M/s. McAfee Software (India) Private Limited, Bengaluru V. National Faceless Assessment Centre, Bangalore

ITTPA 912/BANG/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9079 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 02-11-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 02-11-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 22-09-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANJU PRASAD L
• Keywords: Opportunity of being heard
• Section: 43B; 40(a)(ia); 143(1); 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B”, BANGALORE Before Shri George George K, JM & Shri Laxmi Prasad Sahu, AM IT(TP)A No.912/Bang/2022 : Asst.Year 2017-2018 M/s.Mcafee Software (India) Private Limited, Fairway Business Park, 7 th Floor, Survey Nos.10/1, 11/2 and 12/2b, Next to Embassy Golf Links, Challaghatta Village Domlur, Bangalore – 560 071. PAN : AABCN3175H. v. The Additional Commissioner of Income-tax, NFAC, Delhi (Appellant) (Respondent) Appellant by : Sri.Aliasgar Rampurawala, CA & Sri.Manju Prasad L Respondent by : Sri.Manjunath Karkihalli, CIT –DR Date of Hearing : 03.11.2022 Date of Pronouncement : 03.11.2022 O R D E R Per George George K, JM : This appeal at the instance of the assessee is directed against final assessment order dated 28.07.2022 passed u/s 143(3) r.w.s. 144C(13) of the I.T.Act. The relevant assessment year is 2017-2018. 2. The grounds raised read as follows:- “1. On facts and circumstances of the case & in law, the final assessment order (,final order') passed under section 143(3) r.w.s. 144C (13) r.w.s. 144B of the Income-tax Act, 1961 ('the Act') dated July 28, 2022, by the Assessment Unit, Income Tax Department ('Ld. National Faceless Assessment Centre' or 'Ld. NaFAC') to the extent prejudicial to the Appellant, is erroneous and bad in law and liable to quashed. 2. On the facts and circumstances of the case & in law, the NaFAC has erred in determining the assessed income at IT(T)A No.912/Bang/2022 M/s.Mcafee Software (India) Private Limited. 2 INR 1,14,48,71,340 by placing its reliance on the intimation u/s 143(1) as against the taxable income of INR 1,08,32,16,980 declared by the Appellant in the income-tax return, thereby confirming the addition to the tune of INR 6,16,54,359/ - to the total income. 3. On the facts and in the circumstances of the case and in law, the NaFAC has erred in confirming the addition of INR 6,12,81,302 under section 43B of the Act, based on the intimation u/s 143(1) of the Act, issued by the Centralized Processing Centre, Bengaluru ('CPC'), without giving any opportunity of being heard or providing any reasoning in the final order. 4. On the facts and in circumstances of the case and in law, the NaFAC has erred in making the addition of INR 373,057 under section 36(1) (va) of the Act, based on the intimation u/s 143(1) of the Act by the CPC, without giving any opportunity of being heard or providing any reasoning in the final order. That the Appellant craves leave to add to and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal.” 3. The brief facts of the case are as follows: The assessee is a company engaged in the business of rendering software development services to its group companies. For the assessment year 2017-2018, the return of income was filed on 29.11.2017 declaring total income of Rs.108,32,16,980. The return was processed u/s 143(1) of the I.T.Act on 01.03.2019, wherein the total income was determined at Rs.114,48,71,340 instead of Rs.108,32,16,980 declared in the return of income (though in the draft assessment order and the final assessment order it is mentioned the return was processed u/s 143(1) of the I.T.Act accepting the returned income). In the intimation issued u/s 143(1) of the I.T.Act, following adjustments were made to the returned income:- IT(T)A No.912/Bang/2022 M/s.Mcafee Software (India) Private Limited. 3 (i) Addition of Rs.6,12,81,302 u/s 43B of the I.T.Act (ii) Addition of Rs.3,73,057 u/s 36(1)(va) of the I.T.Act 4. Later, the draft assessment order was passed on 30.09.2021, wherein the adjustment made u/s 143(1) of the I.T.Act was not incorporated. In the draft assessment order, the A.O. had incorporated the T.P. adjustment proposed by the Transfer Pricing Officer (TPO) and disallowance u/s 40(a)(ia) of the I.T.Act. 5. The assessee being aggrieved by the draft assessment order, filed objections before the Dispute Resolution Panel (DRP). The DRP vide its directions dated 16.06.2022 disposed of the assessee’s objections. Pursuant to the DRP’s directions, final assessment order was passed, accepting the returned income. Therefore, the TP adjustment proposed in the draft assessment order and the disallowance u/s 40(a)(ia) of the I.T.Act was deleted. 6. Aggrieved by the final assessment order, the assessee has filed the present appeal before the Tribunal. Initially the appeal was posted on 2 nd November, 2022, however, the same was adjourned to 03.11.2022 at the request of the learned AR. On 03.11.2022, the learned AR, Shri Aliasgar Rampurawala appeared and submitted that the assessee is aggrieved by the final assessment order, since in the computation sheet attached to the final assessment order, the A.O. has taken into account not the returned income but the total income computed as per the intimation u/s 143(1) of the I.T.Act. IT(T)A No.912/Bang/2022 M/s.Mcafee Software (India) Private Limited. 4 7. The learned Departmental Representative, on the other hand, submitted that the adjustment made u/s 143(1) of the I.T.Act was not the subject matter of the draft assessment order, therefore, the DRP nor the A.O. has considered the same. The learned DR submitted that the correct course open for the assessee is to file appeal to the first appellate authority against the intimation issued u/s 143(1) of the I.T.Act. 8. We have heard rival submissions and perused the material on record. From the grounds raised in the memorandum of appeal, it is clear that the assessee is aggrieved by the additions / disallowances made in the intimation issued u/s 143(1) of the I.T.Act. The intimation u/s 143(1) of the I.T.Act is dated 01.03.2019. The assessee being aggrieved by the additions / disallowances made in the said intimation ought to have filed appeal before the CIT(A). The draft assessment order, DRP’s directions nor the final assessment order has touched upon the issues of adjustment made u/s 143(1) of the I.T.Act. Therefore, the issue of addition u/s 43B and disallowance u/s 36(1)(va) of the I.T.Act arise out of the intimation issued u/s 143(1) of the I.T.Act dated 01.03.2019 and not from the final assessment order dated 28.07.2022. Therefore, since the cause of action stems out of intimation u/s 143(1) of the I.T.Act, this appeal filed by the assessee as against the final assessment order needs to be rejected. Therefore, grounds 3 & 4 as regards the merits of addition u/s 43B and disallowance u/s 36(1)(va) respectively are rejected. IT(T)A No.912/Bang/2022 M/s.Mcafee Software (India) Private Limited. 5 9. In the final assessment order, the A.O. had included in the computation statement the figures from the intimation u/s 143(1) of the I.T.Act instead of the returned income (which are not subject matter of adjudication in draft assessment order and DRP’s directions). In other words, the A.O. has adopted figure of Rs.114,48,71,340 (computation as per intimation u/s 143(1) of the I.T.Act) instead of Rs.108,32,16,980 (as per return of income). In ground 2, the assessee challenges the above action of the A.O. We are of the view that in the final assessment order, the A.O. can only include those figures, which are subject matter of dispute in the draft assessment order and the DRP’s direction. Therefore, the final assessment order by the A.O., by taking figures from intimation u/s 143(1) of the I.T.Act, has indirectly upheld addition of Rs.6,16,54,359, which is not correct. However, needles to state that demand raised u/s 143(1) of the I.T.Act will have to be sustained unless and until the assessee challenges the same. Therefore, we allow ground 2 raised by the assessee. 10. Ground 1 is general in nature, no adjudication is called for, hence, same is dismissed. IT(T)A No.912/Bang/2022 M/s.Mcafee Software (India) Private Limited. 6 11. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on this 03 rd day of November, 2022. Sd/- (Laxmi Prasad Sahu) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 03 rd November, 2022. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The DRP-2, Bangalore. 4. The JCIT, TP-2(1)(1), Bangalore. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore