2022 (7) TMI 1356 - AT - Income Tax

Deduction u/s.80JJAA - adjustment of total income computed in the intimation received u/s.143(1) - assessee has not filed audit report, as required under the provisions of section 44AB of the Income Tax Act, 1961, in Form No.10DA - HELD THAT - It is well settled principle of law by the decisions of various Courts, including decision of Raghuvir Synthetics Ltd. 2017 (4) TMI 975 - SUPREME COURT if the issue involved is debatable, then same cannot be adjusted in intimation issued u/s.143(1) of the Income Tax Act, 1961. In this case, if you go through nature of adjustment made by the Assessing Officer towards deduction in respect of employment of new employees as per provisions of section 80JJAA of the Act, we find that the issue is highly debatable which can be resolved by deliberation, including verification of necessary documents and thus, we are of the considered view that the Assessing Officer cannot make adjustments towards deduction u/s.80JJAA of the Act, while processing return u/s.143(1) of the Income Tax Act, 1961. Therefore, we direct the Assessing Officer to delete additions made towards disallowance of deduction claimed u/s.80JJAA of the Income Tax Act, 1961. Appeal filed by the assessee is allowed.

Summary

Issues:
Claim of deduction u/s.80JJAA without filing audit report in Form No.10DA for assessment year 2019-20.

Analysis:
The appellant, an assessee, filed an appeal against the order of the Commissioner of Income Tax (Appeals) concerning the assessment year 2019-20. The appellant had claimed a deduction under section 80JJAA of the Income Tax Act, 1961, for employing new employees, amounting to Rs.1,76,543, for the first time in the assessment year 2017-18. The Assessing Officer rejected the deduction claimed under section 80JJAA on the grounds of non-filing of the audit report in Form No.10DA as required by section 44AB of the Income Tax Act, 1961. The appellant challenged this decision before the first appellate authority, which upheld the Assessing Officer's decision. The appellant contended that the audit report filing was not required for every year if the deduction was claimed in the previous financial year and all necessary conditions were met. The appellant also argued that the Assessing Officer erred in making adjustments without proper verification, as only prima facie adjustments can be made under section 143(1) of the Act.

The learned CIT(A) upheld the Assessing Officer's decision, stating that filing the audit report in Form 10DA was a prerequisite for claiming the deduction under section 80JJAA. However, the ITAT Chennai, after considering the arguments of both parties and reviewing the orders of the authorities below, held that the issue of deduction under section 80JJAA was debatable and required deliberation and verification of documents. Referring to established legal principles, including the decision of the Hon'ble Supreme Court in CIT vs. Raghuvir Synthetics Ltd., the ITAT Chennai concluded that adjustments towards deductions like those under section 80JJAA cannot be made under section 143(1) of the Income Tax Act, 1961, as they involve debatable issues. Therefore, the ITAT Chennai directed the Assessing Officer to delete the additions made towards the disallowance of the deduction claimed under section 80JJAA for the assessment year 2019-20.

In conclusion, the ITAT Chennai allowed the appeal filed by the assessee, emphasizing that the Assessing Officer cannot make adjustments towards deductions like the one under section 80JJAA while processing returns under section 143(1) of the Income Tax Act, 1961. The judgment was pronounced on 13th July 2022 by the ITAT Chennai.