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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
Appellant by Smt. Ashima Gupta, D.R. Respondent by Shri S.K. Deshpande, A.R. Date of Hearing: 19.11.2019 Date of Pronouncement: 22.11.2019 आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the revenue is directed against order of the CIT(A)-1, Indore dated 15.1.2018 pertaining to the assessment year 2008-09. The revenue has raised following grounds of appeal:
[ ] [M/s. Narmada Malwa Gramin Bank, Indore]
1. Whether in the facts and in the circumstances of the case, Ld. CIT(A) was justified in admitting and adjudicating the ground regarding addition of Rs.16,95,83,384/- u/s 369(1)(viia) of the Act even when no such addition was made in the order u/s 147/143(3) of the I.T. Act dated 20.3.2016.
Whether in the facts and in the circumstances of the case, Ld. CIT(A) was justified in deleting addition of Rs.47,90,498/- on account of the excess provision of gratuity and leave encashment. 3. Whether in the facts and in the circumstances of the case, Ld. CIT(A) was justified in sustaining only Rs.48,790/- out of addition of Rs.2,10,395/- u/s 40(a)(ia) in view of findings in assessment order. 4. Whether in the facts and in the circumstances of the case, Ld. CIT(A) was justified in deleting the addition of Rs.5,89,91,207/- on account of provision of gratuity and leave encashment without giving any findings as to whether it was not already allowed on provision basis and also not making any verification about its actual payments. 5. The appellant craves leave to add to, deduct from or otherwise amend the above ground of appeal
2. Briefly stated facts are that case of the assessee was reopened and the assessment u/s 147 r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) was framed vide order dated 23.3.2016. While framing the assessment, the A.O. made addition of Rs.47,90,498/- on account of the excessive provision in respect of leave encashment and gratuity. The A.O. also made addition of Rs.2,10,395/- on account of non-deduction of tax at source. Further, addition was made in respect of provision
[ ] [M/s. Narmada Malwa Gramin Bank, Indore] of gratuity and leave encashment u/s 143(3) of the Act.
Aggrieved against this, the assessee preferred an appeal before Ld. CIT(A), who after considering the submissions deleted the addition of Rs.47,90,498/- out of the provision made for leave encashment and gratuity. The Ld. CIT(A) held that both the payments were actually made. In respect of the addition made on account of non-deduction of tax at source, the Ld. CIT(A) partly allowed the relief to the assessee. Thereby, he confirmed addition to the extent of Rs.47,790/- out of the total addition of Rs.2,10,395/- in respect of addition made on account of excess provision of Rs.5,89,91,207/- was also deleted. Against this, the revenue is in present appeal.
Ground No.1 of the revenue’s appeal reads as under:
Whether in the facts and in the circumstances of the case, Ld. CIT(A) was justified in admitting and adjudicating the ground regarding addition of Rs.16,95,83,384/- u/s 369(1)(viia) of the Act even when no such addition was made in the order u/s 147/143(3) of the I.T. Act dated 20.3.2016.
[ ] [M/s. Narmada Malwa Gramin Bank, Indore]
It is noticed that the assessee had taken a ground before Ld. CIT(A) i.e. ground No.2, which is reproduced as under:
“The Ld. A.O. has erred in disallowing the claim of the assessee made of Rs.16,95,85,384/- u/s 36(1)(vii)(a).” 5. This ground of the assessee’s appeal was dismissed by the Ld. CIT(A) in para 4.2.5 by observing as under:
“Respectfully following the aforesaid decisions of CIT(A), ITAT and Hon'ble Supreme Court, the disallowance of claim of deduction u/s 36(1)(viia) of I.T. Act of Rs.16,95,85,384/- is hereby Confirmed. Therefore, the appeal on this ground is Dismissed. 6. In view of the above, ground No.1 of the revenue’s appeal is dismissed.
Ground No.2 is against deleting the addition made on account of excess provision of gratuity and leave encashment.
Ld. CIT(DR) supported the order of the A.O. and submitted that Ld. CIT(A) was not justified in deleting the addition.
[ ] [M/s. Narmada Malwa Gramin Bank, Indore]
Ld. Counsel for the assessee opposed these submissions and submitted that all payments have been made during the year under consideration and in view of the provisions of section 43B(b) of the Act, total demand is allowable as a deduction.
We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. We find that Ld. CIT(A) has given a finding on fact that all the payments have been actually made. This fact is not controverted by the revenue, therefore, we do not see any reason to interfere with the finding of the Ld. CIT(A). Ground raised by the revenue is rejected.
Ground No.3 is against sustaining the addition of Rs.48,790/- out of total addition of Rs.2,10,395/- u/s 40(a)(ia) of the Act.
[ ] [M/s. Narmada Malwa Gramin Bank, Indore]
Ld. CIT(DR) supported the order of the A.O. and submitted that Ld. CIT(A) was not justified in reducing the addition.
We find that Ld. CIT(A) has followed the judicial pronouncements applicable on the facts of the present case, therefore, the view of the Ld. CIT(A) is affirmed as the revenue failed to bring any judgement of the Hon'ble jurisdictional High Court on this issue.
Ground No.4 is against deleting the addition of Rs.5,89,91,207/- on account of provision of gratuity and leave encashment.
Ld. CIT(DR) supported the order of the A.O. and submitted that Ld. CIT(A) has mechanically allowed the claim of the assessee without verifying the actual payments. Ld. D.R. submitted that the Ld. CIT(A) ought to have confirmed these additions.
[ ] [M/s. Narmada Malwa Gramin Bank, Indore]
On the contrary, Ld. Counsel for the assessee reiterated the submissions as made in the written submissions before the Ld. CIT(A). The Ld. Counsel for the assessee submitted that the A.O. made addition on a wrong appreciation of fact that no details have been submitted about the payments and it is not ascertainable as to how this claim of Rs.5,89,91,207/- is allowable. He submitted the complete details of payments was filed vide letter dated 22.6.2015 and 11.8.2015 wherein it was also stated that deduction is claimed on the basis of actual payment. The attention was also drawn to the audit report for the financial year 2006-07 & 2007-08, wherein it was submitted that this is a pre-existing liability which was disallowed in the earlier years being not paid during those years. The computation of the earlier years disallowing the said payment was also attached with the tax audit report for the assessment year 2007-08. It would be seen that the [ ] [M/s. Narmada Malwa Gramin Bank, Indore] said amount had been mentioned on the pre-exist liability on the first day of the previous year not allowed in the earlier assessment year and not paid during the year.
During the year under consideration, the said amount was paid and in view of the provisions of section 43B(b) of the Act the said amount is allowable as deduction. He submitted that the challans of the actual payments were filed before the A.O. and copies of the same were enclosed in the paper book before Ld. CIT(A).
We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. Ld. CIT(A) has allowed the deduction by observing as under:
“The appellant submitted that the expense has been debited on the basis of actual payment. The appellant has shown pre existing liability in the F.Y. 2006-07 and F.Y. 2007-08, which has been disallowed in the earlier year. The appellant has made the said payment during the year under consideration and the same is allowable u/s 43B of the Income Tax Act. Therefore, the A.O. is not justified in making the addition. “
[ ] [M/s. Narmada Malwa Gramin Bank, Indore]
For the sake of clarity, section 43B(b) of the Act is reproduced as under:
“43B(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, [or] ……………………………………………………… ……………………………………………………… ………………………………………………………
Shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him.” 19. The Ld. CIT(A) has given a finding on fact that the payments were actually made in the year under appeal, therefore, in view of the aforesaid provision, we do not see any infirmity in to the finding of Ld. CIT(A) and the same is hereby affirmed. This ground of the revenue’s appeal is rejected.
Ground No.5 is general in nature needs no separate adjudication.
[ ] [M/s. Narmada Malwa Gramin Bank, Indore]
In the result, the appeal filed by the revenue is dismissed.
Order was pronounced in the open court on 22 .11.2019.