DURGAPUR IRON & STEEL CO. (P) LTD.,,DURGAPUR vs. DCIT, CENTRAL CIRCLE 4(4),, KOLKATA

IN THE INCOMETAXAPPELLATE TRIBUNAL “A” BENCH, KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member ITA No.354/Kol/2026 Assessment Year: 2020-21 Durgapur Iron & Steel Co. (P) ltd.,…………………….………………………….Appellant Bamunara Industrial Area, P.O. Banunara, Durgapur, Paschim Bardhman, West Bengal- 713212 [PAN No. AABCD7928E] Vs. DCIT, Central Circle 4(4)……….……………………..…………….………... Respondent, Aayakar Bhawan (Poorva), 110, Shantipalli, Kolkata- 700107 Appearances by: Shri Rajeeva Kumar, Advocate, appeared on behalf of the Appellant. Shri H. Robindra Singh, CIT (DR) ,appeared on behalf of the Respondent. Date of concluding the hearing : April 27, 2026 Date of pronouncing the order :May 20 ,2026 ORDER Per Pradip Kumar Choubey, Judicial Member: This appeal filed by the assessee is directed against the order dated 26.11.2025 of the Office of the Commissioner of Income Tax passed under Section 143(1) of the Assessment Year 2020-21 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). 2. The brief facts of the case of the assessee is that assessee filed return of income declaring total income Rs. 13,58,850/-. The said return was processed determining total income at Rs. 11,05,14,650/- by making addition of Rs. 10,84,00,000/- for the bank guarantee given to the customers, Rs. 62,75,73/- for the bogus or commission paid to the employee for the service rendered, Rs. 226,915/- for the delay payment of PF and IESI and Rs. 1310/- for the penalty.

ITA No.354Kol/2026 Assessment Year- 2020-21 Aggrieved by the order assessee preferred appeal before the CIT(A) wherein CIT(A) partly allowed the appeal of the assessee as the CIT(A) confirmed the addition of Rs. 10,84,00,000/- for the bank guarantee. Being aggrieved by and dissatisfied the assessee preferred appeal before us. 3. The Ld. AR challenges the very impugned order on the sole issue that is the confirmation of addition of a sum of Rs. 10,84,00,000.- against the bank guarantee by submitting that CIT(A) erred in confirming the addition as the same has been given for the bank guarantee to the West Bengal Electricity Distribution Company Limited. The Ld. AR further submits that during the financial year 2019-20,assessee company required bank guarantee to make payment to the West Bengal Electricity Distribution Company Limited for any default and for this bank guarantee amounting to Rs. 10,84,00,000/- was made for the year under consideration. The Ld. AR further submits that assessee company filed tax audit report and auditor of the assessee inadvertently mentioned the bank guarantee of Rs. 10,84,00,000/- under the head any liability of a contingent nature.His further submission is that realizing the mistake auditor has filed revise tax audit report rectifying the said mistake but the CPC did not take any action based on revised tax audit report though it is apparent that tax auditor committed in an advertent error in reporting the contingent liability to have been debited to the profit and loss account which was factually incorrect and in the revise tax audit report correct position that contingent liabilities have not been claimed as expense for determining taxable income. The further submission of the AR is that contingent liabilities disallowed as expenditure by the CPC were never provided for the in the profit and loss account and was never claimed as expenditure for the purpose of determining the taxable income 2

ITA No.354Kol/2026 Assessment Year- 2020-21 returned by the assessee and the adjustment has been carried out by the CPC solely on the basis of the Tax audit Report where the tax auditor committed inadvertent error and wrongly reported the contingent liabilities as expenses actually debited to profit and loss account. The prayer of the AR is that addition of Rs. 10,84,00,000 is to be deleted as it is a contingent liabilities for the bank guarantee given to the West Bengal Electricity Distribution Company Limited.The Ld. AR has also cited following decisions: - [2025] 174 taxmann.com 843 (Ahmedabad – Trib.) 1. IN THE ITAT AHMEDABAD BENCH ‘D’ Assistant Commissioner of Income-tax V. Mahesh Mohanbhai patel (HUF)

Contrary to that Ld. DR supports the impugned order. 4. Upon hearing the submission of the counsel of the respective parties and on perusal of the impugned order we find that assessee is engaged in the business of mining and quarrying services. During the financial year 2019-20 that the assessee company as bank guarantee amounting to Rs. 10,84,00,000 was made to the West Bengal Electricity Distribution Company Limited. Details of the bank guarantee has been filed by the assesses. The submission of the AR is that auditor of the assessee inadvertently mentioned the bank guarantee under the head any

ITA No.354Kol/2026 Assessment Year- 2020-21 liability of a contingent nature and subsequently revised tax audit report has been filed rectifying the said mistake. We find that on realization of apparent error the auditor revised the tax audit report U/s 44 AB of the Act which depicts the correct position that contingent liability has not been claimed as expenses for determining taxable income. It is pertinent to mention here that contingent liabilities disallowed as expenditure by the CPC where never provided for in the profit and loss account and was never claimed as expenditure for the purpose of determining the taxable income returned by the assessee. The adjustment has been carried out by the CPC solely on the basis of tax audit report where the tax auditor committed inadvertent error and wrongly reported the contingent liabilities as expenses actually debited to profit and loss account which is untrue and inconsistent with the audited financial statement. The case of the assessee is that an expenditure cannot be disallowed where it has not been claimed at the first instance.We have gone through the cited decision of the assessee and find that Ahmedabad Bench in a case of ACIT Mahesh Mohanbhai Patel has dealt this issue and has held thus: -

ITA No.354Kol/2026 Assessment Year- 2020-21 (supra) have held that contingent liabilities which are not debited to the profit and loss account cannot be added merely on the basis of disclosure in the audit report. Further, under section 143(1)(a), the scope of adjustment is limited to arithmetical errors, incorrect claims apparent from any information in the return, or disallowance of loss claimed without required return. The adjustment made in the present case does not fall under any of these categories, as it requires verification beyond the return itself.

Kolkata, the 20th May, 2026.

[Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member Dated:.. 20. 05.2026. DC, PS

Copy of the order forwarded to: 1. Appellant - 5

ITA No.354Kol/2026 Assessment Year- 2020-21 2. Respondent - 3. CIT(A)- 4. CIT- 5. CIT(DR)

//True copy// By order Assistant Registrar, Kolkata Benches

ITA No.354Kol/2026 Assessment Year- 2020-21