FIVES STEIN INDIA PROJECTS PRIVATE LIMITED,KOLKATA vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 8, KOLKATA

The present appeal has been preferred by the assessee against the order dated 11.08.2021 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).

The brief facts are that the assessee had filed its return of income for the relevant year on 28.09.2010 declaring total income at Rs.4,14,00,347/- under the normal provisions of the Act. In the aforesaid return of income, the assessee had offered suo motu disallowance under section 43B of the Act amounting to Rs.10,024/-, Rs.18,27,770/- and Rs.65,33,395/- towards service tax, bonus and leave encashment respectively on provision basis. In the said return, the assessee had claimed deduction under section 43B of the Act amounting to Rs.5,06,300/-, Rs.15,03,060/- and Rs.66,58,305/- towards gratuity, bonus and leave encashment respectively on payment basis. Subsequently, the assessee noticed that it had made certain inadvertent mistakes while offering suo motu disallowance and claiming deduction under section 43B of the Act. Accordingly, during the course of assessment proceedings under section 143(3) of Fives Stein India Projects (P) Ltd Assessment Year: 2010-11 the Act, the assessee vide letter dated 04.03.2013 submitted before the Ld. Deputy Commissioner of Income Tax, Circle 8, Kolkata (hereinafter referred to as ‘A.O’) that it was entitled to additional claim towards gratuity bonus and leave encashment under section 43B of the Act amounting to Rs.5,43,343/- Rs.17,94, 187/- and Rs.36,94,383/- respectively aggregating to Rs.60,31,913/-. In the assessment order under section 143(3) of the Act dated 31-03-2013 the Assessing Officer did not allow the aforesaid claim of the assessee. In the said order, the Assessing Officer had also not discussed the reasons for rejecting the above additional claim of the assessee. Aggrieved with the above, the assessee preferred an appeal against the aforesaid order under section 143(3) of the Act before the Ld. Commissioner of Income Tax (Appeals) The then Ld. CIT(A) considering the submissions of the assessee admitted the above claims of the assessee raised vide ground nos. 5,6 and 7 of the appeal before him, and principally decided the same in favour of the assessee by holding in para no. 7.5 of the order dated 25.07.2014 that, "the assessee stands prejudiced even after paying due taxes on the amount of provision. The actual payments were not allowed as deduction though the same is allowable as per the express provisions of section 43B of the Act". Further, the Ld. CIT(A) directed the Assessing Officer to allow the claims of the assessee as per law and after carrying out necessary verification as per his satisfaction in respect of gratuity, bonus and leave encashment paid during the year under consideration. Thus ground nos. 5, 6 and 7 of appeal are allowed for statistical purpose.

No appeal has been preferred by the Department against the said order dated 25.07.2014 of the ld. CIT(A). Thereafter, the Assessing Officer passed an order u/s 251 read with section 143(3) of the Act dated 05.09.2014 giving effect to the order of the CIT(A) dated 25.07.2014 wherein the Assessing Officer missed to give effect/relief to the assessee in respect of aforesaid claim u/s 43B of the Act decided by the ld. CIT(A) vide Ground nos.5,6 & 7 of the appeal before him. The assessee again filed a letter dated 10.07.2015 before the Assessing Officer requesting him to grant relief as per the direction of the then ld. CIT(A). However, the Assessing Officer did not pass any further

Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the ld. CIT(A). However, the CIT(A) vide impugned order dated 11.08.2021 also rejected the claim of the assessee in mechanical manner and on flimsy grounds observing that the Assessing Officer has mentioned in the appeal effect order that the same has been passed after necessary verifications. Being aggrieved by the said order of the ld. CIT(A), the assessee has come in appeal before us.

We have considered the rival contentions of ld. representatives of both the parties and gone through the record. We, with a heavy heart, note that the case is a perfect example of a case where the assessee has been a victim of error in the system and apathy on the part of the concerned Income Tax authorities. It is a simple case where the assessee had pleaded that while giving appeal effect to the order of the ld. CIT(A) dated 25.07.2014, the ld. Assessing Officer failed to give effect to the directions given by the ld. CIT(A) in respect of aforesaid claim of deduction u/s 43B of the Act raised vide Ground nos.5,6 & 7 in the appeal before him. A perusal of the order dated 05.09.2014 of the Assessing Officer giving appeal effect shows that the Assessing Officer has given relief/complied the directions in respect of Ground nos.1 to 4 of appeal order. However, there is no mention or discussion about the directions given by the ld. CIT(A) in respect of the aforesaid claim raised vide Ground nos.5,6 & 7 before him. It was a clear-cut case of mistake apparent on record as the Fives Stein India Projects (P) Ltd Assessment Year: 2010-11 Assessing Officer has failed to give full effect to the order of the CIT(A) and failed to comply with the directions given by the ld. CIT(A) in respect of Ground no.5,6 & 7 of the appeal order. However, the Assessing Officer, in a most negligent and mechanical manner, rejected the application of the assessee. Even the CIT(A)/National Faceless Appeal Centre has miserably failed to consider the simple prayer of the assessee and rejected the appeal in a mechanical manner. The assessee thus, has been left to the mercy of the system and has to approach this Tribunal for the simple case that the Assessing Officer may be directed to give appeal effect to the order of the ld. CIT(A). The action of the Assessing Officer, in our view, is not only negligent but contemptuous in nature as he has failed to comply with the directions given by his appellate authority. In view of the above discussion, the appeal of the assessee is hereby allowed and the Assessing Officer is directed to give full appeal effect to the order dated 25.07.2014 and comply with the directions given by the CIT(A) in respect of the aforesaid claim of the assessee by way of a speaking order.

In the result, the appeal of the assessee stands allowed. Kolkata, the 3rd March, 2022. Sd/- Sd/- [Rajesh Kumar] [Sanjay Garg] Accountant Member Judicial Member Dated:03.03.2022. RS Copy of the order forwarded to: 1. Fives Stein India Projects (P) Ltd 2. DCIT, Circle-8, Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR),