ADITYA BIRLA SUN LIFE AMC LIMITED,MAHARASHTRA vs. THE DEPUTY COMMISSIONER OF INCOME TAX- CIRCLE 6 (1)(1), MAHARASHTRA

The year-wise factual matrix emerging from the assessment orders and the appellate orders of the CIT(A) is summarised in the table below: Α.Υ. 2017-18 Α.Υ. 2018-19 Α.Υ. 2022-23 Α.Υ. 2023-24 Particulars Return of 29.11.2017 27.11.2018 27.11.2022 27.11.2023 income filed on Returned Rs. Rs. Rs. Rs. total 3,33,33,48,440/- 4,17,01,72,850/- 8,44,58,08,730/- 7,48,99,79,434/- income Date of 26.12.2019 14.04.2021 28.02.2024 21.03.2025 assessment order Assessed Rs. total Rs. 3,34,76,51,568/- 4,20,47,45,482/- 8,45,13,02,470/- 7,49,13,26,247/- Rs. Rs. income

In A.Y. 2017–18, the Assessing Officer disallowed employees' contribution to provident fund amounting to Rs. 82,10,149/- under section 36(1)(va), disallowed deduction claimed under section 80G in respect of CSR related payments amounting to Rs. 92,31,072/-, disallowed interest on delayed payment of tax deducted at source amounting to Rs. 3,29,345/-, and disallowed provision for leave encashment amounting to Rs. 57,63,634/-. The CIT(A) upheld all the aforesaid disallowances and granted limited relief only in respect of short grant of TDS credit by directing verification. Interest under sections 234B and 234C was treated as consequential.

In A.Y. 2018–19, the Assessing Officer disallowed deduction claimed under section 80G in respect of CSR expenditure amounting to Rs. 2,53,96,666/-, disallowed employees' contribution to provident fund amounting to Rs. 41,05,801/- and made disallowance under section 40(a)(ia) amounting to Rs. 50,49,586/-. The CIT(A) confirmed all the above disallowances following the appellate order for the preceding year and granted limited relief in respect of TDS credit, while treating interest grounds as consequential.

In A.Y. 2022–23, no independent addition or disallowance was made in the regular assessment order passed under section 143(3) read with section 144B of the Act. The CIT(A) recorded that only the income as processed under section 143(1) had been adopted in the assessment order and, accordingly, dismissed the appeal.

In A.Y. 2023-24, the Assessing Officer made an addition of Rs. 13,46,813/- on account of short-term capital gains on equity shares. The CIT(A) upheld the said addition and rejected the contention that the same was assessable under a different head. The CIT(A) directed the Assessing Officer to verify and allow correct credit of tax deducted at source and treated the levy of interest under sections 234B and 234C as consequential.

Aggrieved by the orders of the CIT(A), the assessee is in separate appeal before us raising following grounds of appeal: Α.Υ. 2017-18 (ITA No. 6663/Мum/2025) GROUND NO. I: DISALLOWANCE OF EMPLOYEES CONTRIBUTION ΤΟ PROVIDENT FUND AMOUNTING TO RS. 82,10,149/-

For the sake of clarity and orderly adjudication, we propose to deal with the appeals assessment year-wise and, within each

Since, in respect of each of the grounds raised by the assessee, the learned Departmental Representative has relied upon the orders of the lower authorities, we shall proceed to examine each ground individually and thereafter record our findings and decision thereon. A.Y. 2017–18 - (ITA No. 6663/Mum/2025) Ground No. I: Disallowance of employees' contribution to provident fund amounting to Rs. 82,10,149/-

The learned AR fairly conceded that in view of the subsequent decision of the Hon'ble Supreme Court in Checkmate Services (P) Ltd. v. CIT [2022] 448 ITR 518, the issue now stands decided against the assessee.

In view of the binding decision of the Hon'ble Supreme Court, we find no infirmity in the action of the Assessing Officer in disallowing the employees' contribution to provident fund and in the order of the CIT(A) in confirming the same. Accordingly, this ground of appeal is dismissed. Ground No. II: Disallowance of interest on delayed payment of TDS amounting to Rs. 3,29,345/-

The learned AR submitted that interest on delayed payment of TDS does not partake the character of income-tax of the assessee, but represents tax deducted and paid on behalf of a third party. It was submitted that such expenditure is not in the nature of tax on the income of the assessee. However, in view of the smallness of the amount involved, the learned AR submitted that this ground is not pressed.

In view of the above submission, this ground is dismissed as not pressed. Ground No. III: Disallowance of provision for leave encashment amounting to Rs. 57,63,634/-

During the assessment proceedings, the Assessing Officer noticed that the assessee had made a provision for leave encashment amounting to Rs. 57,63,634/-. Though the assessee explained that the provision was made on actuarial valuation in accordance with AS-15 and under the mercantile system of accounting, the Assessing Officer held that the liability had not crystallised during the year. He treated the provision as an unascertained liability, further observing that the provision was reversed in the subsequent year. Holding that mere provision in the books is not allowable under the Act, the Assessing Officer disallowed the said amount and added it to the total income of the assessee.

The ld. CIT(A) upheld the disallowance. He held that, notwithstanding the actuarial basis of the provision, deduction for leave encashment is governed by section 43B(f) of the Act and is allowable only on actual payment basis. Placing reliance on the judgment of the Hon'ble Supreme Court in Union of India v. Exide Industries Ltd.(116 taxmапп.com 378), the ld. CIT(A) concluded that the assessee had not satisfied the conditions of section 43B during the year under consideration and, accordingly, confirmed the disallowance of Rs. 57,63,634/-.

The learned AR submitted that the assessee had made provision for leave encashment on the basis of actuarial valuation. The Assessing Officer disallowed the same on the ground that it was not an ascertained liability, and the CIT(A) upheld the disallowance holding that the same was covered under section 43B(f) of the Act.

It was submitted that this issue is squarely covered in favour of the assessee by the decisions in the assessee's own group cases, namely: i. Aditya Birla Nuvo Limited v. ACIT (ITA Nos. 5848 & 5935/Mum/2017) for A.Y. 2012–13, ii. Aditya Birla Nuvo Limited v. Dy. CIT (ITA Nos. 563 & 1885/Mum/2018) for A.Y. 2013–14, iii. Aditya Birla Nuvo Limited v. Addl. CIT (ITA Nos. 1065 & 1248/Mum/2017) for A.Y. 2011–12, and iv. DCIT v. Ultratech Cement Limited (ITA Nos. 4835 & 5318/Mum/2017).

The learned AR placed a copy of decision of Co-ordinate Bench in case of Aditya Birla Nuvo Limited v. ACIT (ITA Nos. 5848 & 5935/Mum/2017) for A.Y. 2012–13. It was accordingly submitted that the disallowance made by the Assessing Officer and sustained by the CIT(A) be deleted.

We find that the issue relating to allowability of provision for leave encashment made on actuarial basis is no longer res integra. The Hon'ble Supreme Court in Bharat Earth Movers v. CIT (245 ITR 428) has authoritatively laid down that where a business liability has definitely arisen in the accounting year, the same is allowable as deduction, notwithstanding that the liability is to be discharged at a future date. The Hon'ble Supreme Court has held that – The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain.

The aforesaid principle has been consistently followed by the co-ordinate Benches in the assessee's group cases, as listed above, wherein it has been uniformly held that provision for leave encashment computed on actuarial valuation represents an ascertained liability and is allowable as deduction, and that the bar under section 43B(f) is not attracted to deny such claim where the liability is accrued and quantified on scientific basis.

In the present case, it is an admitted position that the assessee has created provision for leave encashment on the basis of actuarial valuation. The Assessing Officer disallowed the same by treating it as unascertained liability, and the Ld. CIT(A) sustained the disallowance by invoking section 43B(f). In view of the binding ratio of the Hon'ble Supreme Court in Bharat Earth Movers (supra) and the consistent view taken by the co-ordinate Benches in the assessee's group cases on identical facts, we hold that the provision for leave encashment made on actuarial basis constitutes an ascertained liability and is allowable as deduction.

We have also carefully considered the reliance placed by the ld. CIT(A) on the judgment of the Hon'ble Supreme Court in Union of India v. Exide Industries Ltd. (supra). In our considered view, the said decision does not dilute or override the ratio laid down in Bharat Earth Movers (supra) on the nature of liability towards leave encashment. As explained by the Hon'ble Supreme Court in Exide Industries Ltd., insertion of clause (f) to section 43B merely regulates the timing of deduction by linking it to actual payment and does not alter the character of leave encashment liability as a present and accrued liability under the mercantile system of accounting. The Hon'ble Supreme Court has categorically observed that the amendment neither reverses the nature of the liability nor extinguishes the deduction as such, but only postpones its allowance in accordance with the statutory prescription. In the present case, the co-ordinate Benches in the assessee's own group cases, after considering Bharat Earth Movers have consistently held that provision for leave encashment computed on actuarial basis represents an ascertained liability and is allowable as deduction.

Respectfully following the said binding and consistent judicial view, the reliance placed by the ld. CIT(A) on Exide Industries Ltd. to sustain the disallowance cannot be upheld. Therefore, we set aside the order of the Ld. CIT(A) on this issue and direct the Assessing Officer to delete the disallowance of Rs. 57,63,634/-. Accordingly, this ground of appeal is allowed. Ground No. IV: Non-granting of deduction claimed under section 80G amounting to Rs. 92,31,072/-

During the assessment proceedings, the Assessing Officer observed that the assessee had incurred CSR expenditure of Rs. 4,09,48,683/-, which was disallowed while computing business income. Out of the said amount, the assessee had claimed deduction under section 80G of Rs. 92,31,072/- in respect of donations made to eligible trusts. The Assessing Officer was of the view that allowing deduction under section 80G would result in double deduction of CSR expenditure. The explanation of the assessee that CSR expenditure had already been disallowed under section 37(1) and that the claim under section 80G was restricted only to eligible donations was not accepted. Relying on Explanation 2 to section 37(1), the Assessing Officer withdrew the deduction claimed under section 80G.

Before the ld. CIT(A), the assessee reiterated that there was no double deduction, as the CSR expenditure was not claimed under section 37(1) and the claim under section 80G was confined to donations made to institutions approved under section 80G. The ld. CIT(A), however, upheld the action of the Assessing Officer by holding that, in view of the amendment to section 37(1) by the Finance Act, 2014, CSR or donation expenditure is not allowable and, consequently, deduction under section 80G in respect of such payments was not in accordance with the provisions of the Act. The ld. CIT(A) thus confirmed the withdrawal of deduction of Rs. 92,31,072/- claimed under section 80G.

The learned AR submitted that the issue raised in this ground is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench in the assessee's own case in Aditya Birla Sun Life AMC Private Limited v. ACIT (ITA Nos. 494 & 792/Mum/2025) for A.Y. 2020–21 on identical facts and circumstances.

It was submitted that the assessee had claimed deduction under section 80G in respect of donations made to institutions duly approved under the said section and had complied with all statutory conditions prescribed therein. It is an admitted position that the assessee has not claimed the impugned expenditure as deduction under section 37(1) of the Act and that its claim is restricted only to deduction under section 80G of the Act. It is also not in dispute that the donations made by the assessee do not fall within the exclusions prescribed under sub-clauses (iiihk) and (iiihl) of section 80G(2) of the Act. The issue raised before us is identical to that decided by the Co-ordinate Bench in the assessee's own case for A.Y. 2020–21(ITA Nos. 494 & 792/Mum/2025),wherein, after detailed consideration in paras 18 to 25, it has been held that Explanation 2 to section 37(1) merely prohibits allowance of CSR expenditure as business expenditure while computing income under the head “Profits and gains of business or profession”, but does not operate as a bar against claiming deduction under Chapter VI-A, particularly under section 80G of the Act.

The Co-ordinate Bench in the said decision has further held that section 80G itself contains specific exclusions in respect of certain CSR-related payments under sub-clauses (iiihk) and (iiihl) and that, save and except for those exclusions, there is no legislative embargo on allowing deduction under section 80G merely because the payment forms part of CSR obligation. It has also been held that to deny deduction under section 80G in such circumstances would result in double disallowance, which is neither contemplated by the statute nor intended by the Legislature.

It has further been laid down therein that the character of a payment as a “donation” does not stand negated merely because the payment is made pursuant to a statutory mandate, so long as the payment is made without any material return or quid pro quo. In the present case, the Revenue has not alleged that the assessee made the donations with an intention to obtain any tangible benefit in return. The genuineness of the donations, the identity of the donees and the fact that the payments were made through banking channels are also not in dispute.

Respectfully following the ratio laid down by the co-ordinate Bench in Aditya Birla Sun Life AMC Private Limited v. ACIT (supra), and applying the principles enunciated in paras 18 to 25 thereof to the facts of the present case, we hold that the assessee is entitled to deduction under section 80G of the Act in respect of the impugned amount of Rs. 92,31,072/-.

Accordingly, we set aside the order of the Ld. CIT(A) on this issue and direct the Assessing Officer to allow the deduction claimed under section 80G amounting to Rs. 92,31,072/-. This ground of appeal is allowed. Additional Grounds

Now we deal with additional grounds of appeal raised by the assessee before us. The assessee has raised additional grounds before the Tribunal relating to (i) non-granting of credit or refund of Dividend Distribution Tax (DDT) amounting to Rs. 10,17,96,378/-, and (ii) levy of interest under section 115P of the Act amounting to Rs. 2,99,79,485/-.

At the outset, we note that these issues emanate from the assessment order itself and the material facts necessary for adjudication thereof are already available on record. The assessee had duly disclosed the payment of DDT in the return of income as well as in the Tax Audit Report. It is also a matter of record that the assessee had addressed a specific communication to the Assessing Officer seeking grant of credit or refund of excess DDT paid. However, the Assessing Officer did not examine or adjudicate these issues while framing the assessment.

It is contended that the assessee specifically raised these issues before the 1d. CIT(A). Nevertheless, the ld. CIT(A) also did not render any finding on the issues relating to grant of credit or refund of DDT and levy of interest under section 115P of the Act. Consequently, these issues have remained undecided at both the assessment stage and the first appellate stage.

The additional grounds raised by the assessee are thus directly borne out from the assessment records and the material already available on file. The assessee is not seeking to introduce any new claim or fresh evidence; rather, it seeks adjudication of issues which were specifically raised before the lower authorities but were not dealt with by them.

The powers of the appellate authorities to admit additional grounds in such circumstances are well recognised. The Hon'ble Supreme Court in Jute Corporation of India Ltd. v. CIT (189 ITR 688) has held that an appellate authority is not precluded from entertaining additional grounds when the same arise from the record and are necessary for proper adjudication of the appeal. Similarly, in National Thermal Power Co. Ltd. v. CIT (229 ITR 383), it has been held that the Tribunal can consider additional grounds where all the relevant facts are already on record and no further investigation of facts is required.

In the present case, the additional grounds arise from the existing material on record and their adjudication is necessary for a complete and effective disposal of the appeal. We, therefore, admit the additional grounds raised by the assessee for consideration. - Additional GroundsV and VI Non-granting of Dividend Distribution Tax (DDT) amounting to Rs. 10,17,96,378/- and levy of interest under section 115P amounting to Rs. 2,99,79,485/-

The learned AR submitted that these grounds were raised by way of additional grounds. It was submitted that the issue is purely factual in nature inasmuch as the computation sheet pursuant to the order passed under section 143(3) did not grant credit of Dividend Distribution Tax paid and also did not grant refund of excess DDT.

Reference was made to the Tax Audit Report placed at page 12 of the factual paper book and to Form 26AS, wherein such DDT was reflected. It was submitted that relevant supporting documents were enclosed as Annexure 2. 44. The learned AR, therefore, prayed that appropriate directions be issued to the Assessing Officer to verify the said documents and to grant credit of DDT, refund of excess DDT and to delete the consequential demand of interest under section 115P, in accordance with law.

The grievance of the assessee is that while giving effect to the assessment order, the Assessing Officer did not grant credit of Dividend Distribution Tax paid by the assessee and did not grant refund of excess DDT, and consequently levied interest under section 115P of the Act.

The learned AR submitted that the issue is purely factual in nature and placed reliance on the Tax Audit Report and Form 26AS, wherein the payment of DDT is reflected. It was prayed that the matter be restored to the file of the Assessing Officer for verification of the relevant records and grant of due credit and refund in accordance with law.

We find merit in the submission of the learned Authorised Representative that the issue requires factual verification. In the interest of justice, we deem it appropriate to restore this issue to the file of the Assessing Officer with a direction to verify the claim of payment of DDT on the basis of the Tax Audit Report, Form 26AS and other relevant records and, if found in order, to grant credit of DDT amounting to Rs. 10,17,96,378/- and refund of excess DDT amounting to Rs. 81,10,486/-, in accordance with law.

Since the levy of interest under section 115P is consequential to the non-grant of DDT credit, the same shall also be recomputed after giving effect to this direction. Accordingly, these grounds are allowed for statistical purposes. A.Y. 2018–19 - (ITA No. 6701/Mum/2025) Ground No. I: Addition on account of deduction claimed under section 80G amounting to Rs. 2,53,96,666/-

We have already adjudicated the issue relating to deduction under section 80G while deciding the corresponding ground for A.Y. 2017–18. Since the facts and the applicable legal principles for the year under consideration are identical, we do not consider it necessary to adjudicate the issue separately for this year. The findings recorded by us for A.Y. 2017–18 shall apply mutatis mutandis to this assessment year as well. Accordingly, this ground of appeal is allowed. Ground No. II – Employees' contribution to PF under section 36(1)(va) of Rs. 41,05,801/-

We also have already adjudicated the issue relating to deduction under section 80G while deciding the corresponding ground for A.Y. 2017–18. Since the facts and the applicable legal principles for the year under consideration are identical, we do not consider it necessary to adjudicate the issue separately for this year. The findings recorded by us for A.Y. 2017-18 shall apply mutatis mutandis to this assessment year as well. Accordingly, this ground of appeal is dismissed. Ground No. III: Disallowance under section 40(a) amounting to Rs. 50,49,586/-

During the course of assessment, the Assessing Officer noticed that the assessee had created a year-end provision on ad hoc basis in respect of certain expenses and had claimed deduction thereof. Since tax was not deducted at source on the said provision, the Assessing Officer invoked the provisions of section 40(a) of the Act and disallowed 30 per cent of the provisioned amount, resulting in a disallowance of Rs. 50,49,586/-. The Assessing Officer treated the said amount as not allowable in view of the alleged non-compliance with the tax deduction at source provisions.

In appeal, the assessee contended that the provision in respect of which the disallowance was made was only a year-end provision and that the entire provision had been reversed in the subsequent year when no invoices were received. It was submitted that the corresponding amount had already been offered to tax by way of reduction in the computation of income and, therefore, no further disallowance was warranted.

The Ld. CIT(A), however, did not accept the explanation of the assessee and upheld the action of the Assessing Officer. The CIT(A) held that since tax had not been deducted at source on the provisioned amount, the provisions of section 40(a) were clearly attracted and the Assessing Officer was justified in making the disallowance. Accordingly, the disallowance of Rs. 50,49,586/- made under section 40(a) of the Act was confirmed.

The learned AR submitted that the assessee had created a year-end provision on ad hoc basis of Rs. 1,68,31,954/- during the year ended 31.03.2017 and, out of abundant caution, disallowed 30 per cent thereof amounting to Rs. 50,49,586/- under section 40(a) of the Act in A.Y. 2017–18 (a copy of the statement of computation of income for A.Y. 2017-18 was placed on record). It was further submitted that in the present

We further find that an identical issue has been accepted in principle by the Co-ordinate Bench in the assessee's own case(ITA Nos. 494 & 792/Mum/2025) for A.Y. 2020–21. Once the provision itself stands reversed and the income correspondingly reduced, there remains no justification for sustaining the disallowance in the year under consideration. Accordingly, we set aside the order of the Ld. CIT(A) on this issue and direct the Assessing Officer to allow the deduction of Rs. 50,49,586/-. This ground of appeal is allowed. Ground No. IV - Disallowance under section 43B – Rs. 9,076/- (professional tax)

The Assessing Officer observed that professional tax liability of Rs. 9,076/- remained unpaid as on the due date of filing of return of income. He, therefore, invoked the provisions of section 43B of the Act and disallowed the said amount. The CIT(A) confirmed the disallowance made by the Assessing Officer. He held that in view of section 43B, any statutory liability is allowable only on payment basis and, since the assessee had not paid the professional tax within the prescribed time, the Assessing Officer was justified in making the disallowance.

The learned AR submitted that this ground is not pressed.

The Assessing Officer, while passing the assessment order, computed the gross total income at Rs. 4,20,47,45,483/- instead of Rs. 4,20,47,33,978/- as claimed by the assessee, resulting in an arithmetical difference in the computation of income. The CIT(A) did not grant any relief on this issue and upheld the computation made by the Assessing Officer, without accepting the assessee's contention that there was an error in computation of the gross total income. Ground No. VI - Short grant of TDS credit – Rs. 3,09,621/-

The Assessing Officer allowed TDS credit of Rs. 1,11,26,00,781/- as against the TDS of Rs. 1,11,29,10,402/- claimed by the assessee in the return of income, thereby granting short credit of Rs. 3,09,621/-.The CIT(A) confirmed the action of the Assessing Officer. He held that the TDS credit was allowed on the basis of Form 26AS and, in absence of reconciliation to his satisfaction, no further credit could be allowed. Ground No. VII -Levy of interest under section 234D Rs. 5,26,845/-

The Assessing Officer levied interest under section 234D of the Act on the ground that the refund granted earlier was in excess of the refund determined on regular assessment. The CIT(A) upheld the levy of interest under section 234D, holding that the same was consequential and mandatory in nature once it was found that excess refund had been granted at the time of processing under section 143(1).

We find that the issues raised in these grounds are essentially factual in nature and would require verification of the computation of income, reconciliation of tax deducted at source as per Form 26AS with the assessee's claim, and re-computation of interest, if any, leviable under section 234D. In the interest of justice, we deem it appropriate to restore these issues to the file of the Assessing Officer for the limited purpose of verifying the assessee's claims and for deciding the same in accordance with law after granting reasonable opportunity of being heard to the assessee.

Accordingly, Ground Nos. V, VI and VII are restored to the file of the Assessing Officer for fresh adjudication in accordance with law. These grounds are allowed for statistical purposes. A.Y. 2022–23 - (ITA No. 6702/Mum/2025) Ground No. I - Disallowance of employees' contribution to Provident Fund under section 36(1)(va) of the Act amounting to Rs. 54,93,734/-

During the processing of the return of income under section 143(1) of the Act, an adjustment was proposed in respect of employees' contribution to Provident Fund amounting to Rs. 54,93,734/- on the ground that the same was deposited beyond the due date prescribed under the relevant welfare legislation, as reflected in clause 20(b) of Form 3CD.A show cause notice was issued to the assessee, to which the assessee replied on 30.01.2024, submitting that the employees' contribution pertaining to the month of June 2021 had been credited to the employees' provident fund account on July 04, 2021, which was prior to the statutory due date of July 15, 2021. The assessee enclosed a copy of the challan evidencing the date of payment as July 04, 2021, and contended that the date mentioned in the tax audit report was erroneous. However, the said explanation was not accepted at the processing stage, and the adjustment under section 143(1) was carried out. The reply of the assessee was noted, but it was stated that the issue was left to the juri ictional Assessing Officer and subject to physical verification. Subsequently, the assessment was completed under section 143(3) read with section 144B of the Act. In the assessment order, no independent addition was made on this issue; instead, the income as determined under section 143(1) was adopted, and the adjustment relating to employees' contribution to Provident Fund as made in the intimation under section 143(1) continued to form part of the assessed income.

Before the ld. CIT(A), the assessee challenged the sustained disallowance of Rs. 54,93,734/- and submitted that: • The employees' contribution to Provident Fund for the month of June 2021 was deposited on July 04, 2021, i.e., before the due date of July 15, 2021 prescribed under the relevant Provident Fund Act. • In clause 20(b) of Form 3CD, the date of payment was inadvertently mentioned as July 04, 2020 instead of July 04, 2021, which resulted in the erroneous adjustment under section 143(1). • Documentary evidence in the form of payment challans was placed on record to substantiate the actual date of payment. • The Assessing Officer erred in mechanically adopting the intimation under section 143(1) while completing the assessment under section 143(3), without considering the assessee's detailed submissions on merits. • It was contended that scrutiny assessment proceedings under section 143(3) are independent of the intimation under section 143(1), and the Assessing Officer ought to have adjudicated the issue on merits. • The assessee also pointed out that an application under section 154 had been filed against the intimation under section 143(1), and that parallel remedies were being pursued.

On merits, the assessee prayed for deletion of the disallowance under section 36(1)(va) of the Act.

The ld. CIT(A) rejected the assessee's grounds and upheld the action of the Assessing Officer. The ld. CIT(A) recorded that: • In the assessment order under section 143(3), no fresh addition had been made and the Assessing Officer had merely adopted the income as determined under section 143(1). • The present appeal was directed against the assessment order under section 143(3) and not against the intimation under section 143(1), wherein the impugned adjustment had actually been made. • Proceedings under section 143(1) and section 143(3) operate in distinct fields, and there is no merger of an intimation under section 143(1) with an assessment order under section 143(3), unless the issue has been examined and adjudicated in the scrutiny assessment. • Reliance was placed on the decision of the Bangalore Bench of the Tribunal in M/s Areca Trust v. CIT(Appeals) (ITA No. 433/Bang/2023), as well as other judicial precedents, to hold that the Assessing Officer, while completing the assessment under section 143(3), could not review or sit in appeal over the intimation issued under section 143(1). • Since the assessee had not filed an appeal against the intimation under section 143(1), and no rectification order under section 154 deleting the adjustment was brought on record, the adjustment continued to hold the field. • The merits of the addition made under section 143(1) could not be examined in the appeal against the assessment order under section 143(3). • On the above reasoning, the ld. CIT(A) held that there was no infirmity in the approach of the Assessing Officer in adopting the income as per the intimation under section 143(1), declined to adjudicate the issue on merits, and dismissed the grounds raised by the assessee. Consequently, the appeal was dismissed.

The learned AR reiterated the facts and submitted that the issue is purely factual in nature, supported by documentary evidence on record, and the lower authorities failed to appreciate the correct factual position. The ld. AR, therefore, prayed that the disallowance be deleted.

We have carefully considered the rival submissions, perused the material available on record, and examined the reasoning adopted by the lower authorities.

At the outset, it is an undisputed fact that the impugned disallowance of Rs. 54,93,734/- on account of employees' contribution to Provident Fund was made at the stage of processing of return under section 143(1) of the Act, based on the date of payment as reflected in clause 20(b) of Form 3CD. It is also not in dispute that during the course of processing under section 143(1), the assessee had furnished a detailed reply dated 30.01.2024 along with documentary evidence in the form of challans, demonstrating that the employees' contribution for the month of June 2021 had, in fact, been deposited on July 04, 2021, which was prior to the due date of July 15, 2021 under the relevant Provident Fund Act. The assessee had also specifically pointed out that the date mentioned in the tax audit report was erroneous.

However, the said explanation was not accepted at the processing stage, and the adjustment under section 143(1) was carried out, with an observation that the matter was left to the juri ictional Assessing Officer for verification. Subsequently, while completing the assessment under section 143(3) read with section 144B of the Act, the Assessing Officer did not carry out any independent examination of the issue on merits and merely adopted the income as determined under section 143(1).

Before the ld. CIT(A), the assessee raised a specific grievance that the Assessing Officer, while framing the scrutiny assessment under section 143(3), failed to adjudicate the issue on merits despite detailed submissions and supporting evidence being available on record. The ld. CIT(A), however, declined to examine the issue on merits and dismissed the ground by holding that the adjustment had been made under section 143(1), that there was no merger of the intimation under section 143(1) with the assessment order under section 143(3), and that the present appeal, being directed against the assessment order under section 143(3), could not be used to challenge the adjustment made under section 143(1). In doing so, reliance was placed on the decision of the Bangalore Bench of the Tribunal in M/s Areca Trust v. CIT(Appeals) (ITA No. 433/Bang/2023).

While there can be no quarrel with the settled proposition that an intimation under section 143(1) and an assessment order under section 143(3) operate in distinct fields, and that there is no automatic merger of an intimation with a scrutiny assessment unless the issue is examined in the assessment proceedings, the crucial aspect which cannot be lost sight of is that once an assessment is framed under section 143(3), the Assessing Officer is duty-bound to assess the total income in accordance with law, after due consideration of the material available on record.

In the present case, the assessee had placed before the Assessing Officer contemporaneous documentary evidence establishing that the employees' contribution to Provident Fund had been deposited within the due date prescribed under the relevant Act. The adjustment under section 143(1) itself was based on an apparent factual error in the tax audit report, which was specifically brought to the notice of the Assessing Officer. Despite this, the Assessing Officer chose not to examine the issue on merits during the scrutiny assessment and mechanically carried forward the adjustment made under section 143(1).

In our considered view, the reliance placed by the ld. CIT(A) on the decision in M/s Areca Trust (supra) is misplaced in the facts of the present case. The said decision deals with the doctrine of merger and the maintainability of an appeal against an assessment order under section 143(3) in respect of an adjustment made under section 143(1), without the issue having been examined in scrutiny proceedings. However, it does not lay down that the Assessing Officer, while completing an assessment under section 143(3), is absolved of the responsibility to adjudicate an issue on merits when the same is brought to his notice along with supporting evidence.

The scope of section 143(3) is materially different from that of section 143(1). An intimation under section 143(1) is a summary processing based on apparent adjustments, whereas an assessment under section 143(3) is a quasi-judicial determination of total income after consideration of facts, evidence, and submissions. The Assessing Officer, therefore, cannot abdicate his statutory obligation under section 143(3) by merely adopting the figures determined under section 143(1), particularly when the assessee has demonstrated, with evidence, that the very basis of the adjustment is factually incorrect.

In the present case, the disallowance rests entirely on the premise that the employees' contribution was deposited beyond the due date. The assessee has categorically shown that the contribution was deposited on July 04, 2021, which is prior to the due date of July 15, 2021. This factual position has not been controverted by the lower authorities. Once the payment is made within the due date under the relevant welfare legislation, no disallowance under section 36(1)(va) of the Act is warranted.

As regards the pending application under section 154, it is well settled that the availability or invocation of rectification proceedings does not curtail the powers or obligations of the Assessing Officer while framing an assessment under section 143(3), nor does it bar the appellate authorities from adjudicating an issue on merits when it arises in appeal. The pendency of a rectification application merely provides an additional statutory remedy to correct an apparent mistake; it cannot be used as a ground to perpetuate an otherwise unsustainable addition or to denly adjudication on merits in assessment or appellate proceedings.

In view of the above facts and circumstances, we are of the considered opinion that the lower authorities erred in sustaining the disallowance merely on technical considerations relating to the stage at which the adjustment was made, without adjudicating the issue on merits. The approach adopted defeats the substantive rights of the assessee and is not in consonance with the scheme of assessment under the Act.

Accordingly, we direct the Assessing Officer to delete the disallowance of Rs. 54,93,734/- made under section 36(1)(va) of the Act. Thus, Ground No. I raised by the assessee for A.Y. 2022- 23 is allowed. Ground No. II - Short grant of consequential interest under section 244A of the Act

This ground relates to the grievance of the assessee that the Assessing Officer has granted short interest under section 244A of the Act, and the assessee has prayed for a direction to compute and grant correct consequential interest in accordance with law.

At the outset, it is observed that interest under section 244A of the Act is statutory in nature and arises automatically when any refund becomes due to the assessee under the provisions of the Act. The quantum of interest under section 244A is not an independent or standalone issue, but is purely consequential to the determination of the correct amount of tax, refund, or reduction of tax liability arising from the assessment or appellate proceedings.

Since in the present appeal we have granted relief to the assessee on the substantive grounds, the computation of refund and the interest payable thereon under section 244A would necessarily undergo a change. Accordingly, this ground is allowed for statistical purposes, with a direction to the Assessing Officer to recompute and grant the correct consequential interest under section 244A of the Act, as may be due to the assessee, while giving effect to this order, in accordance with law. A.Y. 2023–24 - (ΙΤΑ No. 6703/Mum/2025) Ground No. I - Addition on account of Short Term Capital Gains under section 111A of the Act amounting to Rs. 13,46,813/-

During the course of assessment proceedings, while examining the details of capital gains, the Assessing Officer identified Issue No. 3 relating to “Large short-term capital gains declared under section 111A”, as recorded on page 5 of the assessment order.

The Assessing Officer noted that, for the year under consideration, the assessee had stated that short-term capital gains taxable under section 111A amounted to Rs. 87,48,294/-. However, in the return of income filed for the captioned

It was further recorded by the Assessing Officer that, while computing short-term capital gains on redemption of units of equity mutual funds, the assessee had considered redemption of 30,00,000 units of Aditya Birla Sun Life Nifty 50 ETF, whereas, as per the Annual Information Statement (AIS) for F.Y. 2022–23, the assessee had in fact redeemed 35,00,000 units of the said fund.

Accordingly, the Assessing Officer observed that the short- term capital gains attributable to redemption of 5,00,000 units of Aditya Birla Sun Life Nifty 50 ETF had not been disclosed. On the basis of this discrepancy, the assessee was issued a show cause notice requiring it to explain why short-term capital gains taxable under section 111A amounting to Rs. 13,46,813/-, relating to the said 5,00,000 units, should not be added back to the total income and taxed accordingly.

In response to the show cause notice, the assessee submitted that, in the return of income filed for the captioned

The Assessing Officer did not accept the explanation. He recorded that unless the error had been identified by the computerized system, it would have gone unchecked. He treated the case as one of under-reporting of income. Accordingly, the Assessing Officer made an addition of Rs. 13,46,813/- as short- term capital gains taxable under section 111A of the Act and initiated penalty proceedings for under-reporting of income under section 270A of the Act.

Before the ld. CIT(A), the assessee assailed the impugned addition by filing detailed written submissions. It was contended that during the relevant previous year, the assessee had sold a total of 35,00,000 units of Aditya Birla Sun Life Nifty 50 ETF. Out of the said units, the gains arising from 30,00,000 units were duly offered to tax as short-term capital gains taxable under section 111A of the Act, while the gains arising from the balance 5,00,000 units were already offered to tax as long-term capital gains under section 112A of the Act at the time of filing the return of income. It was thus submitted that the gains arising from the entire 35,00,000 units had already been subjected to tax, albeit under different heads of capital gains, and there was no escapement of income.

It was further submitted that the addition made by the Assessing Officer would result in double taxation of the very same capital gains, which is impermissible in law. Without prejudice to the above, the assessee contended that even if the addition were to be sustained, the same could only be assessed under the head “Capital Gains” in accordance with the charging provisions of the Act and taxed at the applicable concessional rates, and not under any other head of income or at a higher rate of tax.

In support of the above contentions, the assessee also placed on record documents along with the appeal to substantiate the manner in which the capital gains had been computed and offered to tax in the return of income.

The learned CIT(A) upheld the addition made by the Assessing Officer on the ground that during the assessment proceedings the assessee itself had admitted an error in computation of short-term capital gains and had offered the additional amount to tax. The subsequent contention that the assessee had, by mistake, offered an excess amount as short- term capital gains was held to be an afterthought raised only at the appellate stage. The ld. CIT(A) further noted that the assessee sought to rely on certain documents filed along with the appeal, which were in the nature of additional evidence, without furnishing any justification for non-production of the same before the Assessing Officer or filing an application for admission of additional evidence. Accordingly, such material was not admitted. It was held that the Assessing Officer had merely acted upon the assessee's own admission during assessment proceedings, and therefore no infirmity could be found in the assessment order. On this reasoning, the ld. CIT(A) dismissed the ground of appeal and confirmed the addition.

The learned AR submitted that the assessee had already offered the amount of Rs. 13,46,813/- to tax as capital gains in the return of income. It was contended that the said amount had been correctly offered as long-term capital gains under section 112A of the Act and that, during the course of assessment proceedings, the assessee inadvertently admitted, by mistake, that the said amount had not been offered as short-term capital gains. Relying on such inadvertent admission, the Assessing Officer treated the amount as short-term capital gains under section 111A.

The learned AR submitted that the admission was factually incorrect and that, on proper verification of the return of income and computation thereof, it would be evident that the gains had already been subjected to tax. It was contended that the impugned addition has resulted in double taxation of the same income. An explanatory note on capital gains, setting out the factual details and manner of computation, was stated to have been filed before the appellate authority. The learned AR, therefore, prayed that the Assessing Officer be directed to re- verify the facts on record and delete the impugned addition.

We have carefully considered the facts on record, the assessment order, the impugned order of the ld. CIT(A), and the submissions of the learned AR.

The addition of Rs. 13,46,813/- has been made by the Assessing Officer solely on the basis of an inadvertent admission made by the assessee during the course of assessment proceedings, without undertaking a holistic verification of the return of income, computation of capital gains, and the supporting records already available on file. It is well settled that an admission, though relevant, is not conclusive and cannot override the correct factual and legal position emerging from the record. Taxation has to be in accordance with law and on real income, and not merely on the basis of an erroneous or mistaken admission.

We further find merit in the assessee's contention that sustaining the impugned addition would lead to double taxation of the same capital gains, which is impermissible in law. The ld. CIT(A), instead of examining the issue on merits and verifying whether the income in question had already been offered to tax under section 112A of the Act, rejected the assessee's claim primarily on procedural grounds and on the premise that the assessee had admitted the mistake during assessment proceedings. Such an approach, in our considered view, is not sustainable.

On the facts of the present case, once it is demonstrated that the gains arising from the transfer of 5,00,000 units had already been offered to tax as long-term capital gains, no further addition could have been made by treating the same amount again as short-term capital gains under section 111A of the Act. The impugned addition, therefore, lacks factual foundation.

Accordingly, we set aside the impugned order of the ld. CIT(A) on this issue and restore the matter to the file of the Assessing Officer with a direction to verify the assessee's claim, after examining the return of income, computation of capital gains, and the supporting records, and to delete the addition of Rs. 13,46,813/- made under section 111A of the Act, if it is found that the said income has already been offered to tax as long-term capital gains. Therefore, this ground is allowed for statistical purposes. Ground No. II - Short grant of TDS credit amounting to Rs. 15,76,346/-

The assessee has challenged the short grant of TDS credit of Rs. 15,76,346/-. It was submitted that the assessee had offered the corresponding income to tax in the return of income for the relevant assessment year. However, while passing the assessment order under section 143(3) read with section 144B of the Act, the Assessing Officer allowed TDS credit of Rs. 1,16,95,21,997/- as against the total TDS claimed, resulting in short grant of credit.

The ld. AR submitted that the assessee is legally entitled to the TDS credit under section 199 of the Act read with Rule 37BA of the Income-tax Rules, 1962, and prayed that the Assessing Officer be directed to verify the details and allow the correct credit.

We find that the issue relating to grant of TDS credit is purely factual in nature and requires verification of Form 26AS, TDS certificates, and reconciliation with the income offered to tax. The lower authorities have not undertaken such verification in detail.

In such circumstances, and in line with settled judicial principles, the matter deserves to be restored to the file of the Assessing Officer for proper verification.

The issue relating to short grant of TDS credit amounting to Rs. 15,76,346/- is restored to the file of the Assessing Officer. The Assessing Officer shall verify the claim of the assessee in accordance with section 199 of the Act read with Rule 37BA of the Income-tax Rules, 1962, and grant appropriate credit after affording due opportunity of being heard to the assessee. This ground is allowed for statistical purposes.

The combined result is tabulated below: S1. No. ITA No. Assessment Year