The Income Tax Appellate Tribunal (ITAT) Chandigarh Bench has set aside an order by the Commissioner of Income Tax (Appeals) [CIT(A)] and directed fresh adjudication citing the failure to address key grounds related to the computation of deemed income under Section 115JB and MAT credit under Section 115JAA of the Income Tax Act, 1961.
SJVN Limited, a public sector undertaking, filed its return of income for the Assessment Year 2020-21, declaring total income of Rs. 12,12,02,26,080 under normal provisions and book profit of Rs. 19,05,26,62,664 under Section 115JB. However, the Centralized Processing Center (CPC) adjusted the book profits by adding Rs. 201,15,58,023 on account of deferred tax provisions, enhancing the book profit to Rs. 21,06,42,20,687. Additionally, the MAT credit claimed by the assessee at Rs. 90,64,10,581 was reduced to Rs. 55,49,51,164 by the CPC.
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Subsequently, the case was selected for scrutiny, and the Assessing Officer (AO) finalized the assessment under Section 143(3), confirming the book profit as declared by the assessee but including an additional tax demand of Rs. 2,75,30,33,942. The assessee filed a rectification application under Section 154, pointing out errors in book profit computation and MAT credit. The AO only partially accepted the rectification, maintaining the higher book profit figure and the reduced MAT credit.
SJVN Limited appealed before CIT(A), raising three primary grounds: incorrect computation of book profits under Section 115JB, erroneous reduction of MAT credit under Section 115JAA, and an inflated tax demand due to computational errors. However, CIT(A) dismissed these grounds, stating that they arose from CPC adjustments under Section 143(1) and not from the assessment order under Section 143(3). CIT(A) advised the assessee to file a separate appeal against the intimation under Section 143(1), rather than adjudicating the issues in the current appeal.
Before ITAT, the assessee argued that once a regular assessment is completed under Section 143(3), all previous proceedings, including CPC adjustments under Section 143(1), merge into the final assessment. Therefore, CIT(A) should have adjudicated the issues related to book profit and MAT credit. The assessee also contended that the deferred tax adjustment was erroneously included in the book profit, as it was based on profit before tax, not after tax.
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The Tribunal, comprising Vikram Singh Yadav (Accountant Member) Paresh M. Joshi (Judicial Member), agreed with the assessee’s argument. The Bench observed that the errors in book profit computation and MAT credit were carried forward from CPC adjustments and continued into the final assessment. It ruled that CIT(A) was incorrect in refusing to adjudicate these grounds and directed a fresh adjudication, instructing CIT(A) to decide on the matter with a speaking order after granting the assessee an opportunity to present its case.
In conclusion, ITAT emphasized that once an assessment is completed under Section 143(3), all previous proceedings merge into the final order, making it the responsibility of CIT(A) to address all relevant issues. Accordingly, ITAT set aside CIT(A)’s order and remanded the matter for re-adjudication, ensuring that SJVN Limited gets a fair hearing on its claims.
In the result, the appeal of the assessee is allowed for statistical purposes.
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