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Facts
The assessee challenged the CIT(A)'s order which dismissed their appeal, upholding the disallowance of leave encashment expenditure. The assessee claimed the expenditure was paid before the due date of filing the return but after the tax audit report, thus not reported in the tax audit report.
Held
The Tribunal held that the matter requires factual verification by the AO. The appeal was restored to the AO to decide afresh after providing an opportunity of hearing to both parties. The appeal was allowed for statistical purposes.
Key Issues
Whether the disallowance of leave encashment expenditure paid after the tax audit report but before the due date of filing the return is justified. Whether the levy of interest under Section 234C is correct.
Sections Cited
250, 1961, 43B, 154, 139(1), 234C, 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH MUMBAI
Before: HON’BLE SHRI SANDEEP GOSAIN & SHRI GIRISH AGRAWAL
Assessee by Ms. Anita Basrur Revenue by Ms. Monika H. Pande, Sr. DR Date of Hearing 02.01.2025 Date of Pronouncement 19.02.2025 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order 27.09.2024, passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (‘Ld. CIT(A)’) for the assessment year 2022-23. The assessee raised the following grounds of appeal:
1. Ground No. I-Order bad in law 2 NEC Software Solutions (Ind) Pvt Ltd, Mumbai 1.1 On the facts and in the circumstances of the case and in law, the Learned CIT(A) has grossly erred in disregarding the fact of the matter and dismissing the appeal only on the legal ground that the issue under consideration is controversial and beyond the ambit of section 154 of the Act.
1.2 The appellant wishes to state that the issue under consideration is not controversial but mere non-consideration of facts on hand. The Learned AO proceeded to pass the before the filing of return of income and thus allowable deduction under section 43B of the Act rectification order under section 154 of the Act without considering the fact that the appellant has made payment of leave encashment after the date of the tax audit report but 1.3 Thus Learned CIT(A) has erred in dismissing the appeal filed by the appellant and ignoring the facts on record.
1.4 Accordingly, the appellant prays Your Honour to consider the plea as above and direct the Learned AO to verify the claim and delete the demand of Rs. 5,22,070.
Ground No. II- Disallowance of Leave Encashment Expenditure Amounting to Rs. 20,09,075 2.1 On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in not allowing deduction for leave encashment expenditure of Rs. 20,09,075/- paid before the due date of filing return of income but after filing of tax audit report.
2.2 The Learned CIT(A) has erred in ignoring the submissions of the appellant that the leave encashment amounting to Rs. 20,09,075 was pald before the due date of filing return of income under section 139(1) of the Act i.e. 30th November 2022 and upholding the disallowance of leave encashment expenditure by Learned AO which is completely incorrect, unlawful, without jurisdiction and hence bad-in-law.
2.3 In light of the above, the appellant prays before Your Honor to direct the Learned AO to verify the claim and delete the aforementioned disallowance.
3 NEC Software Solutions (Ind) Pvt Ltd, Mumbai
Ground No. III - Incorrect Levy of Interest Under Section 234C of the Act 3.1 Consequent to the above, on the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the levy of interest Rs. 16,433/- under section 234C of the Act by Learned AO. 3.2 The appellant company prays that on verification of the above claim, the demand shall stand deleted and accordingly interest would not be payable under Section 234C of the Act. The appellant craves leave to add, alter, amend, modify or withdraw any of the above stated Grounds of Appeal
at any time before or at, the time of hearing, of the appeal.
2. All the grounds raised by the assessee relates to challenging the disallowance of leave encashment expenditure, therefore we have decided to take up all the grounds together and adjudicate these grounds through the present consolidated order.
3. After having heard both the parties on the grounds raised in the present appeal and after evaluating the orders passed by the revenue authorities, documents placed on record, we noticed that assessee filed its return of income for the year under consideration, subsequently intimation u/s 143(1) of the Act was issued for proposed adjustments of Rs. 20,09,075/- on account of leave encashment.
4. The assessee explained that the additional claim raised was on account of payment made after date of tax audit report but prior to due date of filing of return which was a allowable expense as per the provisions of Sec.43B of the 4 NEC Software Solutions (Ind) Pvt Ltd, Mumbai Act. However, the CPC went ahead and made adjustment. It was also submitted that rectification petition filed by the assessee u/s 154 of the Act was rejected and even the appeal was also dismissed by the CIT(A) by holding that allowance of leave encashment is a “debatable issue”
5. Be that as it may, as per the assessee the claim was allowable as leave encashment was paid before the due date of filing of Return of Income but after filing of tax audit report, therefore, the same could not be reported in tax audit report. In our view, the above matter requires factual verification at the end of the AO, therefore, without going into any technicalities and also keeping in view the cause of substantial justice, we therefore restore the matter back to the file AO to verify the above factual position and thereafter pass afresh order on this issue. Thus the appeal of the assessee is restored to the file of A.O to decide it afresh by providing one more opportunity of hearing to both the parties. However, the assessee shall not seek any adjournment on frivolous grounds and remain cooperative during the course of proceedings and the appeal of the assessee is thus allowed for statistical purposes.
Before parting, we make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the 5 NEC Software Solutions (Ind) Pvt Ltd, Mumbai merits of the dispute, which shall be adjudicated by the AO independently in accordance with law.
In the result, the appeal filed by the assessee is allowed for statistical purposes.