ACIT Vs Corro Health Infotech Pvt Ltd (ITAT Chennai)
The Chennai ITAT dismissed the Revenue’s appeal against the order of the Commissioner of Income Tax (Appeals) for AY 2022-23 concerning adjustments made by the Central Processing Centre (CPC) while processing the assessee’s return under Section 143(1) of the Income-tax Act. The Revenue challenged the deletion of an ICDS adjustment, restoration of carried forward loss/unabsorbed depreciation, and grant of prepaid tax credits.
The assessee, engaged in providing integrated revenue cycle management services in the global healthcare industry, had filed its return declaring nil taxable income and claimed carried forward unabsorbed depreciation. During processing under Section 143(1), CPC noticed a mismatch between the ICDS disclosures reported in Clause 13(e) of Form 3CD and the disclosures made in Schedule ICDS of the return. Treating the difference as under-reported income, CPC made an adjustment of ₹24,00,70,753, reduced the carried forward loss/unabsorbed depreciation, and did not grant prepaid tax credits amounting to ₹7,53,32,100.
Before the CIT(A), the assessee also filed a rectification application under Section 154. According to the assessee, CPC acknowledged that ICDS deviations had been wrongly treated as disallowances, although the rectification did not completely restore the returned loss. The CIT(A) held that the assessee had already considered the ICDS adjustments while filing the return. It observed that amortisation of Right-of-Use (ROU) assets amounting to ₹11,53,31,686 had already been disallowed under Schedule BP while computing business income and that any further adjustment would result in double disallowance. The CIT(A) further observed that CPC had considered only ICDS adjustments resulting in increase in profit while ignoring ICDS adjustments resulting in decrease in profit. It held that this selective consideration led to an incorrect computation of income and travelled beyond the scope of prima facie adjustments permissible under Section 143(1). The CIT(A) therefore directed deletion of the ICDS adjustment, restoration of the returned carried forward loss/unabsorbed depreciation, and grant of prepaid tax credits.
Before the Tribunal, the Revenue contended that the CIT(A) had deleted the adjustment without properly appreciating the disclosures in Form 3CD. It submitted that the assessee had disclosed net ICDS income of ₹57,32,09,628 in Form 3CD but had offered only ₹45,78,77,941 in the return, resulting in short offering of income. According to the Revenue, the adjustment under Section 143(1) was based on inconsistencies between the tax audit report and the return, and the CIT(A) accepted the assessee’s explanation regarding ROU asset amortisation without factual verification. It also argued that the restoration of carried forward loss was granted without proper reconciliation of the ICDS figures.
The assessee submitted that the net ICDS income reported in Form 3CD comprised two components: ICDS adjustments of ₹45,78,77,941 already reflected in Schedule ICDS and amortisation of ROU assets of ₹11,53,31,686 already disallowed under Schedule BP. It contended that CPC considered only ICDS adjustments increasing profit while ignoring those decreasing profit. The assessee further submitted that CPC itself had accepted during rectification proceedings under Section 154 that ICDS deviations had been wrongly treated as disallowances. Regarding prepaid taxes, the assessee explained that the credits related to taxes paid by the amalgamating company, Visionary RCM Infotech (India) Pvt. Ltd., which had merged with the assessee, and that the credits had not been claimed by any other entity.
After examining the record, the Tribunal found that CPC had assumed the difference between Form 3CD and Schedule ICDS represented income not offered to tax. It accepted the reconciliation furnished by the assessee showing that the reported ICDS income consisted of amounts already reflected in Schedule ICDS and amortisation of ROU assets already disallowed while computing business income. The Tribunal observed that the difference arose from the manner of disclosure in different schedules and did not represent omitted income.
The Tribunal further observed that CPC considered only ICDS adjustments increasing profit while completely ignoring ICDS adjustments decreasing profit, resulting in a distorted computation of income. It also found that since amortisation of ROU assets had already been added back under Schedule BP, any further adjustment on the same amount would result in duplication of disallowance and double addition. The Revenue had not produced any material to dispute these factual findings.
The Tribunal also noted that CPC had accepted during rectification proceedings under Section 154 that the ICDS deviations had been wrongly treated as disallowances. It held that the issue required examination of reconciliation statements and the interaction between Form 3CD, Schedule ICDS, and Schedule BP, involving factual verification beyond the scope of a prima facie adjustment under Section 143(1). Accordingly, it upheld the CIT(A)’s order deleting the ICDS adjustment of ₹24,00,70,753 and restoring the returned carried forward loss and unabsorbed depreciation.
Regarding prepaid tax credits of ₹7,53,32,100, the Tribunal noted that the CIT(A) had recorded a categorical finding that the credits related to the amalgamating company and had not been claimed by any other entity. As the Revenue did not produce any contrary material, the Tribunal upheld the direction to grant the prepaid tax credits in accordance with law. Finding no infirmity in the CIT(A)’s order, the Tribunal dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
The captioned appeal filed by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals), ADDL/JCIT (A)-1, Hyderabad, [CIT(A)] dated 30.12.2025 for Assessment Year 2022-23.
2. The revenue has raised the following grounds of appeal as under:
i. The Order of the Ld. CIT(A) is contrary to law, facts and circumstances of the case and hence not sustainable.
ii. The Ld. CIT(A) erred in deleting the addition made on account of ICDS adjustment without appreciating the facts and material available on record.
iii. The Ld. CIT(A) failed to appreciate that as per Form 3CD, the assessee had disclosed net ICDS income of Rs.57,32,09,628/-, whereas only Rs. 45,78,77,941/- was offered in the return of income, resulting in short offering of income of Rs. 11,53,31,687/-.
iv. The Ld. CIT(A) erred in accepting the contention of the assessee that the ICDS adjustment pertaining to Right-of-Use assets had already been disallowed under book depreciation, without recording any factual finding or calling for verification from the Assessing Officer.
v. The Ld. CIT(A) erred in deleting the adjustment made u/s 143(1) without appreciating that the adjustment was made due to inconsistency between Form 3CD and return of income.
vi. The Ld. CIT(A) erred in restoring the carried forward loss without proper reconciliation of the ICDS figures and without recording a clear finding on computation of income.
vii. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.
2.1 Brief facts of the case are that the assessee, CorroHealth Infotech Private Limited, is engaged in the business of providing integrated revenue cycle management services in the global healthcare industry. For AY 2022-23, the assessee filed its return of income on 30.11.2022 declaring nil taxable income and claiming carried forward unabsorbed depreciation of Rs.39,61,86,619/- under the normal provisions of the Act. While processing the return u/s 143(1), CPC noticed a mismatch between the ICDS disclosures reported in Clause 13(e) of Form 3CD and the amount disclosed in Schedule ICDS of the return of income. As per Form 3CD, ICDS-related increase in profit was reported at Rs.69,79,48,694/-, whereas only Rs.45,78,77,941/- was considered in the return of income. CPC treated the difference of Rs.24,00,70,753/- as underreported income and made an adjustment u/s 143(1). Consequent to the above adjustment, the returned loss/unabsorbed depreciation available for carry forward was reduced. CPC also did not grant prepaid tax credits claimed by the assessee amounting to Rs.7,53,32,100/-.
3. Aggrieved by the said adjustments, the assessee preferred an appeal before the ld.CIT(A). The assessee also filed a rectification application u/s 154, pursuant to which CPC acknowledged that ICDS deviations had been wrongly treated as disallowances. However, according to the assessee, the rectification order did not fully restore the returned loss. The ld.CIT(A) held that the assessee had duly considered the ICDS adjustments while filing the return of income. The ld.CIT(A) observed that the amortisation of Right-to-Use (ROU) assets amounting to Rs.11,53,31,686/- had already been disallowed by the assessee under Schedule BP while computing business income and, therefore, any further adjustment would result in double disallowance. The ld.CIT(A) further noted that CPC had considered only ICDS adjustments resulting in increase in profit aggregating to Rs.69,79,48,694/- and ignored ICDS adjustments resulting in decrease in profit aggregating to Rs.12,47,39,067/-. According to the ld.CIT(A), selective consideration of upward ICDS adjustments and duplication of disallowances resulted in an incorrect computation of income and travelled beyond the scope of prima facie adjustments permissible u/s 143(1). The ld.CIT(A) also noted that CPC itself, in the rectification proceedings u/s 154, accepted that ICDS deviations had been wrongly treated as disallowances. Accordingly, the ld.CIT(A) directed deletion of the ICDS adjustment of Rs.24,00,70,753/-, restoration of the returned carried forward loss/unabsorbed depreciation and grant of prepaid tax credits of Rs.7,53,32,100/-. Against the said relief granted by the ld.CIT(A), the Revenue is in appeal before the Tribunal.
4. The ld.DR for the revenue submitted that the ld.CIT(A) erred in deleting the adjustment made on account of ICDS discrepancies without properly appreciating the information available in Form 3CD. As per Clause 13(e) of Form 3CD, the assessee had disclosed net ICDS income of Rs.57,32,09,628/-, whereas only Rs.45,78,77,941/-was offered in the return of income, resulting in short offering of income of Rs.11,53,31,687/-. The adjustment u/s 143(1) was made due to inconsistency between the tax audit report and the return of income and therefore fell within the scope of permissible adjustments. The ld.CIT(A) accepted the assessee’s explanation regarding disallowance of Right-to-Use asset amortisation without recording a specific factual finding based on verification from the Assessing Officer. The ld.CIT(A) restored the carried forward loss without proper reconciliation of the ICDS figures and without arriving at a clear computation of taxable income. Therefore, ld.DR prayed that the order of the CIT(A) deserves to be set aside and that of the CPC/Assessing Officer restored.
5. The ld.AR for the assessee submitted that the assessee submitted that the net ICDS income reported in Form 3CD was Rs.57,32,09,627, comprising:
- ICDS adjustments already considered under Schedule ICDS amounting to Rs.45,78,77,941; and
- Amortisation of Right-of-Use assets amounting to Rs.11,53,31,686 already disallowed under Schedule BP.
It was contended that the CPC considered only the ICDS adjustments increasing profit (Rs.69,79,48,694/-) and completely ignored ICDS adjustments decreasing profit (Rs.12,47,39,067/-). The assessee argued that the adjustment relating to ROU asset amortisation had already been disallowed under Schedule BP and any further addition would amount to double disallowance. It was further submitted that the CPC, in rectification proceedings u/s 154, accepted that ICDS deviations had been wrongly treated as disallowances, thereby supporting the assessee’s stand (refer pages 267-269 of Paper Book). Regarding prepaid taxes, the assessee submitted that pursuant to amalgamation of Visionary RCM Infotech (India) Pvt. Ltd. with the assessee company, certain advance tax, TDS and TCS credits stood in the PAN of the amalgamating company and were rightly claimed by the assessee. The same had not been claimed by any other entity. The assessee therefore sought deletion of the ICDS adjustment, restoration of the returned loss and grant of prepaid tax credit.
6. We have heard the rival submissions, perused the orders of the lower authorities and the material available on record. The sole grievance of the Revenue is against the action of the ld. CIT(A) in directing deletion of the adjustment made by CPC u/s. 143(1) on account of alleged ICDS mismatch, restoring the returned loss/unabsorbed depreciation and directing grant of prepaid tax credits.
7. The undisputed facts emerging from the record show that while processing the return u/s. 143(1), CPC compared the figures reported in Clause 13(e) of Form 3CD with the disclosures made in Schedule ICDS of the return of income and proceeded on the assumption that the difference represented income not offered to tax by the assessee. Based on such comparison, an adjustment of Rs.24,00,70,753/- was made resulting in reduction of the loss/unabsorbed depreciation claimed for carry forward.
8. On careful examination of the reconciliation furnished by the assessee, we find merit in the findings recorded by the ld. CIT(A). The assessee has demonstrated that the net ICDS income reported in Form 3CD comprised two components, namely (i) ICDS adjustments aggregating to Rs.45,78,77,941/- which were duly reflected in Schedule ICDS of the return, and (ii) amortisation of Right-to-Use (ROU) assets amounting to Rs.11,53,31,686/- which had already been disallowed while computing business income under Schedule BP. Therefore, the difference noticed by CPC did not represent any income omitted from taxation but arose on account of the manner in which the disclosures were made in different schedules of the return.
9. We further find that CPC considered only the ICDS adjustments resulting in increase of profit aggregating to Rs.69,79,48,694/-while completely ignoring ICDS adjustments resulting in decrease of profit aggregating to Rs.12,47,39,067/-. Such selective adoption of figures, without considering the corresponding downward adjustments mandated under ICDS, inevitably results in distorted computation of income. The record thus supports the finding of the ld. CIT(A) that the adjustment made by CPC was not based on a holistic appreciation of the disclosures made by the assessee.
10. We also find force in the contention of the assessee that amortisation of Right-to-Use assets amounting to Rs.11,53,31,686/-had already been added back while computing business income under Schedule BP. Once the said expenditure stood disallowed in the computation itself, any further adjustment on the same account by treating it again as ICDS income would clearly result in duplication of disallowance and consequential double addition. The Revenue has not brought any material on record to controvert this factual position or to demonstrate that the amount had not already been disallowed in the computation of income.
11. Significantly, the record further reveals that in rectification proceedings u/s. 154, CPC itself accepted that the ICDS deviations had been wrongly treated as disallowances. Though the rectification may not have completely restored the returned loss as claimed by the assessee, the admission by CPC lends substantial support to the assessee’s explanation that the original adjustment arose due to an incorrect understanding of the ICDS disclosures.
12. In our considered view, the issue involved required examination of reconciliation statements, interplay between disclosures made in Form 3CD, Schedule ICDS and Schedule BP, and verification of whether the impugned amount had already been disallowed elsewhere in the computation. Such an exercise goes beyond the scope of a prima facie adjustment contemplated u/s. 143(1) of the Act. It is well settled that where the issue is debatable or requires detailed verification of facts and reconciliation of accounts, no adjustment can be made while processing the return u/s. 143(1).
13. We therefore concur with the finding of the ld. CIT(A) that the adjustment made by CPC was founded on an incomplete appreciation of the disclosures made by the assessee and resulted in double disallowance of the same amount. The Revenue has not placed any cogent material before us to rebut the factual findings recorded by the ld. CIT(A) or to establish any infirmity therein. Accordingly, we uphold the order of the ld. CIT(A) directing deletion of the ICDS adjustment of Rs.24,00,70,753/- and restoration of the returned loss/unabsorbed depreciation as originally claimed.
14. As regards the direction relating to grant of prepaid tax credits amounting to Rs.7,53,32,100/-, we find that the ld. CIT(A) has recorded a categorical finding that such credits pertained to taxes paid in respect of the amalgamating company, Visionary RCM Infotech (India) Pvt. Ltd., which stood amalgamated with the assessee and that the credits had not been claimed by any other entity. The Revenue has not brought any contrary material on record to dispute the entitlement of the assessee to such credits. In the absence of any rebuttal to the factual findings recorded by the ld. CIT(A), we see no reason to interfere with the direction issued for grant of prepaid tax credits in accordance with law.
15. In view of the foregoing discussion, we find no merit in the grounds raised by the Revenue. The order of the ld. CIT(A) does not suffer from any infirmity warranting interference. Accordingly, all the grounds raised by the Revenue are dismissed.
16. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on the 01st day of July 2026, in Chennai.
