properly considered, leading to an artificial increase in taxable income. The Tribunal found that the adjustments were made without providing an opportunity to the assessee, which is a statutory requirement under Section 143(1)(a) of the Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121566 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-07-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 18-01-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH
• Keywords: Capital asset converted into stock in trade
• Section: 154; 45(2); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.126/DEL/2023 Assessment Year 2020-21 Jhajjar Power Limited Admin Building Khanpur Jharli (154) Jhajjar, Haryana. Vs. Deputy Commissioner of Income Tax Circle-Rohtak Haryana TAN/PAN: AACCJ0468L (Appellant) (Respondent) Appellant by: Shri Biren Shah, CA Respondent by: Mr. Waseem Arshad, CIT (DR) Date of hearing: 26 07 2023 Date of pronouncement: 26 07 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he capt ione d a ppeal has bee n file d by t he assess ee a gainst the order of the ld. C ommissi on er of Inco me T ax (A ppea ls)- N ati ona l Fac ele ss A ppeal Centre ( N FA C), D elhi ( ‘CIT(A )’ in shor t) dat ed 28. 11 .2022 arising fr om t he inti mat i on orde r da te d 20. 12.2021 passed b y t he Assess ing Office r (A O ) under Se ct ion 143(1) of the Inc ome T ax A ct, 1961 (t he A ct ) c on cerni ng AY 2020-21. 2. A s per t he g rounds of ap peal, the assessee has cha l le nge d the a dj us t me nt carried out b y CP C-B engaluru on accou nt of Income C ompu ta tion A nd D isclos ur e Standa rds ( ICD S) n ot ifie d under Sect ion 145(2) of t he Ac t a mount i ng to R s.1 8,73, 20,3 68/ - w hile draw ing inti ma tion unde r Sect i on 143 (1) of t he A ct. I.T.A. No.126/Del/2023 2 3. T he A ssessee -c omp an y f il ed its retu rn of i nc ome on 15. 02.2021 for As sess ment Yea r 20 20-21 in ques tion decla ri ng tota l i nc ome a t Nil. T he CPC, howeve r assessed the ta xa ble inco me at R s.18, 73, 76,940/ - w hi le process ing the retu rn of i nc ome under Sect io n 143(1) of th e Act w hi c h i nc lude d R s. 18, 73, 20,3 68/ - on account o f ICD S adj ustme nts w hi ch is under c ha lle nge in the prese nt a ppe al. 4. When the matter w as calle d fo r hearin g, the ld. couns el for the ass essee, at t he o utset, a dve rte d to F or m 3CD of t he T ax Audit Report and submi t ted t ha t t he as sess ee ha s reporte dl y carried out certa in ICD S A dj ust ment as poi nted out i n Row N o. 13(e ) of For m 3CD . A s per t he I CDS A djustmen ts re por ted in T ax A udit R eport, the A sse ssing O f fice r- CPC to ok the ICD S adj ust me nt at Rs. 44, 28,03, 658/ - ins tea d of correc t fi gur e of R s.25, 54, 83,2 90/ - i.e. diffe renc e bet w een aggregat e i nc reas e of R s.46, 06, 53,657/- and dec re ase of R s. 20,51, 70, 367/ -. In effe ct, th e asse ssee i tself has increase d the ta xa ble inco me to the exte nt of Rs. 25, 54,83, 290/- on ly on acc ou nt of such ICD S adj ust ments as re por ted in the T ax A udit R eport. 4. 1 E labo rati ng furthe r, the ld. cou nsel points out that ow in g t o suc h IC DS adj us t ments w hile dra w ing the i nt imat ion under Sect ion 143(1) by CPC B enga luru , the decrease in pro fi t on account o f I CD S a djustmen ts to the t une of Rs. 20,5 1, 70, 367/ - h as not been taken i nt o acc ount at al l and als o in cr ease in profit t o the extent of Rs. 1, 78, 50, 000/ - has bee n omit ted t o be consi de re d. This has res ulte d i n a rt if icial i nc rease i n taxable income to the extent I.T.A. No.126/Del/2023 3 of Rs. 18, 73, 20, 367/- [Rs. 20,51, 70, 36 7 (-) Rs. 1, 78, 50, 000]. 4. 2 T he ld. couns el re fe rre d to provi si on of Sec tion 1 45(2) of the A ct which en ti tles the asse ssee to make adj ustment on acc ount of n oti fied ICD S. The T ax A udit Re port has be en p repared afte r taki ng no te of pe rmissi bl e adj ust me nts i n cons onance w ith Secti on 145(2) of the A ct. The ld. counsel s ubmit ted t ha t on acco unt of ICD S adj ust me nt, the ta xa bl e profit, in e ffect, ha s st ood i nc reas ed but how ever, t he CPC has uni late ra ll y take n into acc ount onl y the incr ease in profit on acc ount of suc h a dj us tmen t and has omi tted to l ook at corres pon di ng d ec reas e i n t he profi ts on account of simi la r adj us t ment s on i dent ical pre mi ses. The l d. couns el next submits that w hi le ma ki ng s uch adjustments, no opport un it y w hats oe ve r has been given t o the assesse e whic h i s stat ut ori l y ma ndated as per the 1 s t p rovis o to Sect io n 143( 1)( a) of the A ct. The adjus t me nt s carrie d out w it hout gi ving opportuni t y has offen ded th e ena cted law o f Secti on 14 3(1) as wel l as sacrosa nct pri nci ples of natural justice. 5. T he ld. C IT (D R ), on the ot he r, submi t ted tha t the a ss essee, havi ng fi led recti ficat ion application unde r Sect ion 154 of the A ct, is e nt it led t o s uita ble re med y available t he re in i n ac co rdance w ith law and the re fore, the pres ent a ppe a l of the assessee i s a fut i le exercise a nd shoul d not be ente rtaine d. 6. We ha ve ca re ful ly conside re d t he rival su bmiss i ons. The qua ntif ica ti on of adj us t ments on a ccount of ICD S read w it h Sect ion 145(2) o f t he A c t res ult ing bo th towa rds i ncre ase and decrea se in profi ts, w hi le draw ing int i ma tion u nde r Sec tion 143( 1) I.T.A. No.126/Del/2023 4 is i n cont rover s y. The assessee c ont ends that no opportu nit y has been given wh il e ma ki ng i nc orr ec t qua nti ficati on o f adjustmen ts. The assessee furt he r cont en ds t hat such a dj us tments are not pe rmiss i ble un der Section 143(1 )(a ) of the A ct. 7. Making a vai la bl e of oppo rtunit y t o assessee is indis pe nsi bl e under Secti on 143(1) o f t he A c t. In t he abs enc e o f opportuni t y, the adjus tment under S ection 14 3(1) (a ) is viti at ed and runs cont ra ry t o sta tutor y mandate of l aw. U nder the se circumsta nces, w e are not in a posit ion to comme nt on t he pe rmiss i bi li t y or otherw is e of suc h adjustments and quant i fi cat ion ther eof in the procee di ngs under Sect i on 143(1a ) of the A ct. 8. H avi ng regard t o t he facts a nd c ircums tan ces, we s et aside the i nt imat i on in ques tion and rest ore the ma tter ba ck to the f ile of the Assessin g O fficer. The A ss essing O ffic er sha ll gi ve prope r opportunit y to t he assesse e in the ma tte r an d take into account the submiss ions / de fense ra ised by the assess ee in this rega rd and sha ll asses s the t axable income afresh in acc ordance with l aw . It sha ll be ope n t o the assess ee t o rais e such a rgume nt s as ma y be advised, be fo re t he Assessing O fficer in t hi s re gard. 9. In the r esu lt, the appeal of t he a ssessee is allow ed f or sta tis ti ca l purpos es . Order dictated and pronounced in the open Court on 26/07/2023 Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /07/2023 Prabhat