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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘SMC’, LUCKNOW
Before: SHRI T. S. KAPOOR
This is an appeal filed by the assessee against the order of learned CIT(A), dated 26/12/2021 pertaining to assessment year 2017-2018. In this appeal the assessee has raised the following grounds:
“1. That the Income Returned should have been accepted.
That the Learned Lower Court erred in facts and legal aspects in not accepting application filed u/s 154 which should have been accepted.
The addition made by Learned Lower Court was not within the preview of adjustments which could be made u/s 143(1)(a).
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That the Learned Lower Court erred in facts and legal aspects of the case in confirming the addition made of Rs.28,68,551/- by invoking Sec 43B in respect of Service tax which has never been debited to profit and loss account. The same fact was also reported in Form 3CD para 26(B).
That the Learned Court erred in facts of the case by adding a sum of Rs.7,28,139.70/- being interest on Service Tax, when the same was already added back in the return which amount to double addition. 6. That the order passed is against the merit, circumstances and legal aspects of the case.”
Learned counsel for the assessee, at the outset, submitted that assessee is engaged in the business of civil contracts and is regularly maintaining books of account and the assessee along with the return of income for the relevant year also uploaded tax audit report. It was submitted that the auditor had reported certain disallowances u/s 43B of the Act in the audit report and in this respect my attention was invited to page 17 of the paper book where in the copy of audit report where the auditor had mentioned three items viz. interest on service tax, service tax and EPF as disallowable u/s 43B of the Act. Against column for service tax, it was mentioned by the auditor that this amount was not routed through the profit & loss account and regarding other two items, the auditor had mentioned that these were routed through profit & loss account. Learned counsel for the assessee submitted that in the computation of income the assessee itself had added back interest on service tax and EPF as is apparent from the computation of income placed at page 14 of the paper book and regarding the third entry of service tax, no adjustment was needed as the service tax was not routed through profit & loss account. It was submitted that the CPC in its order u/s 143(1)(a) added back the entire amount as disallowance u/s 43B and therefore, a rectification application was filed. However, CPC, without
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affording any opportunity and without providing any reasons, disallowed the amount in the rectified intimation and therefore, the assessee filed appeal before learned CIT(A) who also dismissed the appeal of the assessee by holding that there was no mistake apparent from record. Learned counsel for the assessee in this respect submitted that this finding of learned CIT(A) is not correct as the mistake is apparent from record as the computation of income along with complete audit report was available with the CPC and CPC should have captured the entire contents of audit report along with the entire contents of computation of income. It was submitted that if the audit report and computation of income is considered together, it is observed that assessee itself had added back to its income the two items of interest on service tax and EPF and as regards service tax, it was not required to be added back as it was not routed through profit & loss account and this fact is also mentioned in the audit report which was available with the CPC. Therefore, there existed a mistake apparent from record which needed to be rectified by CPC and if not by CPC, the learned CIT(A) should have allowed the appeal of the assessee which he has not done and therefore, it was prayed that the appeal filed by the assessee may be allowed.
Learned D. R., on the other hand, submitted that assessee did not reply to the intimation letter issued by CPC wherein such additions were proposed to be made and therefore, finding no response from the assessee, the CPC has rightly added back the amounts and since there was no mistake apparent from record, learned CIT(A) has rightly dismissed the appeal of the assessee.
I have heard the rival parties and have gone through the material placed on record. I find that assessee filed its return of income along with
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the audit report, a copy of which is placed in paper book pages 16 & 17. Page 17 is a copy of audit report wherein in respect of disallowance u/s 43B as reported by auditor, it is mentioned that three amounts were incurred in the previous year but were not paid before the due date of submission of return of income. Out of these three amounts, against two amounts it is mentioned that such amounts were routed through the profit & loss account and for the third item, it is mentioned that such item was not routed through profit & loss account. The assessee, in the computation of income, added back to its income the amounts which were routed through the profit & loss account which is apparent from page 14 of the paper book. As regards the third item of service tax, no adjustment was required to be made as this amount was not routed through the profit & loss account and therefore, was not disallowable u/s 43B of the Act. The auditor has mentioned the complete facts regarding the fact of not having paid these amounts along with the fact as to whether the entries were passed through profit & loss account or not. The CPC though allowed opportunity to the assessee for proposed adjustment to which the assessee did not reply and therefore, the CPC did the adjustment and made the addition in complete contrast to the facts available. The assessee therefore, filed application u/s 154 of the Act for correcting the mistake which it claimed to be mistake apparent from record and which the CPC and learned CIT(A) have held not to be mistake apparent from record. However, I find that since for two amounts the assessee itself had added back such expenditure to its income and this fact was available with the CPC through computation of income, therefore, the finding of CPC and learned CIT(A) that these amounts were not mistake apparent from the record is not correct. As regards the amount of service tax which has been mentioned in the audit report as not paid before the due date of furnishing of return of income. I find that the auditor had mentioned that
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this amount was not routed through the profit & loss account and therefore, in my opinion this amount was not required to be added u/s 43B of the Act. The learned CIT(A) has simply not allowed the appeal of the assessee by holding that section 143(1)(a)(iv) provides that disallowance of expenditure can be made as indicated in the audit report as CPC while processing u/s 143(1) must have captured the data from the audit report filed by the assessee. The learned CIT(A) has further recorded a finding that such amount was debited to the profit & loss account which fact is partly correct and partly incorrect. The assessee itself in the computation of income had added back two amounts which were required to be added u/s 43B of the Act and the third item was not required to be added u/s 43B as the same was not routed through profit & loss account. All these facts were available with the CPC and learned CIT(A) therefore, this is a mistake apparent from the record which is rectifiable u/s 154 of the Act and keeping in view these facts, I reverse the order of learned CIT(A) and delete the addition.
In the result, the appeal of the assessee stands allowed.
(Order pronounced in the open court on 27/04/2022)
Sd/. ( T. S. KAPOOR ) Accountant Member Dated:27/04/2022 *Singh
Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow Assistant Registrar