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Facts
The assessee created a provision for leave encashment of ₹32,98,103 and paid ₹3,80,401/- for prior years' leave encashment, which was self-disallowed under Section 43B. The AO (CPC), while processing the return under Section 143(1), added the paid amount of ₹3,80,401/- to the assessee's income, which was confirmed by the Ld. CIT(A).
Held
The Tribunal found that the assessee had already adjusted the ₹3,80,401/- paid towards prior years' leave encashment in its computation of income. It held that the AO (CPC) had no jurisdiction to disallow an actual payment made against leave encashment for prior years. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition.
Key Issues
Whether the AO (CPC) has jurisdiction to disallow actual payment of leave encashment made during the year for prior years when the assessee had already accounted for it in its income computation.
Sections Cited
43B, 143(1)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals) ADDl/JCIT (A)-2, Gurugram(hereinafter referred to as the “Ld. CIT(A)”] dated 23.01.2025 for the AY 2022-23.
The only issue raised in various grounds of appeal is against the confirmation of disallowance of ₹ 3,80,401/- by ld. CIT (A) as made by the ld. AO (CPC) in the order passed under section 143(1) in respect of leave and encashment paid.
4. In the appellate proceedings, the ld. CIT (A) also confirmed the order of the Learner AO by holding that assessee himself has shown in the Tax Audit Report in Form 3CD at serial number 26B(b), an amount of ₹32,98,103/- was not paid on or before the stipulated date. However, whereas the amount disallowed under Section 143Bof the Act was only ₹29,17, 702.The ld. CIT (A) further noted that assessee has not submitted any documenting evidences in the form of challans or books of accounts or any other relevant documents regarding payments of Leave encashment before filing the return of income. Therefore, the ld. AO (CPC) has correctly made the addition.
After hearing the rival contentions and perusing the materials available on record, we find that the assessee has categorically sated in the computation of income attached to the ITR that out of the total provisions created during the year of ₹32,98,103/-, the assessee has adjusted ₹3,80,401/- on account of payment of leave encashment during the year in respect of prior years. Therefore, we find merit in the contention of the assessee that the ld. AO / CPC has no
In the result, the appeal of the assessee is allowed
Order pronounced in the open court on 26.08.2025.