Case Law Details
True Sparrow Systems Private Limited Vs DCIT (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, partly allowed the assessee’s appeal for Assessment Year 2014-15 and allowed the appeal for Assessment Year 2015-16, holding that filing the incorrect audit form by the Chartered Accountant was a procedural lapse that could be rectified and should not, by itself, defeat an otherwise eligible claim for deduction under Section 10AA of the Income Tax Act.
The assessee, a private limited company engaged in providing information technology services and software-related services outside India, had obtained approval from the Special Economic Zone (SEEPZ) on 19 January 2011, making it eligible to claim deduction under Section 10AA. For AY 2014-15, the assessee filed its return declaring total income of ₹8,34,871 after claiming a deduction of ₹6,10,66,460 under Section 10AA. During the original scrutiny assessment under Section 143(3), the Assessing Officer (AO) examined the claim, verified the relevant details, and accepted the return without any addition. Subsequently, the assessment was reopened under Sections 148A(d) and 148, following which the AO disallowed the deduction on the ground that the assessee had filed Form 56G instead of Form 56F, treating compliance with Form 56F as mandatory and adding ₹6,10,66,460 to the business income. The Commissioner of Income Tax (Appeals) upheld the disallowance.
Before the Tribunal, the assessee contended that all information relied upon in the reassessment was already available during the original assessment and that there was no new material. It submitted that it fulfilled all conditions for claiming deduction under Section 10AA, had valid SEZ approval, maintained audited books of account, and carried on export-oriented software business. According to the assessee, the filing of Form 56G instead of Form 56F resulted from an error by the Chartered Accountant and constituted only a procedural lapse. The assessee argued that the AO should have examined the substantive eligibility for deduction rather than rejecting the claim solely because of the incorrect form. Reliance was also placed on the Supreme Court’s decision in Union of India vs. Rajiv Bansal for AY 2015-16.
The Tribunal observed that neither the AO nor the Commissioner (Appeals) had disputed the assessee’s substantive eligibility for deduction under Section 10AA. It held that filing Form 56G instead of Form 56F was a procedural mistake capable of rectification. Accordingly, it directed the AO to accept the corrected Form 56F along with the audited books of account and, if the assessee fulfilled all the prescribed conditions under Section 10AA, allow the deduction. Consequently, the appeal for AY 2014-15 was partly allowed. For AY 2015-16, the Tribunal held that the issue was covered by the Supreme Court’s decision in Union of India vs. Rajiv Bansal and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The appeal filed by the assessee is against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “Ld. CIT(A)”]dated 21.11.2025 for the Assessment Year (in short “AY”) 2014-15.
2. The assessee has raised the following grounds of appeal:
“1. The Ld. AO has erred in law and on facts of the case in re-opening the assessment u/s. 147 of the Act. Under the facts and circumstances of the case, the action of reopening is without jurisdiction and is not permissible either in law or on facts.
2. The Ld. CIT(A) erred in law and on facts in upholding the order of Ld. AO u/s 143 r.w.s. 147 of the Act in denying the exemption u/s. 10AA of the Act.
3. The Ld. Assessing Officer has erred in law and on facts in disallowing the exemption claimed of Rs.6,10,66,460/- by the Appellant under section 10AA of the Act merely on the ground that Form No. 56G was filed instead of FormNo. 56F, without appreciating that the Appellant was otherwise fully eligible for exemption and had complied with the substantive conditions prescribed under the Act.
4. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and principles of Natural Justice and therefore deserves to be quashed.
5. The learned AO has erred in law and on facts in initiating penalty proceedings u/s. 271(1)(c) of the Act.
6. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
3. The assessee is a private limited company and engaged in the business of providing information technology services and rendering services as required by the customers in relation to processing of information and use of software outside India. The company obtained approval from SEEPZ (Special Economic Zone) vide letter dated 19.01.2011 and was entitled to claim 100% deduction from profits and gains of business and profession u/s 10AA of the Income Tax Act, 1961 (in short “the Act”). The assessee filed return of income for AY 201415 on 29.11.2014 declaring total income of Rs.8,34,871/- after claiming exemption of Rs.6,10,66,460/-u/s 10AA of the Act. The case of the assessee was selected for scrutiny u/s 143(3) of the Act and all the details and conditions claiming deduction u/s 10AA of the Act were verified by the Ld. Assessing Officer (in short “Ld. AO”) who accepted the return of income by passing the assessment order on 30.11.2016. Subsequently, the assessee’s case was reopened pursuant to issue of notice u/s 148A(d) of the Act dated 24.05.2022, response of the assessee dated 26.05.2022 was submitted and subsequently order u/s 148A(d) of the Act was passed and notice u/s 148 of the Act dated 30.07.2022 was issued. The assessee received notice u/s 142(1) of the Act which was responded by the assessee. The Ld. AO observed that the assessee in its reply contended that From 56G was filed by mistake by the Chartered Accountant (in short “CA”) instead of Form 56F. Thus, the Ld. AO rejected the contention of the assessee company by observing that getting the account books is mandatory and filing Form 56F is procedural condition. Therefore, the Ld. AO made addition of Rs.6,10,66,460/- under the head “income from business”.
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The Ld. Authorised Representative (in short “Ld. AR”) for the assessee submitted that the information upon which the Ld. AO is making the addition in the proceeding u/s 147 r.w.s. 148 of the Act was already there in the original assessment. There is no new information and therefore the reassessment is merely based on assumption that the deduction u/s 10AA of the Act claimed by the assessee is not allowable. The assessee company was selected for scrutiny for A.Y. 2014-15 and the assessment order was passed on 30.11.2016.In the original assessment proceedings u/s 143(3) of the Act, the Ld. AO called for preliminary details and the same was submitted by the assessee in March and April 2016. In fact, the Ld. AO passed the assessment order with nil addition. The Ld. AR submitted that the Ld. AO did not dispute the contentions of the assessee company and has not decided the objections with the reasons but simply rejected the objections. The Ld. AR further submitted that the assessee fulfills the criteria of claiming the deduction u/s 10AA of the Act applicable for AY 2014-15 as the assessee is an entrepreneur defined u/s 2(J) of the SEZ Act, 2005. In fact, the assessee company got the approval from the Development Commissioner as a unit established in SEZ vide approval letter dated 19.01.2011and assessee’s books were duly audited. The assessee is exclusively engaged in the business of software outside of India and earns income out of exports exclusively. The assessee through its CA erroneously filed Form 56G instead of 56F and this cannot be treated as a mandatory but a procedural lapse which is curable. The assessee’s books were audited but due to the mistake of the CA Form 56G was filed which does not contain audit report/audited books. Thus, the Ld. AO should have looked into the merits and the eligibility criteria whether fulfilled by the assessee u/s 10AA of the Act deduction while claiming the same. The Ld. AR also relied upon the decision of the Hon’ble Apex Court in the case of Union of India vs. Rajiv Bansal (judgment dated 03.10.2023) for the AY 2015-16.
6. The Ld. Departmental Representative (in short “Ld. DR”) for the Revenue relied upon the assessment order and the order of the Ld. CIT(A).
7.We have heard both the parties and perused all the relevant materials available on record. The assessee has filed the Form 56G instead of 56F but the fact remains that the assessee is eligible for deduction u/s 10AA of the Act which was not at all disputed by the Ld. AO or by the Ld. CIT(A). Therefore, the procedural mistake can be rectified and we direct the Ld. AO to take the corrected Form along with audited books and if the assessee is fulfilling entire criteria as envisaged u/s 56F then accordingly allow the claim of the assessee u/s 10AA of the Act.
8. The appeal of the assessee in AY 2014-15 being ITA No.85/AHD/2026 is partly allowed.
9. As regards ITA No.86/AHD/2026 for AY 2015-16, the assessee’s case is covered by the Hon’ble Apex Court’s decision in case of Union of India vs. Rajiv Bansal (order dated 03.10.2023). Thus, the appeal for AY 2015-16 being ITA No.86/AHD/2026 is partly allowed.
10. In result, the appeal being ITA No.85/AHD/2026 is partly allowed & ITA No.86/AHD/2026 is allowed.
Order pronounced in the open court on 23.06.2026
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