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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
This appeal is filed by the assessee against appellate order passed by the National Faceless Appeal Centre, Delhi [the ld. CIT (A)] for A.Y. 2020-21 dated 10.06.2022 by which the appeal filed by the assessee against the order dated 18.10.2021 passed u/s. 143 (1) of the Income Tax Act, 1961 [ The Act ] by the Centralized Processing Centre, Bangalore [ The ld AO] was partly allowed.
Assessee is aggrieved and has raised following grounds of appeal:
“1. Natural Justice
(i) The same is framed in breach of the participles of natural justice; and (ii) The same is perverse, passed without application of mind to the facts on record.
1.2 Without prejudice to the generality to the above, in the facts and the circumstances of the case, and in law, the order is bad in law as:
(i) The same is passed without granting proper, sufficient and adequate opportunity of being heard to the Appellant; and (ii) The order is passed without application of mind to facts and the submissions brought on record.
1.2. ADDITION OF ₹ 4,49,14,968/- ON ACCOUNT OF CONTIGENT LIABILITIES.
2.1. The learned CIT(A) erred in confirming the action of the Centralized Processing Centre, Income Tax Department, Bangalore, [„AO‟] in making the adjustment u/s 143(1) of ₹ 4,49,14,968/- on account of „Amount of liability of contingent nature‟ [₹ 3,90,96,088/- towards
2.2. While doing so, the CIT (A) erred in –
(i) Basing his action on surmises, suspicion and conjecture;
(ii)Taking into account irrelevant and extraneous considerations; and (iii) Ignoring relevant material and considerations as submitted by the Appellant.
2.3 It is submitted that, assuming-but not admitting- that some disallowance was required to be made, in the facts and circumstances of the case, and in law, such disallowance is not in accordance with the law, is arbitrary and excessive.
Addition of ₹ 3,97,566/- ON ACCOUNT OF CONTRIBUTION RECEIVED FROM EMPLOYEES TOWARDS PROVIDENT FUND
3.1 The Ld.CIT(A) erred in confirming the action of the Assessing Officer in making the disallowance of ₹ 3,97,566/- made by Central Processing Centre, Income Tax Department, being the employees‟ contribution toward the provident fund, on the ground that the same was not paid within the due date prescribed under the respective statues.
3. The brief facts of the case show that, assessee is an association of person [AOP] engaged in banking business. It filed its return of income on 20.01.2021 at total income of ₹5,35,64,760/-. The return was processed u/s. 143(1) of the Act wherein the income from business or profession of the assessee was taken at ₹9,06,92,439/- against the income declared by the assessee at ₹4,42,45,201/-. The adjustment is with respect to disallowance of liability of contingent nature disallowed as per clause 7(h) of the intimation u/s. 143(1) of the Act. The disallowance of ₹ 4,49,14,968/-. This amount was added under the pretext that the amount is debited to the profit and loss account is disallowable u/s. 37(1) of the Act.
adjustment was of ₹3,39,136/- being amount debited to profit and loss of the previous year but disallowable 43B of the adjustment is ₹7,95,132/- being a sum disallowable u/s. 43B payable by the a way of contribution to provident fund for the welfare of employees.
The assessee filed an appeal before the ld.CIT(A) contested that contingent liability of ₹4,49,14,968/- was not at all debited to the profit and loss account, but is a contingent item. It was never claimed by the assessee as deduction. Further duty, taxes and fees ₹41,000 is share forfeiture amount and has not been debited to the profit and loss. Further, the GST payment of ₹ 2,79,736/- is already paid on or before the due date of filing of the return of income. The profession tax of ₹18,400/- is also paid on 23.04.2021. Therefore same is also not disallowable u/s. 43B. The provident fund of ₹3,97,566/- has been paid on 08.04.2020 therefore same is also not disallowable. The assessee submitted that with respect to the bonus, the actual bonus is ₹33,25,285/- whereas in the return of income same was wrongly shown at ₹33,25,000/-. Accordingly, it was stated that adjustment made as per intimation u/s. 143(1) dated 18.10.2021 is not correct.
5. It was further stated that a rectification application u/s. 154 of the Act was also filed on 21.11.2021. The above application u/s. 154 was disposed off on 14.02.2022 wherein certain adjustments are deleted. However,
6. The Ld. Authorized Representative submitted a paper book containing 390 pages and submitted that in the computation of total income assessee has not claimed any deduction on account of contingent liability therefore the addition of the same made by the CPC and confirmed by the ld.CIT(A) is not correct. He referred to profit and loss
Ld. DR vehemently supported the order of the ld.CIT(A). He submitted that when the figures are wrongly punched by the assessee or his auditor no fault can be found with the Central Processing Centre or CIT(A).
We have carefully considered the rival contentions and perused the order of the lower authorities. We find that admittedly the assessee has punched the wrong figures. In fact, it is not the auditor but the assessee who approves the figures put in Form No. 3CD. The Auditor certifies it to be "true and correct". Therefore, in this case the auditor as well as the assessee both are at some fault. However, when the matter is before us the interest of substantial justice need to be looked at. If because of the error of the assessee an amount of income is not taxable we cannot uphold the addition made by the lower authorities, if it is not supported by provisions of law.
In this case, the contingent liability of ₹4,49,14,968/- was not debited to the profit and loss account and therefore
The second item of amount disallowance of ₹ 3,97,566/- on account of employees contribution towards the provident fund which was deposited on 08.04.2020 where the due date of deposit of the above dues was 15.04.2020. The disallowance of this sum is also not correct. Accordingly, we allow Ground No. 2 & 3 of the appeal of the assessee.
In view of our decision Ground No. 1 is merely academic in nature and hence, dismissed.
In the Result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 17.01.2023.