MORNI SAREES PRIVATE LIMITED,INDORE vs. ASST. DIRECTOR OF INCOME TAX, INCOME TAX DEPARTMENT

आदेश / O R D E R

Per Paresh M Joshi, J.M.:

This is an appeal filed by the assessee u/s 253 of the

Income Tax Act 1961 (hereinafter referred to as the “Act” for

sake of brevity) before this Tribunal. The assessee is aggrieved

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by the order bearing Number: ITBA/APL/S/250/2024-

25/1070027154(1) dated 29.10.2024 of Ld. CIT(A) passed u/s

250 of the Act which is hereinafter referred to as the “impugned

order”. The relevant Assessment Year is 2020-21 and the

corresponding previous year period is from 01.04.2019 to

31.03.2020.

2.1 That the assessee had filed ITR for Assessment Year 2020-

21 on 18.12.2020 vide Ack. No. 842860831181220 with the

returned income of Rs.36,19,580/-.

2.2 That the assessee follows mercantile system of accounting

and therefore had made provision for Bonus payable of

Rs.7,19,000/- in his books of accounts as on 31.03.2020.

2.3 That the aforesaid payments were made before the due date

of filing of ITR for Assessment Year 2020-21.

2.4 That in intimation u/s 143(1) dated 23.12.2021

disallowance of bonus payable to employees was made of

Rs.7,19,000/-.

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2.5 That the assessee filed the rectification application before

the CPC u/s 154 on 07.02.2023 for reprocessing of ITR and

rectification of mistake.

2.6 That the rectification order was passed by CPC u/s 154

dated 24.02.2023 in response to above application which was

allowed.

2.7 It is pertinent to note that the assessee has consistently

following the same accounting treatment in the earlier and

subsequent years and that such treatment has been accepted

by CPC in the intimations issued u/s 143(1) of the Act year

after year.

The details of the provision made for bonus payable to

employees are as under:-

S.No. Year Amount of bonus payable – Provision made on 31st March of the relevant F.Y 1 A.Y 2016-17 Rs.8,89,300 2. A.Y 2019-20 Rs.5,58,100 3. A.Y 2021-22 Rs.9,59,000* 4 A.Y 2022-23 Rs.19,82,500 *A.Y 2021-22 under appeal

2.8 That the provision of Bonus payable was made on

31.03.2020 for paying the bonus to the employees as a part of

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incentive in the form of salary the same being not in the nature

of statutory due is outside the purview of Section 43B.

2.9 Therefore the provisions of Section 43B of the Act are clearly

not applicable in case of the assessee.

2.10 The intimation u/s 143(1) of the Act dated 23.12.2021

shows total income provided by tax payer as Rs.36,19,580/-

whereas the revenue has computed as Rs.43,45,100/-. The net

addition comes to Rs.7,25,600/-. The amount of Rs.7,19,000/-

is disallowed as bonus u/s 36 of the Act. Tax payable is

shown as Rs.2,33,580/-. Therefore there was a demand u/s

143(1) intimation dated 23.12.2021 bearing Ack.No.

842860831181220 which is hereinafter referred to as the

“impugned intimation u/s 143(1)” for sake of brevity. The

assessee in turn being aggrieved by the “impugned intimation”

makes a rectification application dated 07.02.2023 in terms of

Section 154 of the Act [Reprocess the Return] and the revenue

by a rectification order u/s 154 of the Act dated 24.02.2023

deletes the aforesaid amount of Rs.7,19,000/- earlier

disallowed as bonus (page 22 of paper book). In brief by an

order u/s 154 of the Act dated 24.02.2023 revenue has

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allowed/withdrawn/deleted the amount of bonus earlier

disallowed. [Total income computed at Rs.36,26,100/- instead of

earlier computed at Rs.43,45,100/-].

2.11 It is also required to be noted and appreciated that on

16.06.2022 [which date is prior to order u/s 154 dated

24.02.2023 (supra)], the assessee being aggrieved by the

“impugned intimation” had also filed “first appeal” in terms of

Section 246A of the Act before Ld. CIT(A) who by the “impugned

order” has dismissed the appeal of the assessee on reasons and

grounds stated therein.

2.12 That the assessee being aggrieved by the “impugned order”

has filed the instant second appeal before us and has raised

following grounds of appeal against the “impugned order” which

are as follows:-

“I. As regards non applicability of provisions of Sec. 36(1)(ii) of I.T. Act, 1961 The Ld. CIT(A) erred in confirming the aforesaid disallowance of Bonus Payable, without appreciating the fact that the appellant had not paid bonus by way of profits or dividend to its employees but had paid the same to employees as part of incentive in the form of salary and therefore the provision of Sec. 36(1)(ii) of I.T. Act, 1961 are not attracted at all and therefore the aforesaid disallowance is arbitrary, unjust and bad in law both on facts and in law. II. As regards non applicability of provisions of Sec. 43B of I.T. Act, 1961

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The Ld. CIT(A) erred in confirming the aforesaid Addition without appreciating the fact that the provisions of section 43 B are not applicable in case of appellant as bonus paid to employees is not covered u/s 43B and therefore the aforesaid disallowance is arbitrary, unjust and bad-in-law both on facts and in law.

III. As regards payment of Bonus of Rs. 7,19,000/- before due date of filing of ITR

Without prejudice to the above, the Ld. CIT(A) erred in confirming the aforesaid disallowance without appreciating the fact that the aforesaid payments had made before the due date of filing of the ITR and therefore the aforesaid disallowance is arbitrary, unjust and bad-in-Law both on facts and in law.

IV. As regards opportunity of personal hearing through video conferencing not provided:

Without Prejudice to the above, the Ld. CIT(A) erred in confirming the aforesaid addition without appreciating the fact that the appellant had specifically and categorically requested for an opportunity of personal hearing through video conferencing and therefore the appeal order passed by Ld. CIT(A) without providing the opportunity of VC is against the principles of natural justice and is also arbitrary, unjust and bad in law both on facts and in law.

V. As regards interest charged u/s 234B & 234C

That the interest charged is arbitrary and erroneous.

VI. That the appellant craves foregoing grounds of appeal leave to add &/or to alter any of the foregoing grounds of appeal as & when necessary”.

3.1 The hearing in the matter took place before this Tribunal on

23.06.2025 when the Ld. AR appearing for and on behalf of the

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assessee briefly narrated the facts of the case as narrated

aforesaid and interalia contended that in view of order u/s 154

dated 24.02.2023 of CPC wherein the “impugned intimation

order” stands modified the “impugned order” of CIT(A)

substantially stands diluted as the disallowance of bonus earlier

made by impugned intimation is now reversed by order u/s 154

dated 24.02.2023 save and except that it was unnecessary for

the Ld. CIT(A) to have inserted Section 36(1)(ii) r.w.s. 43B. The

original disallowance was under Section 36(1)(ii) of bonus as per

impugned intimation order and that Section 43B was nowhere in

picture. Our attention was drawn to following:-

“But in this case, the bonus amount of Rs.7,19,000/- is shown as Bonus payable as on 31/03/2020, which means that the actual payment was not made during the relevant previous year. Hence the deduction is not allowable as per Section 36(1)(ii) r.w.s 43B wherein it is again reiterated that any sum payable by the assessee as an employer shall be allowed only in the previous year in which such sum is paid.

In view of the above, since the bonus of Rs.7,19,000/- was not actually paid during the year, deduction cannot be allowed for the Assessment Year 2020-21. Hence this ground of Appeal is dismissed.”

3.2 Per contra the Ld. DR appearing for and on behalf of the

Revenue contended that in view of order u/s 154 dated

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24.02.2023 [page 21-25] wherein impugned intimation order is

modified u/s 154 by CPC the present appeal has become nearly

infructuous. Since the order u/s 154 dated 24.02.2023 was in

place same ought to have been brought to the notice of Ld.

CIT(A).

4.1 We now have to decide the legality, validity and the

proprietery of the “impugned order” basis records of the case

and rival contentions canvassed before us.

4.2 We have carefully perused the records of the case.

4.3 We are of the considered view that since order u/s 154

dated 24.02.2023 (Page 21-25 of paper book) which was

modified/rectified impugned intimation u/s 143(1) there is hardly

anything more is called for. However since bonus amount is paid

before due date of filing return i.e. Rs.7,02,500/- on 18.08.2020

and Rs.16,500/- on 21.08.2020 for which necessary proof of

bank statement is placed on record (Page 41 & 42 of paper book)

coupled with ledger account of employee showing payment of

Rs.7,19,000/- (page 40 of paper book) the impugned order does

not survive and is set aside. In fact both statement of bank (SBI)

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and so also the ledger account of bonus to employees were filed

and were on record before CIT(A), therefore the Ld. CIT(A) ought

not to have passed the “impugned order” u/s 36(1)(ii) r.w.s.

43B by doing so, he has erred in law.

5.1 In the premises, we set aside the “impugned order” and

allow the appeal of the assessee.

5.2 In result, appeal of the assessee is allowed.

Order pronounced in open court on 24.06.2025.

Sd/- Sd/-

(BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Indore िदनांक / Dated : 24/06/2025 Dev/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore

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