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Facts
The assessee filed a return showing a loss, but the CPC processed it by making additions for disallowance of gratuity and loss on sale/write-off of fixed assets. The assessee contended that these additions were already accounted for in its return and the CPC ignored its replies.
Held
The Tribunal found that the CIT(A) did not properly adjudicate the assessee's claim of double disallowance and that a mismatch between the income tax report and the tax audit report is a curable mistake. Verification from audited books is required.
Key Issues
Whether the CPC correctly made additions for gratuity and fixed asset adjustments without considering the assessee's replies, leading to double disallowance. Whether the CIT(A) properly adjudicated the issue of double disallowance and mismatch between reports.
Sections Cited
143(1), 40A(7), 37
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Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
Date of Hearing 24.07.2025 Date of Pronouncement 19.09.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal is preferred by the assessee against the order passed by the Learned Commissioner of Income-tax, Appeal, ADDL/JCIT(A)-1, Gurugram [hereinafter referred to as “CIT(A)”] pertaining to the intimation order passed u/s. 143(1) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 08.11.2019 for the Assessment Year [A.Y.] 2018-19. P a g e | 2 A.Y. 2018-19 Tata Communications Payment Solutions Limited 2. The grounds of appeal are as under:
1. On the facts and circumstance of the case and in law, the learned CIT(A) erred in upholding the additions made in the intimation dated November 8, 2019 issued under section 143(1) of the Income-tax Act, 1961 ('the Act'), by the Deputy Commissioner of Income Tax, Centralized Processing Centre, Bangalore (hereinafter referred as 'CPC'). The said additions result into reduction of loss to be carried forward twice, since the same have already been considered by the Appellant in the return of income filed for the impugned year.
2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the impugned addition of Rs. 26,36,704 made under section 40 A (7) of the Act although the same addition has already been made by the Appellant in its return of income, thus resulting into double disallowance of Rs 26,36,704.
3. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the impugned addition of Rs. 36,45,866 made under section 37 of the Act, although the Appellant has already made the addition to the tune of Rs. 36,45,317 in its return of income, thus resulting into double disallowance of Rs. 36,45,317.
3. Brief facts of the case are that the Central Processing Centre(‘CPC’) processed the return of income of the assessee u/s 143(1) of the Act after making additions on account of disallowance of Gratuity of Rs. 26,36,704/- under section 40A(7) of the Act and also on account of Loss on sale of Fixed Assets of Rs 15,10,890/- and Write-off of Fixed assets of Rs. 21,34,427/-.
3.1 The assessee which is engaged in the business of Banking Infrastructure Management in various areas filed the return showing loss of Rs 124.41 cr. Subsequently, it received show cause notices from CPC regarding certain proposed adjustments. The assessee responded to P a g e | 3 A.Y. 2018-19 Tata Communications Payment Solutions Limited them and provided its response contesting the adjustment. However, the CPC made the adjustments. The assessee has contented that CPC ignored its replies.
In the subsequent appeal before the ld.CIT(A),the assessee contended that CPC erred in making addition of Rs. 26,36,704/- u/s 40A(7) of the Act although the assessee had already offered this addition in the income tax return for AY 2018-19. It was explained that during the year under consideration, actual gratuity paid amounted to Rs. 47,34,624/- and since a provision of gratuity of Rs. 26,36,704/- was created therefore, only difference between actual paid gratuity of Rs. 47,34,624/- and provision of gratuity of Rs. 26,36,704/- i.e. Rs. 20,97,920/- had been claimed as deduction under section 40A(7) of the Act in the return of income under ‘Schedule BP’ at row no 33 ‘Any other amount allowable as deduction’. The ld.CIT(A) after perusing the ITR noticed that the total amount mention in ‘Row 33’ was Rs. 93,93,754/- and no break-up/detail of this amount had been given in support of its contention that it included Rs. 20,97,920/-as against actual gratuity paid of Rs. 47,34,624/-. Further, it had also not been clarified as to how the Auditor had mentioned some amount in creation of provision u/s 40A(7) of the act when the actual amount paid during the year is more than that. Moreover, when the actual amount paid was higher figure P a g e | 4 A.Y. 2018-19 Tata Communications Payment Solutions Limited than why the assessee was not claiming the entire amount of gratuity paid has also not been explained/clarified. He concluded that since the appellant had not declared provision for payment of gratuity u/s 40A(7) in the relevant part of the ITR whereas the auditor had pointed out the same in its audit report and as there was mismatch, the CPC correctly added the same while processing the return of the appellant. Accordingly, he upheld the addition.
4.1 Further, the assessee contended that CPC erred in making addition of Rs. 36,45,866/- u/s 37 of the Act although it had already made this addition in the income tax return for the relevant year. The ld.CIT(A) noted that there was inconsistency in total amount of disallowance u/s 37 of the Act, reported in return filed vis-à-vis the audit report filed by the Charted Accountant. As per Audit Report, the auditor reported an amount of Rs. 36,45,866/- in Sr. 21(a) of the audit report. However, in the ITR filed by it, the assessee showed NIL amount in the relevant column of ITR i.e. in column 7 of ‘Part A OI-Other Information’. Since the assessee failed to file the relevant details in the ITR, the AO, CPC had added this income to the total income. Before him, the assessee contented that the aforesaid expenses were capital in nature and therefore not allowable as a deduction and accordingly, it had already disallowed the same and added back in the return of income under P a g e | 5 A.Y. 2018-19 Tata Communications Payment Solutions Limited ‘Schedule BP’ at row no 23 ‘Any other item or items of addition under section 28 to 44DA’.
4.2 The ld.CIT(A) further observed that no break-up/detail of this amount has been given in support of its contention that this amount includes Rs. 36,45,866/-being ‘Loss on sale of Fixed Assets of Rs. 15,10,890/- and Write-off of fixed assets of Rs. 21,34,427/-’.
4.3 Accordingly, keeping in view the observation mentioned in above paras as well as the fact that the assessee had not declared total amount of disallowance u/s 37 in the relevant part of the ITR whereas the auditor had pointed out the same in its audit report and as there was mismatch, he held the CPC correctly added the same while processing the return and he upheld the addition.
Before us, the ld.AR contented that the CPC while making the impugned adjustment did not consider the replies of the assessee made in response to the notice for adjustment issued by it. The order is non speaking and did not deal with the responses made by the assessee before it. Thus there is violation of the principles natural justice. Besides, in respect of both the additions, adjustment resulted in double disallowance of the same amount which is not justified. It was also stated that the ld.CIT(A) did not adjudicate the issues properly probably P a g e | 6 A.Y. 2018-19 Tata Communications Payment Solutions Limited on account of lack of proper communication during video conference glitches. It was submitted to send back the entire issue to the JAO for proper evaluation of the issues involved. The ld.DR relied on the appellate order.
On perusal of the aforesaid provisions of Section 143(1)(a) of the Act wherein the first proviso to the section casts a duty upon the AO that if any disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return which is the circumstances of the present case also, in such a case, the first proviso says that no such adjustment shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode. It is provided further that the response received from the assessee, if any, shall be considered before making any adjustment. Coming to the factual aspect of the present case, wherein an intimation u/s.143(1) of the Act was served upon the assessee, it has diligently responded with the reasons specifying that since the amounts which were proposed to be disallowed could not be subjected to any disallowance.
6.1 We find that the ld.CIT(A) has concluded in respect of both the adjustments that there was mismatch in the relevant part of the P a g e | 7 A.Y. 2018-19 Tata Communications Payment Solutions Limited Income Tax Report and the Tax Audit Report which led to the disallowance and he found no infirmity in the said adjustment which was upheld. However, we find that he did not adjudicate the claim of the assessee that in respect of both the additions, there was a case of double disallowance since the assessee had already disallowed them in the return of income. Moreover, merely on the mismatch, the addition could not be justified when such mismatch on account of mistake in Tax audit report is a curable mistake only. The contention regarding double disallowance requires verification from audited books of accounts / records, audited financial statements, respective tax returns filed by the assessee.
On due consideration of all the relevant facts of the case, we are of the considered view that meticulous examination of the facts and figures as also supporting documents is essential for proper and just decision of the case as also claimed by the assessee especially in respect of double disallowance. Thus, the case is remanded back to JAO for decision afresh as prayed for the ld.AR while affording reasonable opportunity to the assessee.He would consider all aspects of the case including any rectified/revised TAR, if any submitted by the assessee in the matter and decide the issue afresh in accordance with law.
P a g e | 8 A.Y. 2018-19 Tata Communications Payment Solutions Limited 7. In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court on 19/09/2025. NARENDER KUMAR CHOUDHRY PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)