TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1113
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....same, Mr.Gupta, the learned counsel appearing on behalf of the Respondents, has put forth an affidavit-in-reply dated 03.12.2024 by one Shri Dinesh V. Honmane on behalf of Respondent No. 1 and also an additional affidavit-in-reply dated 08.01.2025. 4. Taking a holistic view of the above, the facts of the case which emerge are that the Petitioner carries on business of exporting Information Technology related services and claims that it is entitled to deduction under Section 10B, being an Export Oriented Unit. It filed its Return of Income for the A.Y.2008-09 on 29.09.2008. In 'Schedule BP' of the Return of Income (hereinafter also referred to as 'ITR') the profit of Rs. 7,43,13,330/- [Sr. No.34 of Schedule BP of the ITR] was computed and at Sr. No.35(iii) of Schedule BP of the ITR, deduction under Section 10B was claimed of the said profit (i.e. Rs. 7,14,13,330/-). The disclosure with respect to claim for deduction under Section 10B of Rs. 7,14,13,330/- was also made in 'sr. No. a of Schedule 10B of the ITR'' [placed at page 140 of the affidavit-in-reply]. Consequently, no tax under the regular provision of the Act was levied [as is evident from Sr. No. 2 of 'Schedule Part-B TTI....
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....ant for claiming deduction under Section 10B, were submitted. 10. Pursuant thereto an order of assessment under Section 143(3) was passed on 20.12.2011 where no disallowance/addition to the total income was made. Further, there was no adverse variance or inference made with regard to deduction under Section 10B. In paragraph 5 of the said order, it was stated that the total income of the Petitioner was accepted. However, it was stated that the 'Returned income' was Rs. 7,43,13,330/- and the 'Assessed income' was Rs. 7,43,13,330/- [placed at page 152 of the affidavit-in-reply]. Further, the tax liability was computed pursuant to the provisions of Section 115JB [placed at page 149 of the affidavit-in-reply] and after adjusting the prepaid taxes the notice of demand was issued with NIL liability. 11. Vide letter dated 20.12.2012 the 'Audit Officer/LAP-IV' raised an audit objection against the order passed under Section 143(3) stating inter alia that the Petitioner had been allowed excess deduction under Section 10B to the extent of Rs.2,94,88,923/- [placed at page 154 of the affidavit-in-reply]. 12. Vide letter dated 30.08.2013 Respondent No. 1 accepted the above referred aud....
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....m the date of export. This contention of the Petitioner was found correct by the then Respondent No. 1, and he accepted that the claim of deduction Rs.7.43 Crores under Section 10B was not in excess. Respondent No. 1 in the said letter requested the Revenue Audit department to withdraw its objection [placed at page 169 of the affidavit-in-reply]. 19. Thereafter, even the jurisdictional Principal Commissioner of Income Tax, Pune, vide letter dated 16.02.2016 [submitted on 18.02.2016] intimated the Director General of Audit (Central), Mumbai that the claim of deduction under Section 10B of Rs.7.43 Crores was correct and requested the Revenue Audit department to withdraw its objection [placed at page 171 of the affidavit-in-reply]. 20. Consequent to the above, the Director General of Audit (Central) vide letter dated 22.07.2016 closed the Audit objection [placed at page 173 of the affidavit-in-reply]. 21. After all this, suddenly on 12.11.2021, a notice seeking recovery of outstanding demand for A.Y.2008-09 was issued [placed at page 101 of the Writ Petition]. In response thereto, vide letter dated 27.12.2021 [placed at page 175 of the affidavit-in-reply], the Petitioner remi....
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....er Section 143(1) wherein the claim for deduction under Section 10B was not allowed, and tax was computed based on the regular provisions of the Act. So as to rectify this error, the Appellant had filed a rectification application under Section 154 against the said intimation on 06.04.2010 and further submission on 06.05.2010. No response was received for the said application. Hence, it had again filed a request for disposal of the said application on 27.12.2021 which is still not disposed by the Respondents. (c) Even in the regular assessment proceedings the issue of the quantum of deduction under Section 10B was examined and no adverse variance or inference was made. Though, the assessment order erroneously adopted the total income as Rs. 7,43,13,330/-, the tax liability was rightly computed by Respondent No. 1 based on the provisions of Section 115JB. Mr. Jain submitted that the said total income must have been adopted from the faulty ITR-V or from the intimation issued under Section 143(1). (d) Despite the Petitioner having filed submissions to the notices issued under Section 154 dated 18.02.2014 and 02.03.2015 on 03.04.2015 and 08.05.2015, respectively, no f....
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....nt of the deduction under Section 10B, and the taxes were paid pursuant to the provisions of Section 115JB. Thus, even the tax computation sheet of Respondent No. 1 suggests that the deduction under Section 10B was not disputed and was allowed. 24. In these facts, Mr. Jain, the learned counsel for the Petitioner submitted that the recovery of demand for A.Y.2008-09 made in the form of adjustment of refunds pertaining to A.Y.2016-17, A.Y.2018-19 and A.Y.2019-20 be set aside and the said amounts be refunded to the Petitioner with applicable interest. 25. Per contra, Mr. Gupta, the learned counsel appearing on behalf of the Respondent has brought to our notice the affidavit-in-reply dated 03.12.2024 wherein Respondent No. 1 has made following vital averments: (a) In paragraph 3.4 of the said affidavit-in-reply it is stated that Petitioner had not made a claim for deduction under Section 10B of the IT Act in the computation of income of the ITR. However, he concedes that a claim of the said deduction was duly made in the respective schedule of the ITR. (b) In paragraph 3.5 of the said affidavit-in-reply, Respondent No. 1 fairly admits that as per the records of ....
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....o tendered an additional affidavit-in-reply dated 09.01.2025 wherein Respondent No. 1 has stated as under: (a) That the Petitioner had not claimed the deduction under Section 10B of the Act in the return of income. (b) That no disallowance for deduction under Section 10B was made during the processing of ITR under Section 143(1). (c) That in the regular assessment, the returned income was accepted and no addition/disallowance was made which was not challenged in appeal. This is a case where Respondent No. 1 adopted the total income as per the return of income where claim of deduction under Section 10B was not made. Hence, the Petitioner was incorrect in stating that deduction under Section 10B was allowed vide the order of regular assessment. (d) That the rectification order under Section 154 was passed on an incorrect assumption of excess claim of deduction under Section 10B whereas no claim was made by the Petitioner in the return of income. (e) That the claim for deduction under Section 10B should not be allowed as the same was not claimed by the Petitioner in the writ petition. 27. We have heard the parties at length. Firstly, Res....
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....attributable to the Petitioner. In fact, when the intimation under Section 143(1) was generated (based on the ITR) wherein the claim for deduction was disallowed, the Petitioner vigilantly filed Rectification Applications on 06.04.2010 and 06.05.2010, and which are not disposed of till date. 29. Secondly, the aspect of the deduction under Section 10B was scrutinized by Respondent No. 1 even during the regular assessment proceedings where the Petitioner had submitted the requisite details about the claim for deduction made under Section 10B vide its submission dated 15.12.2011. On perusal of the order of assessment it is evident that no adverse inference was drawn by Respondent No. 1 with respect to the claim of deduction under Section 10B. Thus, it can be said that Respondent No. 1 had accepted the claim of the said deduction. However, the only mistake in the said order is that Respondent No. 1 adopted the value of the Returned income as Rs. 7,43,13,330/-. This figure must have been adopted from the ITR or ITR-V where erroneously the Total Income was stated as Rs. 7,43,13,330/- without reducing the claim made by the Petitioner for deduction of the equivalent amount under Section....
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....uring the regular assessment proceedings, followed by the internal audit objections proceedings, where Respondent No. 1 as well as the Principal Commissioner of Income Tax themselves reported that the claim made by the Petitioner under Section 10B was correct and not in excess, it is not open for Respondent No. 1 to now state that the rectification proceedings initiated by Respondent No. 1 under Section 154 were pursuant to an incorrect assumption of excess claim of deduction under Section 10B and that the Petitioner had not made any claim for deduction in the ITR. Such assertions and pleadings at this stage cannot be entertained. Respondent No. 1 cannot himself invalidate any proceedings which were carried out by him earlier. Be that as it may, we have already held that the Petitioner had claimed the deduction under Section 10B in the return of income, and hence the argument of Respondent No. 1 that rectification proceedings under Section 154 were initiated on an incorrect premise of the Petitioner having claimed the deduction in the ITR would have no legs to stand on. 31. Interestingly, it is also pertinent to note that Respondent No. 1 in the affidavit-in-reply states that th....
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....154 for alleged excess claim of deduction under Section 10B but had later changed his view on this aspect in favor of the Petitioner. Considering the above subsequent developments in favor of the Petitioner after the issuance of intimation under Section 143(1), the impugned disallowance made in the said intimation cannot stand on its own. Respondent No. 1 stated that the claim for deduction under Section 10B should not be allowed to the Petitioner as the same is not challenged in the Writ Petition. However, the Petitioner in Ground 'I' of the Writ Petition has inter alia challenged the intimation under Section 143(1) for disallowing the claim of deduction under Section 10B. Firstly, after a deep examination by Respondent No. 1 with respect to allowability and correctness of deduction under Section 10B, it cannot now be contended that the prima facie adjustment made in the intimation under Section 143(1) disallowing the deduction under Section 10B was valid. The said impugned intimation issued under Section 143(1) would get merged into the order of assessment where no negative inference was made in respect of the allowability of the deduction under Section 10B. Secondly, it is settl....