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Facts
The assessee filed its return of income with an audit report which contained errors regarding delayed payments of PF & ESI. The auditor incorrectly calculated the disallowance for these delayed payments, and the CPC made an adjustment based on this incorrect figure under Section 143(1).
Held
The Tribunal held that the adjustment made under Section 143(1) was unsustainable because no show-cause notice was issued as required by the proviso to Section 143 of the Act. Verification for such issues can only be done under Section 143(3).
Key Issues
Whether an adjustment made under Section 143(1) is sustainable without issuing a show-cause notice, especially when it involves disputed figures arising from an audit report?
Sections Cited
250, 143(1), 143(3), 143
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
Present for: Appellant by : Shri Siddharth Agarwal, Advocate Respondent by : Shri Arun Kumar Meena, Addl. CIT, Sr. DR Date of Hearing : 05.03.2025 Date of Pronouncement : 05.03.2025 O R D E R Per Bench : This is an appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), Kolkata-27 [hereinafter referred to as “the Ld. CIT(A)”] vide order no. ITBA/APL/S/250/2024- 25/1068899524(1) dated 20.09.2024 passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2021-22.
Shri Siddharth Agarwal, Advocate appeared on behalf of the assessee and Shri Arun Kumar Meena, Addl. CIT, Sr. DR appeared on behalf of the revenue.
It was submitted by the Ld. AR that the assessee had filed his return of income along with the audit report. It was the submission that unfortunately the audit report filed contained some serious errors committed by the auditor which has also been accepted by the auditor in the letter filed before the Ld. CIT(A). It was the submission that in regard to the PF and ESI, the auditor in the audit report has mentioned the figure to be Rs. 27,93,650/- and the paid amount has been shown as nil. It was the submission that the actual delayed payment of PF & ESI is only Rs.2,75,071/-. It was further submitted by the Ld. AR that unfortunately even in the computation of total income, the auditors have mentioned the disallowance for late payment of PF & ESI of Rs.3,36,522/- as against Rs.2,75,071/-. Thus, it was fairly conceded by the Ld. AR that in view of the decision of Hon’ble Supreme Court in the case of Chekmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC), the delayed payment of PF & ESI is admittedly disallowable. It was the submission that however, the mistake was actually of the amount of Rs.27,93,650/- no portion of which was disallowable as the same was made within the due date. It was the prayer that the disallowance may be deleted.
In reply, the Ld. Sr. DR vehemently supported the orders of the Assessing Officer and the Ld. CIT(A). It was the submission that the issue can be restored to the file of the Assessing Officer for verification. It was further submitted that if a mistake has been committed by the auditor, the CPC cannot be put to blame because the CPC has taken the figures from the audit report as provided by the auditor. It was the submission that the orders of the Assessing Officer and the Ld. CIT(A) should be upheld.
We have considered the rival submissions. Obviously, the appeal is against the order passed u/s. 143(1). Consequently, the issues cannot be sent back to the Assessing Officer for verification in so far as the verification can be done in an order u/s. 143(3) of the Act only. Further, a perusal of the intimation issued u/s. 143(1) dated 11.11.2022 shows that no show cause notice has been issued to the assessee as per the requirement of the 1st proviso to section 143 of the Act. This having not been done, we are of the view that the intimation issued u/s. 143(1) is unsustainable and consequently, the adjustment made u/s. 143(1) of the Act is deleted.
In the result, the appeal of the assessee stands allowed.
Order dictated and pronounced in the open court.