2024 (12) TMI 1084 - AT - Income Tax

Rectification u/s 154 - computation of tax liability u/s 115BAA - Rectification order passed by the CPC without giving any opportunity to the assessee and without assigning any reason for rejection of the option exercised by the assessee to compute its tax liability as per provisions of section 115BAA is invalid in law HELD THAT - We find the assessee in the instant case has exercised the option u/s 115BAA of the Act to tax its income at lower rate. The CPC for the assessment year 2020-21 has accepted the option exercised by the assessee and the assessee was taxed at lower rate as per provisions of section 115BAA. For the current year in the original intimation, the CPC has accepted the computation made by the assessee, according to which, net tax payable was computed at Rs. 26,83,53,229/-. However, since the CPC had given short credit, the assessee filed an application u/s 154 of the Act. We find the CPC without assigning any reasons and without giving opportunity to the assessee enhanced the tax liability by determining the tax at normal rate as against u/s 115BAA. Since the assessee has not withdrawn its option and not violated any of the provisions, therefore, the CPC in our opinion, was not justified in raising the demand by taxing the assessee at normal rate as against the provisions of section 115BAA. Since all the details were available before the CIT(A) / NFAC, therefore, CIT(A) / NFAC, in our opinion, should not have restored the matter to the file of the AO without deciding the issue himself especially when the AO did not respond to four reminders issued by him for submission of the remand report. We, therefore, hold that the rectification order passed by the CPC u/s 154 of the Act was invalid in law to the extent of taxing the assessee at normal rate as against the provisions of section 115BAA of the Act. Thus, the grounds of appeal No.1 to 4 raised by the assessee are allowed. Short grant of TDS - order of the Ld. CIT(A) / NFAC in restoring the matter to the file of the Assessing Officer for verification of the TDS claim - HELD THAT - Since it requires verification at the level of the Assessing Officer, therefore, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC in directing the AO to verify the claim and give necessary credit of TDS. We accordingly uphold the order of the Ld. CIT(A)/NFAC on this issue. The ground raised by the assessee is accordingly dismissed.

Summary

Issues Involved:

1. Validity of the rectification order under Section 154 of the Income Tax Act, 1961, regarding the computation of tax liability under Section 115BAA.
2. Incorrect computation of tax liability by the CPC under regular provisions instead of Section 115BAA.
3. Restriction of TDS credit without justification.

Detailed Analysis:

1. Validity of the Rectification Order under Section 154:

The primary issue concerns the rectification order passed by the CPC without providing an opportunity to the assessee or assigning any reason for rejecting the option exercised under Section 115BAA. The assessee argued that the rectification order was invalid in law, as the CPC had accepted the option under Section 115BAA in the preceding assessment year and the assessee had not withdrawn this option. The Tribunal found that the CPC was not justified in raising the demand by taxing the assessee at the normal rate instead of the provisions of Section 115BAA. The Tribunal held that the rectification order under Section 154 was invalid to the extent of taxing the assessee at the normal rate, thereby allowing grounds of appeal No.1 to 4 raised by the assessee.

2. Incorrect Computation of Tax Liability:

The assessee contended that the CPC incorrectly computed the tax liability under regular provisions, disregarding the option exercised under Section 115BAA. The Tribunal noted that the provisions of Section 115BAA allow a domestic company to compute income tax at a lower rate if certain conditions are met. The CPC had accepted this option for the assessment year 2020-21, and the assessee had not withdrawn this option for the impugned assessment year. The Tribunal emphasized that once the option under Section 115BAA is exercised, it cannot be subsequently withdrawn. Therefore, the CPC's action of taxing the assessee at the normal rate was unjustified, and the Tribunal allowed the appeal on this issue.

3. Restriction of TDS Credit:

The assessee also challenged the CPC's action of restricting the TDS credit to a lesser amount without providing any reason. The Tribunal upheld the order of the Ld. CIT(A) / NFAC, which directed the Assessing Officer to verify the TDS claim and give necessary credit after verification. The Tribunal found no infirmity in restoring the matter to the file of the Assessing Officer for verification, as this issue required further factual examination. Consequently, the Tribunal dismissed ground No.5 raised by the assessee.

Conclusion:

The Tribunal partially allowed the appeal filed by the assessee. It declared the rectification order under Section 154 invalid concerning the computation of tax liability under Section 115BAA, while upholding the Ld. CIT(A) / NFAC's decision to verify the TDS claim at the level of the Assessing Officer.