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Judgment
PER MANISH AGARWAL, A.M.:
The captioned both appeals are filed by assessee against the separate orders, both dated 22.08.2025 passed by Ld. Commissioner of Income Tax (A)-29, New Delhi [“Ld. CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] respectively, arising out of intimation order dated 01.10.2020 passed u/s 143(1) of the Act and arising out of assessment order dated 30.09.2021 passed u/s 153A of the Act respectively, pertaining to Assessment Year 2017-18.
Before us, both the parties have stated that the facts involved in both captioned appeals are common, therefore, they are taken together and decided by a common order.
First we take up the assessee’s appeal for Assessment Year 2017-18 in ITA No.6811/Del/2025.
ITA No.6811/Del/2025 [Assessment Year 2017-18]
Brief facts of the case are that the assessee company filed its return of income on 31.10.2017, declaring total income of INR 86,17,841/- and MAT was declared at INR 6,48,56,890/-. Thereafter, return was revised and the total income was declared at a loss of INR 30,74,583/- u/s 139(5) of the Act and MAT was declared at NIL and the tax paid was claimed as refund. The reason for revision was stated that the assessee has inadvertently added back the income tax provisions twice and therefore, the same was corrected in the revised return of income. However, the CPC has not accepted the revised return and created the demand on the basis of the original return filed and therefore, an appeal was filed before ld. CIT(A) who dismissed the appeal of the assessee.
Aggrieved by the order of ld. CIT(A), the assessee is in appeal before the Tribunal by taking following Grounds of appeal:-
1.“The CPC has erred on law and on fact in issuing an Intimation u/s 143(1) dated 1.10.2020 (revised). The Intimation has deemed total income u/s 115JB at Rs.6,48,56,890/- as against (--) 35895395 as per ITR. Thus resulting in adjustment beyond scope of 143(1) provisions.
2.The CIT(A) has erred on facts and in law in not appreciating that a sum of Rs.10,07,52,285/- being unwinding interest income on interest free loans being notional income has to be excluded from the computation of book profit under MAT under 115JB of the Act. Consequently, the book profit income and the tax computed thereon under MAT computation by the CPC and affirmed by the CIT(A) is wrong and bad in law.
3.The CIT(A) has erred in not appreciating that the unwinding interest income as reflected in the Profit & Loss account is pursuant to application of IND AS to draw the financial statements. These being transitional provisions suitably adjustments to ascertain real book profits as computed in the ITR should be accepted. Therefore, also the adjustment proposed in the intimation cannot be made. The addition to the book profit of Rs. 10,07,52,204/- has to be excluded.
4.The above grounds are independent and without prejudice to one and another.
5.The appellant prays that he may be allowed to add, alter, forgo any of the grounds at the time of hearing.”
During the course of hearing, assessee had taken additional Grounds of appeal wherein the assessee has challenged the processing of return u/s 143(1) dated 01.10.2020 stating that the proceedings u/s 153A were initiated in the case of the assessee vide notice issued on 07.10.2020 and therefore, the proceedings already pending stood abated. For ready reference, additional Grounds of appeal raised by the assessee are reproduced as under:-
1.“That on the facts and circumstances of the case and in the law the impugned intimation u/s 143(1) issued by the CPC for AY 2017-18 dated 01/10/20 and the adjustments made thereupon will be considered to be nonest and bad in law since shortly after the issuance of intimation u/s 143(1), notice u/s 153A dated 07/10/20 was issued and in compliance thereof the Return of Income u/s 153A was filed which will supersede the intimation u/s 143(1) and will have to be considered as the basis for the purpose of section 153A assessment.
2.That on the facts and circumstances of the case and in the law the CIT(A) has proceeded in a completely extraneous manner by way of adjudication on the merits of additions made in the intimation u/s 143(1) since in view of section 153A proceedings having been initiated very shortly after sec 143(1) intimation the same would be superseded by the Return of Income u/s 153A and hence the order of CIT(A) deserves to be annulled.”
Since the additional Grounds of appeal raised by the assessee are legal in nature and requires no fresh verification of facts and therefore, the same are admitted for adjudication in terms of the order of Hon’ble Apex Court in the case of NTPC Ltd. reported in 229 ITR 383(SC).
First, we take regular Grounds of appeal Nos. 1 to 3 wherein the assessee has challenged the adjustment made in the book profits towards the IND AS and also claimed in revised return.
With respect to adjustment of INR 1,16,92,424/- claimed in the revised return, ld.AR submits that while computing the income under the head “income from business” the profit as per the Profit & loss Account was taken at INR 9,68,28,795/- which is prior to charging the Provision for Income Tax, as could be evident from Profit & Loss Account placed at Page 180 however, in the computation, inadvertently the income tax provision of INR 1,38,41,481/- was added back. When this error was come to the notice of the assessee, the same was rectified through the revised return filed. Besides this, assessee has not claimed brought forward losses of INR 4,49,057/- which was claimed in the revised return. It is therefore, submitted that income tax provision was added twice therefore, the same was reduced in the revised return of income and the same should be accepted.
With respect to the adjustment of INR 10,07,52,204/- in the book profits, ld. AR submits that the same was declared as other income on account of unbinding interest from interest free loans given as per Ind AS. It was the claim of the assessee that it has been accounted solely to follow the IND AS and same was taken in the Profit & Loss Account however, no actual interest was received on the loans and advances therefore, the same be was reduced from the total income and book profits while filing the revised return however the same were added back. Ld. AR thus requested for the deletion of the same.
On the other hand, ld. Sr. DR for the Revenue vehemently supported the orders of lower authorities and submits that both the issues require verification and therefore, the matter may be sent to the file of ld. CIT(A).
Heard the contentions of both the parties at length and perused the material available on record. It is observed that ld. CIT(A) while confirming the adjustments made, had not commented upon on the merits of the adjustments made. Under these circumstances, we set aside the order of ld. CIT(A) on this issue and restored back the issue to the file of ld. CIT(A) with the directions to decide them on the basis of submissions made by the assessee. Accordingly, both Grounds of appeal raised by the assessee are allowed for statistical purposes.
The additional Grounds of appeal raised by the assessee wherein arguments of the assessee are that since proceedings u/s 153A were initiated, all the pending proceedings should be abated including the appellate proceedings after intimation u/s 143(1) of the Act.
On careful consideration of the facts, it is observed that once the return is processed and demand is created, it becomes an order against which the appeal was filed by the assessee thus even though the proceedings u/s 153A were initiated, the proceedings already culminated by the order passed cannot be dropped. Accordingly, we find no error in the order and order of AO is hereby, confirmed on this score. Accordingly, additional Grounds of appeal raised by the assessee are dismissed.
In the result, appeal of the assessee is allowed.
Now we take the assessee’s appeal for Assessment Year 2017-18 in ITA No.6812/Del/2025.
ITA No.6812/Del/2025 [Assessment Year 2017-18]
In this appeal, it is observed that in the return filed in response to notice issued u/s 153A, assessee has declared loss of INR 30,74,583/- whereas the AO has observed that in the original return of income, the assessee has declared income of INR 87,45,333/- and book profit at INR 6.00 crores and therefore, he assessed the income of the assessee u/s 153A on the basis of the original return. Since proceedings u/s 153A were initiated based on search u/s 132 of the Act was carried out on 27.11.2019 and there was no material found as a result of search which could be held as incriminating material. Thus, by respectfully following the judgement of Hon’ble Supreme Courtin the case of PCIT vs Abhisar Buildwell Pvt. Ltd. reported in 454 ITR 212 (SC), the AO cannot make any addition dehorse the incriminating material. Here it is relevant to state that in the computation of the AO made the addition which has already been made vide intimation order passed u/s 143(1)(a) which order is challenged separately. However, making addition of the same in the order passed u/s 153A is not permissible hence, same is hereby, deleted.
In the result, appeal of the assessee is allowed.
In the final result, appeal of the assessee in ITA No. 6811/Del/2025 for Assessment Year 2017-18 is allowed for statistical purposes and appeal of the assessee in ITA No. 6812/Del/2025 for Assessment Year 2017-18, is allowed.