2025 (5) TMI 521 - AT - Income Tax

Denial of benefit of Sections 115BAA and invoking the provisions of Section 115JB - HELD THAT - We find that assessee was not given any show cause notice by the AO/CPC before making rejecting the benefit benefit claimed by the assessee u/s115BAA of the Income-tax Act 1961 (the Act) and invoking the provisions of Section 115JB of the Act. We note that in this case the assessee has filed form no.10-IC in the preceding assessment year and has already opted for the lower tax regime. Action of the ld. AO/CPC is beyond the provisions of Section 143(1) of the Act as the issue involved in the present case is debatable issue and therefore could not have been subject matter of the order passed u/s 143(1) of the Act. Besides it is mandatory to issue show cause notice to the assessee before making any adjustment in rejecting the benefit claimed by the assessee which was never issued. Accordingly we hold that the order passed u/s 143(1) of the Act is invalid and cannot be sustained. Consequently we quash the intimation passed u/s 143(1) of the Act. Even on merit the form no.10-IC which was stated to be filed beyond the due date of filing the return of income u/s 139(1) of the Act we find that the same is not mandatory and at best can be regarded as a directory and procedural issue and therefore even on merit the assessee case is very strong case however we are not inclined to decide the same at this stage. Appeal of the assessee is allowed.

Summary

The Appellate Tribunal (ITAT Kolkata) allowed the assessee's appeal against the CIT(A)'s order for AY 2021-22, which had upheld the AO/CPC's denial of benefit under Section 115BAA and invocation of Section 115JB of the Income-tax Act, 1961. The key issue was the validity of the AO/CPC's adjustment under Section 143(1) without issuing a show cause notice and despite the assessee having filed Form 10-IC in the preceding year opting for the lower tax regime.The Tribunal held that: - The AO/CPC's action was "beyond the provisions of Section 143(1)" as the issue was debatable and could not be decided under summary proceedings of Section 143(1). - It is "mandatory to issue show cause notice" before rejecting the benefit under Section 115BAA, which was not done. - Therefore, the order passed under Section 143(1) was "invalid and cannot be sustained," leading to quashing of the intimation under Section 143(1). - On merit, even if Form 10-IC was filed beyond the due date under Section 139(1), this was held to be a "directory and procedural issue," not affecting the substantive right to claim the benefit.Thus, the Tribunal reversed the lower authorities and allowed the appeal.