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Facts
The assessee, Kalamandir Jewellers Ltd., engaged in jewellery business, incurred significant interest expenditure and advanced interest-free loans totalling ₹8,45,15,239/- to two entities. The Assessing Officer disallowed ₹26,18,739/- as proportionate interest under section 36(1)(iii), presuming diversion of borrowed funds for non-business purposes. Additionally, the assessee challenged an adjustment of ₹93,25,310/- made by the Centralised Processing Centre under section 143(1) for statutory dues, which the CIT(A) refused to adjudicate on merits.
Held
The Tribunal remanded both issues back to the Assessing Officer. For the interest disallowance, the AO must verify if interest was actually charged and offered to tax for Sidhdev Trading LLP and whether advances were made from the assessee's own interest-free funds. For the section 143(1) adjustment concerning statutory dues under section 43B, the CIT(A)'s refusal to adjudicate was deemed incorrect, and the AO was directed to verify the allowability of payments on merits.
Key Issues
1. Whether proportionate interest disallowance under section 36(1)(iii) on interest-free advances is justified, considering claims of own funds usage or interest charged. 2. Whether the CIT(A) erred in not adjudicating on merits the adjustment under section 143(1) related to statutory dues when a 143(3) assessment had been framed.
Sections Cited
36(1)(iii), 37, 143(1), 143(3), 43B, 139(1), 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SURAT BENCH “DB SURAT
Before: SHRI SANDEEP GOSAIN & SHRI OM PRAKASH KANT
This appeal by the assessee is directed against order dated 30.08.2024 passed by the Ld. Commissioner of Income-tax (Appeals)-National Faceless Appeal Centre- Delhi [in short ‘the Ld.CIT’] for assessment year 2020-21, raising following grounds:-
“1. In the facts and circumstances of the case as well as in law, the Ld. Commissioner of Income Tax (Appeals) NFAC has erred in confirming addition amounting to Rs. 26,18,739/- u/s.36(1)(iii) of the Act on account of proportionate disallowance of interest at the rate of 10%.
In the facts and circumstances of the case as 2. In the facts and circumstances of the case as well as in law, the Ld. well as in law, the Ld. Commissioner of Income Tax (Appeals) Commissioner of Income Tax (Appeals)-NFAC has erred in confirming the NFAC has erred in confirming the additions without considering the fact that appellant had interest free additions without considering the fact that appellant had interest free additions without considering the fact that appellant had interest free fund to advance. The same was proved before Ld. AO and Ld. CIT (A) fund to advance. The same was proved before Ld. AO and Ld. CIT (A) fund to advance. The same was proved before Ld. AO and Ld. CIT (A) with supporting evidenc with supporting evidence.
In the facts and circumstances of the case as well as in law, the Ld. 3. In the facts and circumstances of the case as well as in law, the Ld. 3. In the facts and circumstances of the case as well as in law, the Ld. Commissioner of Income Tax (Appeals) Commissioner of Income Tax (Appeals)-NFAC has erred in rejecting the NFAC has erred in rejecting the ground raised
In relation to addition of Rs. 93,25, 130/ ground raised In relation to addition of Rs. 93,25, 130/- as consequence as consequence to increase of income vide intimation to increase of income vide intimation order u/s 143(1) in Assessment order u/s 143(1) in Assessment Order, despite of the fact that Ld. Assessing officer while computing Order, despite of the fact that Ld. Assessing officer while computing Order, despite of the fact that Ld. Assessing officer while computing total income increased the income of the appellant on the basis of total income increased the income of the appellant on the basis of total income increased the income of the appellant on the basis of intimation order u/s 143(1). The appellant was not in receipt of any intimation order u/s 143(1). The appellant was not in receipt of any intimation order u/s 143(1). The appellant was not in receipt of any Show Cause Notice/ Show Cause Notice/intimation till passing of the order u/s 143(3) of the intimation till passing of the order u/s 143(3) of the Act.
4. The appellant craves to leave, to add, to amend and/or to alter any of 4. The appellant craves to leave, to add, to amend and/or to alter any of 4. The appellant craves to leave, to add, to amend and/or to alter any of the ground of appeal
, if need be.” the ground of appeal
, if need be 2. Briefly stated, the facts of the case are that the assessee Briefly stated, the facts of the case are that the assessee Briefly stated, the facts of the case are that the assessee company is engaged in company is engaged in the business of manufacture and retail sale the business of manufacture and retail sale of jewellery. For the year under consideration, the return of income of jewellery. For the year under consideration, the return of income of jewellery. For the year under consideration, the return of income filed by the assessee was selected for scrutiny. Statutory notices filed by the assessee was selected for scrutiny. Statutory notices filed by the assessee was selected for scrutiny. Statutory notices under the Income-tax Act, 1961 (hereinafter referred to as “the Act”) tax Act, 1961 (hereinafter referred to as “the Act”) tax Act, 1961 (hereinafter referred to as “the Act”) were duly issued and complied with. duly issued and complied with.
2.1 During the course of scrutiny proceedings, the learned During the course of scrutiny proceedings, the learned During the course of scrutiny proceedings, the learned Assessing Officer noticed that the assessee had debited interest Assessing Officer noticed that the assessee had debited interest Assessing Officer noticed that the assessee had debited interest expenditure amounting to expenditure amounting to ₹8,23,97,819/- in its profit and loss in its profit and loss account. The Assessing Officer further account. The Assessing Officer further observed that the assessee observed that the assessee had advanced interest had advanced interest-free loans aggregating to free loans aggregating to ₹8,45,15,239/-, comprising ₹6,85,42,499/ 6,85,42,499/- to M/s Vaipan Business Private Limited to M/s Vaipan Business Private Limited and ₹1,59,72,740/- to M/s Sidhdev Trading LLP. Being of the view to M/s Sidhdev Trading LLP. Being of the view to M/s Sidhdev Trading LLP. Being of the view that borrowed funds had been diver that borrowed funds had been diverted for non-business purposes, business purposes, the Assessing Officer issued a show the Assessing Officer issued a show-cause notice calling upon the cause notice calling upon the assessee to explain why proportionate interest expenditure should assessee to explain why proportionate interest expenditure should assessee to explain why proportionate interest expenditure should not be disallowed.
2.2 The explanation tendered by the assessee was not found to be The explanation tendered by the assessee was not found to be The explanation tendered by the assessee was not found to be satisfactory. Accordingly, the Assessing Officer, in the assessment ory. Accordingly, the Assessing Officer, in the assessment ory. Accordingly, the Assessing Officer, in the assessment order passed under section 143(3) of the Act dated 25.09.2022, order passed under section 143(3) of the Act dated 25.09.2022, order passed under section 143(3) of the Act dated 25.09.2022, disallowed proportionate interest at the rate of 10% per annum, disallowed proportionate interest at the rate of 10% per annum, disallowed proportionate interest at the rate of 10% per annum, resulting in a disallowance of resulting in a disallowance of ₹26,18,739/-.
3. Aggrieved, the assesse Aggrieved, the assessee preferred an appeal before the learned e preferred an appeal before the learned Commissioner of Income Commissioner of Income-tax (Appeals), raising two principal tax (Appeals), raising two principal grievances. First, the assessee challenged the disallowance of grievances. First, the assessee challenged the disallowance of grievances. First, the assessee challenged the disallowance of interest amounting to interest amounting to ₹26,18,739/- made out of the interest on made out of the interest on borrowed funds under section borrowed funds under section 36(1)(iii) read with section 37 of the 36(1)(iii) read with section 37 of the Act. Second, the assessee objected to the adjustment of Act. Second, the assessee objected to the adjustment of Act. Second, the assessee objected to the adjustment of ₹93,25,310/- made by the Centralised Processing Centre while made by the Centralised Processing Centre while made by the Centralised Processing Centre while processing the return under section 143(1) of the Act, contending processing the return under section 143(1) of the Act, contending processing the return under section 143(1) of the Act, contending that the Assessing Officer, while that the Assessing Officer, while framing the assessment under framing the assessment under section 143(3), mechanically adopted the income processed under section 143(3), mechanically adopted the income processed under section 143(3), mechanically adopted the income processed under section 143(1) without independently examining the validity of the section 143(1) without independently examining the validity of the section 143(1) without independently examining the validity of the said adjustment.
3.1 The learned CIT(A), however, rejected both contentions of the The learned CIT(A), however, rejected both contentions of the The learned CIT(A), however, rejected both contentions of the assessee and affirmed the order of the Assessing Officer. Aggrieved assessee and affirmed the order of the Assessing Officer. Aggrieved assessee and affirmed the order of the Assessing Officer. Aggrieved by the said order, the assessee is in appeal before the Tribunal on by the said order, the assessee is in appeal before the Tribunal on by the said order, the assessee is in appeal before the Tribunal on the grounds reproduced hereinabove. the grounds reproduced hereinabove.
Before us, the le Before us, the learned counsel for the assessee placed on arned counsel for the assessee placed on record a paper book comprising pages 1 to 43. Grounds Nos. 1 and record a paper book comprising pages 1 to 43. Grounds Nos. 1 and record a paper book comprising pages 1 to 43. Grounds Nos. 1 and 2 of the appeal relate to the disallowance of 2 of the appeal relate to the disallowance of ₹26,18,739/ 26,18,739/- made by the Assessing Officer under section 36(1)(iii) of the Act by way of the Assessing Officer under section 36(1)(iii) of the Act by way of the Assessing Officer under section 36(1)(iii) of the Act by way of proportionate disallowance of interest at the rate of 10% per isallowance of interest at the rate of 10% per isallowance of interest at the rate of 10% per annum.
4.1 We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the material available on record. It is an undisputed position that material available on record. It is an undisputed position that material available on record. It is an undisputed position that during the year under consideration the assessee incurred interest during the year under consideration the assessee incurred interest during the year under consideration the assessee incurred interest expenditure amounting to diture amounting to ₹8,23,97,819/-, which was claimed as , which was claimed as deduction on the ground that the borrowed funds were utilised for deduction on the ground that the borrowed funds were utilised for deduction on the ground that the borrowed funds were utilised for the purposes of its business. It was, however, noticed by the the purposes of its business. It was, however, noticed by the the purposes of its business. It was, however, noticed by the Assessing Officer that the assessee had advanced interest-free loans Assessing Officer that the assessee had advanced interest Assessing Officer that the assessee had advanced interest aggregating to ₹8,45,15,239/ 8,45,15,239/-, comprising ₹6,85,42,499/ 6,85,42,499/- to M/s Vaipan Business Private Limited and Vaipan Business Private Limited and ₹1,59,72,740/ 1,59,72,740/- to M/s Sidhdev Trading LLP. Sidhdev Trading LLP.
4.2 The explanation of the assessee was that the aforesaid The explanation of the assessee was that the aforesaid The explanation of the assessee was that the aforesaid advances were made for business purposes and that both the advances were made for business purposes and that both t advances were made for business purposes and that both t entities were service providers belonging to the same group, entities were service providers belonging to the same group, entities were service providers belonging to the same group, rendering services such as rendering services such as legal services, strategic business legal services, strategic business planning, Business management, Consultancy related to call planning, Business management, Consultancy related to call planning, Business management, Consultancy related to call options for purchases and sales, taxation advisory and advisory in options for purchases and sales, taxation advisory and options for purchases and sales, taxation advisory and relation to proposed fund tion to proposed fund-raising activities etc.. It was further . It was further contended that the assessee had proposed to raise funds through contended that the assessee had proposed to raise funds through contended that the assessee had proposed to raise funds through the stock market, for which the services of the said entities were the stock market, for which the services of the said entities were the stock market, for which the services of the said entities were engaged; however, owing to the Covid engaged; however, owing to the Covid-19 pandemic, the process 19 pandemic, the process was abandoned and, consequently, the services could not be as abandoned and, consequently, the services could not be as abandoned and, consequently, the services could not be availed. It was also submitted that the advances were subsequently availed. It was also submitted that the advances were subsequently availed. It was also submitted that the advances were subsequently repaid in the succeeding assessment years and that interest had repaid in the succeeding assessment years and that interest had repaid in the succeeding assessment years and that interest had been charged in earlier years, though not during the year under been charged in earlier years, though not during the year under been charged in earlier years, though not during the year under consideration on account of prevailing business conditions. The sideration on account of prevailing business conditions. The sideration on account of prevailing business conditions. The assessee further claimed that the advances were made out of its assessee further claimed that the advances were made out of its assessee further claimed that the advances were made out of its own interest-free funds, free funds, only constitute about 5% of owned fund only constitute about 5% of owned fund and which were substantially in excess of the amounts advanced. In and which were substantially in excess of the amounts advanced. and which were substantially in excess of the amounts advanced. support of this contention, the assessee placed reliance on its support of this contention, the assessee placed reliance on its support of this contention, the assessee placed reliance on its financial statements showing owned funds aggregating to ₹162.92 financial statements showing owned funds aggregating to financial statements showing owned funds aggregating to crores, far exceeding the advances of crores, far exceeding the advances of ₹8.45 crores. 8.45 crores. The relevant details of funds deployment details of funds deployment submitted by the assessee and the assessee and reproduced by the AO is extracted as under: duced by the AO is extracted as under:
Sr No. Particulars Amount Amount Owned Fund Share Capital (Brought by shareholders) Share Capital (Brought by shareholders) Rs. 1,25,52,630/ Rs. 1,25,52,630/- Reserve and Surplus (Accumulated Profit Reserve and Surplus (Accumulated Profit Rs. 161,66,73,241/ Rs. 161,66,73,241/- and Loss of account from the incorporation and Loss of account from the incorporation of company) Total Rs. 162,92,25,871/ Rs. 162,92,25,871/- Loans Advances Given Loans Advances Given M/s. Vaipan Business Pvt Ltd M/s. Vaipan Business Pvt Ltd Rs.6,85,42,499/- Rs.6,85,42,499/
M/s. Sidhdev Trading LLP M/s. Sidhdev Trading LLP Rs. 1,59,72,740/- Rs. 1,59,72,740/ Total Rs.8,45,15,239/- Rs.8,45,15,239/ 4.3 The assessee also explained before the Ld. CIT(A) by way of the The assessee also explained before the Ld. CIT(A) by way of the The assessee also explained before the Ld. CIT(A) by way of the funds and no loan bank statement that advances bank statement that advances were out of own funds and no loan was taken for advancing advancing the said loans.
4.4 In so far as M/s Sidhdev Trading LLP is concerned, the far as M/s Sidhdev Trading LLP is concerned, the far as M/s Sidhdev Trading LLP is concerned, the assessee specifically contended assessee specifically contended before the Ld. CIT(A) that before the Ld. CIT(A) that interest amounting to ₹10,82,822/ 10,82,822/- at the rate of 10% per annum had, in at the rate of 10% per annum had, in fact, been charged and offered to tax during the year under fact, been charged and offered to tax during the year under fact, been charged and offered to tax during the year under consideration and, therefore, consideration and, therefore, there cannot be a question of there cannot be a question of considering the said sums for again for disallowance u/s 36(1)(iii) of considering the said sums for again for disallowance u/s 36(1)(iii) of considering the said sums for again for disallowance u/s 36(1)(iii) of the Act.
4.5 It was also submitted that interest expenses had been It was also submitted that interest expenses had been It was also submitted that interest expenses had been incurred towards loan taken from towards loan taken from the bank for business the bank for business whereas the company has also also not paid interest towards the unsecured not paid interest towards the unsecured loans taken by the directors and the shareholders loans taken by the directors and the shareholders.
4.6 The learned CIT(A), ho The learned CIT(A), however, rejected the submissions of the wever, rejected the submissions of the assessee and confirmed the disallowance by largely reiterating the assessee and confirmed the disallowance by largely reiterating the assessee and confirmed the disallowance by largely reiterating the findings of the Assessing Officer. While the assessee relied upon the findings of the Assessing Officer. While the assessee relied upon the findings of the Assessing Officer. While the assessee relied upon the decisions of the Hon’ble Bombay High Court in decisions of the Hon’ble Bombay High Court in Commissioner of Commissioner of Income-tax Vs. Reliance Utilities & Power Ltd. 178 taxman 135 iance Utilities & Power Ltd. 178 taxman 135 iance Utilities & Power Ltd. 178 taxman 135 (Bombay) and HDFC Bank Limited vs. DCIT (ITA No. 1763 of 2016). HDFC Bank Limited vs. DCIT (ITA No. 1763 of 2016). HDFC Bank Limited vs. DCIT (ITA No. 1763 of 2016).
The learned CIT(A) placed reliance on the decisions of the Hon’ble he learned CIT(A) placed reliance on the decisions of the Hon’ble he learned CIT(A) placed reliance on the decisions of the Hon’ble Punjab & Haryana High Court in Punjab & Haryana High Court in the case of Commissioner Of the case of Commissioner Of Income Tax-I vs Abhis I vs Abhishek Industries Ltd (P&H) 286 ITR hek Industries Ltd (P&H) 286 ITR and the Hon’ble Madras High Court in of K. Somasundaram and Brothers Hon’ble Madras High Court in of K. Somasundaram and Brothers Hon’ble Madras High Court in of K. Somasundaram and Brothers Vs. CIT 238 ITR 939 (Madras) dealing with cases of mixed funds. Vs. CIT 238 ITR 939 (Madras) dealing with cases of mixed funds. Vs. CIT 238 ITR 939 (Madras) dealing with cases of mixed funds.
Upon careful consideration, we are of the view that the Upon careful consideration, we are of the view that the Upon careful consideration, we are of the view that the assessee has failed to substantiate, by cogent documentary assessee has failed to substantiate, by cogent documentary assessee has failed to substantiate, by cogent documentary evidence, that the advances made to M/s Vaipan Business Private evidence, that the advances made to M/s Vaipan Business Private evidence, that the advances made to M/s Vaipan Business Private Limited were in the nature of business advances. The loans and Limited were in the nature of business advances. Limited were in the nature of business advances. advances were given in the earlier years and in those year assessee given in the earlier years and in those year assessee given in the earlier years and in those year assessee has already charged interest but in the year under consideration has already charged interest but in the year under consideration has already charged interest but in the year under consideration only assessee has not charged any interest. only assessee has not charged any interest. The contention of the The contention of the assessee that advances were for rendering service in relation to assessee that advances were for rendering service in relation to assessee that advances were for rendering service in relation to proposed raising of the funds, but the assessee has not ed raising of the funds, but the assessee has not ed raising of the funds, but the assessee has not substantiate this claim by way of any documentary evidences. No substantiate this claim by way of any documentary evidences. substantiate this claim by way of any documentary evidences. material has been placed on record to demonstrate that any material has been placed on record to demonstrate that any material has been placed on record to demonstrate that any services were actually rendered by the said party during the year services were actually rendered by the said party during the year services were actually rendered by the said party during the year under consideration or that the on on or that the advances or that the advances advances were were made in were made made in in consideration thereof. The mere assertion that the recipient entities consideration thereof. The mere assertion that the recipient entities consideration thereof. The mere assertion that the recipient entities were engaged in providing certain services is insufficient to were engaged in providing certain services is insufficient to were engaged in providing certain services is insufficient to establish establish establish commercial commercial commercial expediency, expediency, expediency, particularly particularly particularly when when when no no no corresponding evidence of service corresponding evidence of services availed is forthcoming. s availed is forthcoming.
5.1 However, with regard to M/s Sidhdev Trading LLP, the assessee However, with regard to M/s Sidhdev Trading LLP, the assessee However, with regard to M/s Sidhdev Trading LLP, the assessee has specifically claimed that interest of has specifically claimed that interest of ₹10,82,822/ 10,82,822/- was duly charged and offered to tax during the relevant year. If this claim is charged and offered to tax during the relevant year. If this claim is charged and offered to tax during the relevant year. If this claim is factually correct, then, to th factually correct, then, to that extent, no further disallowance under at extent, no further disallowance under section 36(1)(iii) of the Act can be sustained, as it would result in section 36(1)(iii) of the Act can be sustained, as it would result in section 36(1)(iii) of the Act can be sustained, as it would result in double disallowance. This aspect requires factual verification and if double disallowance. This aspect requires factual verification double disallowance. This aspect requires factual verification same is found to be correct then same is found to be correct then corresponding disallowance of disallowance of Rs. 10,82,822/- is liable to deleted is liable to deleted.
5.2 Further, the claim of the assessee that the advances were Further, the claim of the assessee that the advances were Further, the claim of the assessee that the advances were made entirely out of its own interest made entirely out of its own interest-free funds also requires free funds also requires verification with reference to the financial statements and fund flow, verification with reference to the financial statements and fund flow, verification with reference to the financial statements and fund flow, in the light of the settled legal in the light of the settled legal position laid down by the Hon’ble position laid down by the Hon’ble Supreme Court in Supreme Court in Reliance Utilities & Power Ltd. (supra) Reliance Utilities & Power Ltd. (supra) and reiterated in HDFC Bank Ltd. HDFC Bank Ltd. (supra), that where interest , that where interest-free funds are available in excess of the advances, a presumption arises that are available in excess of the advances, a presumption arises that are available in excess of the advances, a presumption arises that such advances are made such advances are made out of own funds.
5.3 Accordingly, in the interests of justice, we restore the issue to Accordingly, in the interests of justice, we restore the issue to Accordingly, in the interests of justice, we restore the issue to the file of the Assessing Officer for the limited purpose of verifying: the file of the Assessing Officer for the limited purpose of verifying: the file of the Assessing Officer for the limited purpose of verifying: (i) whether interest of (i) whether interest of ₹10,82,822/- was in fact charged and offered was in fact charged and offered to tax in respect of the a to tax in respect of the advance to M/s Sidhdev Trading LLP; and dvance to M/s Sidhdev Trading LLP; and (ii) whether the advances were made out of the assessee’s own (ii) whether the advances were made out of the assessee’s own (ii) whether the advances were made out of the assessee’s own interest-free funds, in accordance with the aforesaid judicial free funds, in accordance with the aforesaid judicial free funds, in accordance with the aforesaid judicial principles.
5.4 If the claims of the assessee are found to be correct upon If the claims of the assessee are found to be correct upon If the claims of the assessee are found to be correct upon verification, the corresponding disallowance shall be deleted to that corresponding disallowance shall be deleted to that corresponding disallowance shall be deleted to that extent. The Assessing Officer shall confine the enquiry strictly to the extent. The Assessing Officer shall confine the enquiry strictly to the extent. The Assessing Officer shall confine the enquiry strictly to the above limited aspects and decide the issue in accordance with law above limited aspects and decide the issue in accordance with law above limited aspects and decide the issue in accordance with law after affording reasonable opportunity of being heard to the after affording reasonable opportunity of being heard to the after affording reasonable opportunity of being heard to the assessee.
5.5 The ground No. 1 and 2 of the appeal of the assessee are The ground No. 1 and 2 of the appeal of the assessee are The ground No. 1 and 2 of the appeal of the assessee are allowed for statistical purpose. allowed for statistical purpose.
Ground No. 3 of the appeal relates to the adjustment made under Ground No. 3 of the appeal relates to the adjustment made under Ground No. 3 of the appeal relates to the adjustment made under section 143(1) of the Act in respect of disallowance under section section 143(1) of the Act in respect of disallowance under section section 143(1) of the Act in respect of disallowance under section 43B thereof.
6.1 Before us, the learned counsel for the assessee submitted that Before us, the learned counsel for the assessee submitted that Before us, the learned counsel for the assessee submitted that while processing the return of income under section 143(1) of the while processing the return of income under section 143(1) of the while processing the return of income under section 143(1) of the Act, the Centralised Processing Centre (CPC) had made an Act, the Centralised Processing Centre (CPC) had made an Act, the Centralised Processing Centre (CPC) had made an adjustment of ₹93,25,310/ 93,25,310/- on the basis of Clause 26 of the Tax on the basis of Clause 26 of the Tax Audit Report furnished in Form No. 3CB. It was contended that the Report furnished in Form No. 3CB. It was contended that the Report furnished in Form No. 3CB. It was contended that the said amount represented statutory dues and taxes relating to said amount represented statutory dues and taxes relating to said amount represented statutory dues and taxes relating to employees’ salaries, which had been paid on or before the due date employees’ salaries, which had been paid on or before the due date employees’ salaries, which had been paid on or before the due date of filing of return under section 139(1) of the Act, as extended up to of filing of return under section 139(1) of the Act, as extended up of filing of return under section 139(1) of the Act, as extended up 31.01.2021 for the relevant assessment year. It was further 31.01.2021 for the relevant assessment year. It was further 31.01.2021 for the relevant assessment year. It was further submitted that the amounts relating to Employees’ State Insurance submitted that the amounts relating to Employees’ State Insurance submitted that the amounts relating to Employees’ State Insurance and Provident Fund were also paid within the due dates prescribed and Provident Fund were also paid within the due dates prescribed and Provident Fund were also paid within the due dates prescribed under the respective statutes. The details of such payments, as under the respective statutes. The details of such payments, under the respective statutes. The details of such payments, extracted by the Assessing Officer, are placed on record. For ready extracted by the Assessing Officer, are placed on record. extracted by the Assessing Officer, are placed on record. refrence same is extracted extracted as under:
Sr Nature of Liability or Nature of Liability or Amount Actual Date Due Date of Due Date of Amount No. of Payment Payment as Payment as of per law per law Payment 1. CGST Payable 15,61,867 15.06.2020 31.01.2021 31.01.2021 14,60,154 * 2. Employees Employees State State 1,69,962 14.04.2020 15.07.2020 15.07.2020 1,69,962 Insurance Corporation Insurance Corporation ** 3. Professional Tax 1,53,350 16.06.2020 31.01.2021 31.01.2021 1,21,768 4. Provident Fund 8,38,155 03.04.2020 15.05.2020 15.05.2020 8,38,155 *** 5. SGST Payable 30,05,789 15.06.2020 31.01.2021 31.01.2021 29,04,076 6. TDS Payable 35,96,187 29.04.2020 31.01.2021 31.01.2021 35,82,318 Total 93,25,310 90,76,433 6.2 The Ld. Counsel for the assessee submitted that in the said Ld. Counsel for the assessee submitted that in the said Ld. Counsel for the assessee submitted that in the said assessment year , the assessment year , the due date the filing of return u/s 139 of the due date the filing of return u/s 139 of the Act was extended up upto 31.01.2021 and therefore the payment of to 31.01.2021 and therefore the payment of taxes u/s 43B of the Act taxes u/s 43B of the Act was within the period of due date of filing period of due date of filing of the return. Regarding the egarding the Employee State Insurance Corporation Employee State Insurance Corporation (ESIC) and Provident Fund (PF) vident Fund (PF) was claimed that same were claimed that same were also paid within the prescribed prescribed due date relevant statues . due date relevant statues . The learned CIT(A), however, declined to adjudicate the issue on merits and CIT(A), however, declined to adjudicate the issue on merits and CIT(A), however, declined to adjudicate the issue on merits and rejected the ground primarily on the reasoning that the assessee rejected the ground primarily on the reasoning that the assessee rejected the ground primarily on the reasoning that the assessee ought to have sought rectification of the intimation issued under ought to have sought rectification of the intimation issued under ought to have sought rectification of the intimation issued under section 143(1) of the Act by filing an applicatio section 143(1) of the Act by filing an application under section 154 n under section 154 thereof. The relevant finding of ld CIT(A) is reproduced relevant finding of ld CIT(A) is reproduced relevant finding of ld CIT(A) is reproduced as under: “The appellant assessee in its submissions have stated that "On The appellant assessee in its submissions have stated that "On The appellant assessee in its submissions have stated that "On perusal of intimation order, it is being seen that CPC had made perusal of intimation order, it is being seen that CPC had made perusal of intimation order, it is being seen that CPC had made addition / adjustment of Rs.93,25,310/ addition / adjustment of Rs.93,25,310/- on account of amount n account of amount debited to profit and loss account of the previous but disallowable debited to profit and loss account of the previous but disallowable debited to profit and loss account of the previous but disallowable u/s.43B of the Act. No intimation or show u/s.43B of the Act. No intimation or show-cause had been cause had been received from the CPC with respect to said addition / adjustment received from the CPC with respect to said addition / adjustment received from the CPC with respect to said addition / adjustment to be made in the return of income filed by th to be made in the return of income filed by the Appellant company. e Appellant company.
The appellant assessee itself stated that at first it did not get the The appellant assessee itself stated that at first it did not get the The appellant assessee itself stated that at first it did not get the Intimation order u/s 143(1) but after the grievance application the Intimation order u/s 143(1) but after the grievance application the Intimation order u/s 143(1) but after the grievance application the appellant assessee company got the order us/ 143(1). appellant assessee company got the order us/ 143(1). appellant assessee company got the order us/ 143(1). This appellate authority in the view that is This appellate authority in the view that is appellant assessee appellant assessee disagree with the adjustments made by the CPC/computerized disagree with the adjustments made by the CPC/computerized disagree with the adjustments made by the CPC/computerized system, then the appellant assessee can file an online rectification system, then the appellant assessee can file an online rectification system, then the appellant assessee can file an online rectification application under Section 154(1) to correct the errors in the Section application under Section 154(1) to correct the errors in the Section application under Section 154(1) to correct the errors in the Section 143(1). The appellant assessee has als The appellant assessee has also not provided any proof that o not provided any proof that appellant assessee has raised any objection to the JAO regarding appellant assessee has raised any objection to the JAO regarding appellant assessee has raised any objection to the JAO regarding the wrong adjustments made by the CPC/computerized system. the wrong adjustments made by the CPC/computerized system. the wrong adjustments made by the CPC/computerized system. This appeal of the appellant assessee before this appellate This appeal of the appellant assessee before this appellate This appeal of the appellant assessee before this appellate authority is against the order u/s 143(3). authority is against the order u/s 143(3). dated 25.09.2022 but dated 25.09.2022 but the appellant assessee is pressing this ground relation to addition the appellant assessee is pressing this ground relation to addition the appellant assessee is pressing this ground relation to addition of Rs 93,25,130/ of Rs 93,25,130/- as consequence of increase in income vide as consequence of increase in income vide Intimation u/s 143(1). The correct approach for the appellant Intimation u/s 143(1). The correct approach for the appellant Intimation u/s 143(1). The correct approach for the appellant assessee was to file a rectification applica assessee was to file a rectification application u/s 154 of the tion u/s 154 of the income tax act 1961. income tax act 1961. So, this ground of the appeal is hereby rejected however the So, this ground of the appeal is hereby rejected however the So, this ground of the appeal is hereby rejected however the appellant assessee is free to file an application u/s 154(1) of the appellant assessee is free to file an application u/s 154(1) of the appellant assessee is free to file an application u/s 154(1) of the IT Act 1961subject to the provisions of the act. IT Act 1961subject to the provisions of the act.”
6.3 Having considered the matter, we are of the view that the Having considered the matter, we are of the view that the Having considered the matter, we are of the view that the approach adopted by the learned CIT(A) cannot be sustained. Once approach adopted by the learned CIT(A) cannot be sustained. Once approach adopted by the learned CIT(A) cannot be sustained. Once an assessment has been framed under section 143(3) of the Act, the an assessment has been framed under section 143(3) of the Act, the an assessment has been framed under section 143(3) of the Act, the correctness and legality of adjustments forming part of the assessed correctness and legality of adjustments forming part of the assess correctness and legality of adjustments forming part of the assess income, including those arising from the earlier intimation under income, including those arising from the earlier intimation under income, including those arising from the earlier intimation under section 143(1), should have been examined by the AO during section 143(1), should have been examined by the AO during section 143(1), should have been examined by the AO during scrutiny and if raised before the ld CIT(A), then fall within the scrutiny and if raised before the ld CIT(A), then fall within the scrutiny and if raised before the ld CIT(A), then fall within the appellate jurisdiction of the first appellate authority. The learned appellate jurisdiction of the first appellate authority. The l appellate jurisdiction of the first appellate authority. The l CIT(A) was, therefore, duty CIT(A) was, therefore, duty-bound to examine the claim of the bound to examine the claim of the assessee on merits, either by calling for a remand report from the assessee on merits, either by calling for a remand report from the assessee on merits, either by calling for a remand report from the Assessing Officer or by independently adjudicating the allowability Assessing Officer or by independently adjudicating the allowability Assessing Officer or by independently adjudicating the allowability of the payments under section 43B of the Act. of the payments under section 43B of the Act.
6.4 In the present case, the learned CIT(A) has neither examined In the present case, the learned CIT(A) has neither examined In the present case, the learned CIT(A) has neither examined the factual claim of the assessee nor called for any verification from the factual claim of the assessee nor called for any verification from the factual claim of the assessee nor called for any verification from the Assessing Officer. In these circumstances, and in the interests the Assessing Officer. In these circumstances, and in the interests the Assessing Officer. In these circumstances, and in the interests of justice, we deem it appropriate to restore this issue to the file of of justice, we deem it appropriate to restore this issue of justice, we deem it appropriate to restore this issue the Assessing Officer for the limited purpose of verifying the claim of the Assessing Officer for the limited purpose of verifying the claim of the Assessing Officer for the limited purpose of verifying the claim of the assessee with regard to the allowability of the amounts under the assessee with regard to the allowability of the amounts under the assessee with regard to the allowability of the amounts under section 43B of the Act, in accordance with law, after affording due section 43B of the Act, in accordance with law, after affording due section 43B of the Act, in accordance with law, after affording due opportunity of being heard to the opportunity of being heard to the assessee.
6.5 Accordingly, the ground No.3 of the appeal of the assessee is the ground No.3 of the appeal of the assessee is the ground No.3 of the appeal of the assessee is allowed for statistical statistical purpose.
In the result, appeal of the assessee appeal of the assessee is allowed allowed for statistical purposes.
Order pronounced by way display o Order pronounced by way display of result on notice f result on notice board on 23/12/2025 under Rule 34(4) of ITAT Rules, 1963. /2025 under Rule 34(4) of ITAT Rules, 1963. /2025 under Rule 34(4) of ITAT Rules, 1963.