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Facts
The assessee's appeal arose from an adjustment made by the CPC under Section 143(1) of the Income Tax Act, amounting to ₹82,37,29,994. This adjustment was based on an error in the tax audit report regarding contingent liabilities. The assessee's initial appeal to the CIT(A) was dismissed due to a delay, which was later condoned by the High Court.
Held
The Tribunal noted that the adjustment was based on an inadvertent error in the tax audit report and that the assessee was not given a proper opportunity to present its case on merits due to the earlier dismissal on grounds of delay. Therefore, in the interest of justice, the Tribunal set aside the issue to the file of the Assessing Officer for fresh adjudication.
Key Issues
Whether the assessee was provided a proper opportunity to present its case on merits, considering the adjustment was based on an erroneous tax audit report and the appeal was initially dismissed on delay.
Sections Cited
143(1), 37
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI PRAKASH CHAND YADAV
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the Addl/JCIT(A)-1, Chandigarh dated 27/03/2024 in APL/S/250/2023-24/1063479425(1) for the assessment year 2021-22.
Before addressing the issue raised by the assessee, it is important to outline the background of the case. The Centralized Processing Center (CPC) made an adjustment under section 143(1) of the Income Tax Act amounting to ₹82,37,29,994.00 only. This adjustment was based on the Page 2 of 4 tax auditor’s report, which stated that the amount represented an expenditure that was not allowable as a deduction under section 37 of the Act.
In response to this adjustment, the assessee filed an appeal before the learned CIT(A) with a delay of 359 days. However, the ld. CIT(A) did not condone the delay. The matter was then taken to the ITAT, which upheld the findings of the ld. CIT(A) through its order dated July 4, 2024.
Subsequently, the assessee approached the Hon’ble Jurisdictional High Court in Tax Appeal No. 275 of 2024. Vide order dated January 24, 2025, the Hon’ble Court condoned the delay in filing the appeal. The relevant extract of the judgment is reproduced below: “4. Learned counsel appearing for the Appellant Assessee is justified in submitting that ordinarily delay in Appeals of the kind needs to be addressed with some amount of leniency inasmuch as, in several Appeals filed by the Revenue, that approach has been adopted by this Court itself, He also adds that after all, condoning delay would not add additional merits to the case of Appellant, be it before this Court or before the Tribunal and that dismissing Appeal on the sole ground of delay would cause heart burn to the Assesses. We agree with this view too. In the above circumstances, the substantial question of law as to justifiability of not condoning delay, needs to he answered in favour of the Assessee & accordingly it is. Therefore, we are of the considered opinion that the delay brooked in filing the first Appeal needs to be condoned and in the peculiar facts of the case, the matter be remitted to the portals of ITAT for consideration of the Appeal on merits”
The learned counsel for the assessee submitted before us that the disallowance under section 143(1) of the Act was made due to an inadvertent mistake in the tax audit report. Specifically, the tax auditor . mistakenly reported certain contingent liabilities amounting to ₹ 82,37,29,994 as being claimed in the profit and loss account, whereas no such claim was actually made. To support this contention, the learned AR referred to the tax audit report and the profit and loss account, demonstrating that the assessee had not claimed these contingent liabilities as a deduction. Additionally, a declaration from the tax auditor was filed, confirming that the contingent liabilities were erroneously reported in the tax audit report as claimed deduction in the profit and loss account but were not claimed in the profit and loss account. Accordingly, the learned AR asserted that the assessee has a strong case on merits.
However, the learned AR argued that the lower authorities had not verified all the relevant facts. Thus, in the interest of justice, the learned AR requested that the matter be remanded to the Assessing Officer (AO) for fresh adjudication in accordance with the law.
On the other hand, the learned Departmental Representative (DR) did not object to the matter being set aside for fresh adjudication.
We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the adjustment under section 143(1) of the Act was based on information furnished in the tax audit report, which was later found to contain errors. CPC makes such adjustments through an automated process without delving into the specific details of the case. In this instance, the tax audit report contained an inadvertent error, which led to the disputed adjustment. The assessee attempted to clarify . this mistake before the appellate authorities but was unable to do so earlier due to the dismissal of the appeal on the grounds of delay. The delay, has been admittedly condoned by the Hon’ble High Court as discussed above and the matter was set aside to the file of the ITAT for fresh adjudication based on merit as per the provisions of law. In light of these circumstances, we are of the opinion that the assessee has not been provided with a proper opportunity to present its case on merits. Therefore, in the interest of justice and fair play, we set aside the issue to the file of the AO for fresh adjudication as per the provisions of the law. As a result, the assessee’s ground of appeal is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in court on 6th day of March, 2025