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Facts
The assessee company filed its return of income which was processed by CPC. CPC made adjustments and disallowances, leading to a higher total income than initially declared. The assessee argued that these disallowances were already made by them in their computation of total income, leading to double taxation.
Held
The Tribunal found that the CPC had committed an arithmetical error by disallowing the same sums twice. One disallowance was made in the initial computation of income (u/s 40A(7) and 40A(9)), and another was made by the CPC during processing. The Tribunal held that this resulted in double addition and was unwarranted.
Key Issues
Whether the CPC committed an error by disallowing sums that were already disallowed by the assessee, leading to double taxation.
Sections Cited
143(1), 40A(7), 40A(9), 43B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President
This appeal is filed by Indian Products Private Limited (the assessee/appellant) for the assessment year 2020-21 against the appellate order passed by the Addl.Jt.CIT(A)-1, Nashik [ld. CIT(A)] dated 30.12.2024 wherein the appeal filed by the assessee against the intimation u/s. 143(1) of the Act dated 24.12.2021 passed by the CPC, Bengaluru was dismissed.
The assessee, aggrieved with the same, has preferred this appeal raising the following grounds of appeal :-
“ 1. The learned Assistant Director of Income Tax, CPC erred in not following the procedure laid down in Proviso to 143(1) requiring the CPC to intimate the assessee of such proposed adjustment.
2. Addition of Rs. 18,24,022/- on account of any sum payable by way of contribution to any provident fund or superannuation fund or any other fund for the welfare of the employees. The learned ADDL/JCIT (A)-1 NASHIK and ACIT, CPC erred in adding the sum of Rs. 18,24,022/- on account of disallowance u/s 43B wherein the appellant had already disallowed the sum of Rs. 18,24,022/- under a different section (i.e., u/s 40A(7).
3. Addition of Rs. 32,58,912/- The learned ADDL/JCIT (A)-1 NASHIK, CPC erred in adding the sum of Rs. 32,58,912/- on account of leave encashment u/s 43B although the sum was disallowed u/s 40A(9).
The learned ADDL/JCIT (A)-1 NASHIK and AO has committed an arithmetical error in making an addition of a sum of Rs. 18,24,022/- and Rs. 32,58,912/- which was already taken in computing the Income from Business disregarding the computation of the appellant thus resulting in double taxation. The sums were already disallowed although under a wrong column.
Any other ground that may be taken during the course of appeal proceedings.”
On reading of the grounds of appeal, it is apparent that assessee is contesting that it has already disallowed Rs.18,24,022 u/s. 43B with respect to contribution employees’ welfare fund and a sum of Rs.32,58,912 on account of leave encashment also u/s. 43B and therefore the same were once again disallowed by the CPC resulted into double addition. Such double addition is unwarranted.
4. The facts of the case show that assessee is a private limited company, who filed return of income on 14.2.2021 at a total income of Rs.1,01,26,550. The return of income was processed by intimation on 24.12.2021 wherein total income of the assessee was computed at Rs.1,80,75,340. The difference is in the computation of business income. According to Annexure attached to the intimation u/s. 143(1) ‘Other Information’ at sl.no.9, the assessee disallowed Rs.18,24,022 and Rs.32,58,912, the total sum disallowed u/s. 40A of Rs.50,82,934. Even same disallowance was also computed in 143(1) intimation, however at sl.no.11 of the Annexure, once again CPC disallowed a total sum of Rs.50,82,934 under col. 11(b) as well as 11(f). There is in fact, double disallowance of Rs.50,82,934.
5. Aggrieved with the same, the assessee preferred appeal before the CIT(Appeals) wherein the above submissions was made that assessee has already disallowed the above sum which was once again disallowed in the computation of income. The ld. CIT(Appeals) dismissed the appeal of the assessee, without looking at the grievance of the assessee. Against this, the assessee is in appeal before us.
The ld. AR filed written submissions and the only submission is that the ld. CPC has committed arithmetical error in making double addition of a sum already disallowed in the income tax return which has resulted
into double addition. A detailed paperbook of 217 pages is also filed which is mostly the income tax return and intimation u/s. 143(1) only.
The ld. DR supported the order of ld. lower authorities.
We have carefully considered the rival contentions and perused the order of ld. lower authorities. We find that assessee has a sum of Rs.18,24,022 which is provision for payment of gratuity u/s. 40A(7) which was already disallowed by the assessee in the computation of total income at sl.No.9(c) of the income tax return. The assessee has also disallowed Rs.32,58,912 u/s. 40A(9) at sl.no.9(d) of the income tax return. Thus in the income tax return, the assessee disallowed total sum of Rs.50,82,934. While processing the return, the CPC retained disallowance at sl.no.9(c) & 9(d) and further the same amount was once again disallowed at sl.no.11(b) & 11(f). So instead of total disallowance of Rs.50,82,934, which is accepted by the assessee, the CPC made double disallowance of Rs.101,65,868. Thus, there is a double addition of Rs.50,82,934. The ld. CIT(Appeals) could not notice the simple error and confirmed the order of the ld. CPC. We find that there is double disallowance of the same items which were already by the assessee in its computation of total income and therefore there could not have been disallowance once again of the same item. Accordingly allowing ground No.4 of the appeal of the assessee, we direct the ld. AO to delete the disallowance of double addition of Rs.50,82,934 and reverse the order of the ld. CIT(A). Thus, ground No.4 of the appeal is allowed.
In view of our decision on ground No.4, ground nos. 1 to 3 of the appeal of the assessee does not require any adjudication, hence these are dismissed.
In the result, the appeal by the assessee is partly allowed.
Pronounced in the open court on this 20th day of May, 2025.