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Facts
The Revenue appealed against the CIT(A)'s order concerning a disallowance made by the AO under Section 40A(7) of the Income Tax Act, 1961, for Assessment Year 2017-18. The AO's disallowance was based on the tax audit report indicating certain expenses as not allowable, but the assessee provided evidence of having paid gratuity and leave encashment.
Held
The CIT(A) appreciated the assessee's evidence, confirming that payments for gratuity and leave encashment were indeed made. The Tribunal upheld the CIT(A)'s decision, ruling that the disallowance under Section 43B was not warranted and was correctly deleted by the CIT(A).
Key Issues
Whether the disallowance of gratuity and leave encashment payments, based on a tax audit report, was justified under Section 40A(7) and Section 43B, when the assessee provided evidence of actual payments.
Sections Cited
143(1), 40A(7), 143(3), 43B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘B’: NEW DELHI
Before: SHRI GS PANNU & SHRI ANUBHAV SHARMA
This appeal has been preferred by the Revenue against the order dated 16.11.2023 of Commissioner of Income Tax (Appeal), ADDL/JCIT (A) Madurai, [hereinafter referred to as ‘Ld. CIT(A)’/] in ITA No.- 125/Del/2024 Coforge limited . Appeal No. CIT(A), Delhi-6/10065/2019-20 arising out of an appeal before it against the order dated 30.03.2019 passed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the Asst. Director of Income Tax, CPC, Bengaluru, (hereinafter referred as the Ld. AO) for Assessment Year 2017-18.
Heard and perused the records.
The AO had made a disallowance on the basis of fact that in Tax audit report certain amounts were shown as not allowable u/s 40A(7) of the Act. Assessee has claimed that it was inadvertent mistake. Admittedly, from the evidences submitted and appreciated by CIT(A), it is clearly evident /that the appellant had paid Rs.4,47,94,159/- towards Gratuity and Rs.2,37,581/- towards leave encashment during the previous year relevant to Assessment year 2017-18. If the tax audit report contains a negative i.e. that certain expenses e.g. are of not allowable nature then the AO can use that as ‘material’ for the purpose of assessment under section 143(3) of the Act, and the burden of proving its not so is on the assessee. So that way opinion of auditor is not conclusive. Here AO has not given any such opportunity to assessee and CIT(A) has ITA No.- 125/Del/2024 Coforge limited . drawn conclusion on evidences showing statutory deposits during the previous years. Thus, 43B disallowance was not warranted and is rightly deleted by CIT(A). The grounds of appeal have no substance. The appeal of Revenue is dismissed.
Order pronounced in the Open Court on 18.06.2024