PUNYASHILA AUTOMOBILES,HOSHANGABAD vs. ITO2, ITARSI

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.”

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)

We have heard learned Representatives of both sides and carefully perused the case-record.

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:

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:

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.

In reply, Ld. AR agreed to the Ld. DR’s proposal.

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.