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Facts
The assessee, a partnership firm, filed its return of income for AY 2016-17. The AO processed the return and made a disallowance of Rs. 13,95,474/- on account of partner's remuneration, which was confirmed by the CIT(A). The assessee contended that this was due to a reporting mistake in the return.
Held
The Tribunal agreed that the disallowance arose from an inadvertent reporting error in the return of income, not a denial of entitlement. Observing that a similar mistake in a subsequent year was rectified, the Tribunal decided to grant relief.
Key Issues
Whether a disallowance made due to a reporting error in the return of income, where the claim is otherwise allowable, can be sustained, and if the matter should be remanded for factual verification.
Sections Cited
40(b), 143(1), 250, 154
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आयकर अपीलीय अिधकरण, इंदौर Ɋायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE
BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER
ITA No.476/Ind/2025 Assessment Year:2016-17
Punyashila Automobiles, 01, Near Gupta Ground, Hoshangabad | बनाम/ Vs. | ITO-2 Itarsi (Assessee/Appellant) | (Revenue/Respondent) PAN: AAEFP7379K Assessee by | Shri Manoj Fadnis, AR Revenue by | Shri Ashish | Porwal, Sr. DR Date of Hearing | 18.12.2025 Date of Pronouncement | 08.01.2026
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order dated 26.03.2025 passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT(A)-11, Delhi ["CIT(A)"] u/s 250 of Income-tax Act, 1961 ["Act"], which in turn arises from intimation of assessment dated 22.08.2017 passed by learned CPC, Bengaluru ["AO"] u/s 143(1) of Income-tax Act, 1961 ["the Act"] for Assessment-Year ["AY"] 2016- 17, the assessee has filed this appeal on following grounds:
"1. That the Ld. CIT(A) has erred on facts and in law by confirming the demand of Rs. 5,36,238/-.
- 2. That the Ld. CIT(A) has erred on facts and in law by confirming the disallowance of the credit of partners remuneration of Rs. 13,95,474/-. - 3. The Ld. CIT(A) has ignored the fact that the remuneration on which demand is confirmed is already taxed as the partners have offered such amount for taxation in their income tax return of concerned financial year. Again raising demand on the same amount will result in double taxation. - 4. That the Ld. CIT(A) has erred on facts and in law as this mistake was apparent from record. And this was raised as a concern to CPC saying that it is mistake apparent from record which can be rectified if permission granted to the appellant by the department. - 5. That the Ld. CIT(A) has erred on facts and in law as the books of accounts are audited of the appellant and such audited books were furnished before the Ld. CIT(A) as well. But such books were also ignored and not taken into consideration. - 6.That the Ld. CIT(A) has erred on facts and in law by ignoring the fact that the similar mistake was done in the subsequent AY 2020-21, 2021-22. But in such years the CPC as considered such mistake AMD provided an opportunity to the appellant to rectify such mistake without passing order and such mistake was rectified in the subsequent years for the same matter." - 2. The background facts leading to present appeal are such that the assessee, a partnership firm, filed return of income of AY 2016-17 declaring a total income of Rs. 7,80,315/- (rounded off to Rs. 7,80,320/-). The AO processed return through an intimation dated 22.08.2017 assessing total income at Rs. 21,75,789/- (rounded off to Rs. 21,75,790/-) after making a disallowance/addition of Rs. 13,95,474/- [The AO also denied credit of advance-tax of Rs. 45,000/- to assessee but the CIT(A) has already resolved this issue and the same is not a part of present appeal before us]. The assessee contested the disallowance made by AO in first-appeal before CIT(A)
but did not get any relief. Now, the assessee has come before us in next assailing the orders of lower-authorities.
- 3. We have heard learned Representatives of both sides and carefully perused the case-record. - 4. The grievance of assessee in present appeal is such that the assessee being a partnership firm paid remuneration of Rs. 13,95,474/- to its partners and claimed such payment as deduction u/s 40(b). However, in the return of income filed to Department, the figures of remuneration paid to partners had mistakenly gone at "O", therefore the AO has made impugned disallowance. Ld. AR submitted that except for this, there is no other reason for the impugned disallowance made by AO. The relevant portion of return of income where the wrong reporting had gone, as referred by Ld. AR during hearing, is scanned and re-produced below:
S.No. | Name and address | Percent | PAN | Designated | Status | Rate of | Remuner Name | Address | City | State | Pin Code | age of share (if deter minate) | Partner Identifi cation Number, in case partner in LLP | (see instruction no. 6(iii)) | ation paid/ payable 1 | Puny ashila Rag huwa nshi | 1 Near Gupta Gr ound | HOSHANGABA D | MADHYA PR ADESH | 461001 | 50 | ADWPR28 92N | INDIVID UAL | 12 | 0 2 | PRIT | GROUND | HOSHANGABA D | MADHYA PR ADESH | 461001 | 50 | ADWPR28 93P | INDIVID UAL | 12 | 0
Ld. AR next referred the audited P&L A/c and Balance-Sheet of assessee-firm available at Page No. 43 & 47 of Paper-Book from which it is evident that the assessee paid remuneration to partners as under:
1 | Punyashila Raghuwanshi | 6,97,736.26 2 | Pritam Singh Rabhuwanshi | 6,97,736.26 Total | 13,95,472.52
Ld. AR thereafter submitted that due to inadvertent wrong reporting in the return of income, the assessee's statutory claim of deduction cannot be denied. He also pointed out that in subsequent AY 2021-22 also, a similar mistake had again occurred due to which the AO made similar disallowance in the intimation u/s 143(1) but, subsequently, the AO has made rectification u/s 154 and deleted disallowance. To show this, Ld. AR filed copies of intimation u/s 143(1) and rectification-order u/s 154 passed by AO for AY 2021-22; we re-produce below the first pages of these two documents for an immediate reference:
- 7. With these submissions, Ld. AR requested bench to delete the impugned disallowance made by AO in present year. - 8. Replying to same, Ld. DR for revenue requested that he is not against deletion of disallowance as requested by Ld. AR. But his proposal would be to remand this issue back to the file of AO for factual examination and satisfaction at AO's level. - 9. In reply, Ld. AR agreed to the Ld. DR's proposal. - 10. We have considered above submissions. After a careful consideration, we agree in principle that the claim of assessee cannot be denied for mere mistake of reporting in the form of return when the same is allowable under the provisions of Act and as submitted by Ld. AR, the AO has also deleted similar disallowance made in AY 2021-22 through rectification-order passed u/s 154. Therefore, the assessee deserves relief in present year also. However, as per consensus generated by learned Representatives of both sides in open court, we remand this matter back to the file of AO. We direct the AO to delete the disallowance after factual examination.
Resultantly, this appeal is allowed for statistical purpose.
Order pronounced by putting up on notice board as per Rule 34 of ITAT Rules, 1963 on 08/01/2026
Sd/- Sd/-
(SIDDHARTHA NAUTIYAL) (B.M. BIYANI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore
िदनांक /Dated : 08/01/2026
Patel/Sr. PS
Copies to: (1) The appellant
(2) The respondent
(3) CIT (4) CIT(A)
(5) Departmental Representative
(6) Guard File
By order
Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore