2024 (8) TMI 1009 - AT - Income Tax

Application u/s 154 against the intimation u/s 143(1) - Adjustment on account of ICDS - HELD THAT - Case of the assessee was selected for scrutiny for examining ICDS compliance and adjustment and which in the facts of the present case relates to claim - AO has issued specific notices calling for information /documentation in support of the said claim from time to time and in response, the assessee has filed its submissions providing the necessary explanation as to the nature of the transaction in relation to which claim of losses has been made during the year under consideration as well as filed the necessary information/documentation in support thereof. The matter was therefore examined during the course of assessment proceedings and while passing the assessment order, no adverse finding has been recorded by the AO which means that the claim of the assessee has been examined and duly accepted by the AO. While computing the income, the AO took the figure of income as computed u/s 143(1) of the Act which in normal course would be the right basis but in the facts of the present case, where there was adjustment on account of ICDS as per intimation u/s 143(1) and thereafter, the matter relating to ICDS adjustment was subject matter of examination and in fact, duly examined and accepted during the course of assessment proceedings, the AO should have considered the income after deleting the adjustment as per intimation u/s 143(1) which apparently has not happened in the instant case. We therefore find that the facts are crystal clear and apparent from record that the adjustment towards the ICDS has not been deleted by the AO while computing the income whereas the same was duly examined and accepted during the course of assessment proceedings. We set-aside the order of the CIT(A) and direct the deletion of adjustment. Appeal of the assessee is allowed.

Summary

Issues:
Appeal against rejection of application under Section 154 due to ICDS adjustment.

Analysis:
The appeal was filed by the Assessee against the rejection of the application under Section 154 by the AO concerning the adjustment on account of ICDS amounting to Rs. 3,52,475. The Assessee contended that the said amount was allowable during the current year based on actual incurrence of losses, which had been disallowed in the previous year on a provisions basis. The Assessee argued that the adjustment was not considered by the CPC, Bangalore, and an intimation under section 143(1) was issued after making the adjustment. The Assessee moved an application under section 154, but no action was taken by the AO due to ongoing assessment proceedings. The Assessee provided explanations and submitted documentary evidence during the assessment proceedings, and no adverse findings were recorded by the AO. However, the AO did not delete the adjustment while computing the income, which was accepted during the assessment proceedings.

The Ld. CIT(A) sustained the addition made by the AO, leading the Assessee to appeal. The Assessee argued that the ICDS claim was allowable and claimed on an actual basis. The Assessee contended that all relevant information and documentation were part of the assessment record, and necessary inquiries were conducted during the assessment proceedings. The Assessee requested the deletion of the adjustment made by the AO and sustained by the Ld. CIT(A). The Ld. DR supported the lower authorities' orders, stating that the Assessee failed to file an appeal against the intimation under section 143(1) in a timely manner. The Ld. DR argued that the rectification application was rightly rejected by the AO as there was no mistake apparent from the record. The Ld. DR contended that the appeal against the order under section 154 r.w.s 143(3) was without merit and deserved dismissal.

The Tribunal found that the AO did not delete the adjustment towards ICDS while computing the income, despite examining and accepting the claim during the assessment proceedings. The Tribunal held that the AO should have considered the income after deleting the adjustment as per the intimation under section 143(1). Therefore, the Tribunal set aside the order of the Ld. CIT(A) and directed the deletion of the adjustment of Rs. 3,52,475. The appeal of the Assessee was allowed.