MULLEN LINTAS P.LTD (FORMERLY KNOWN AS LINEN ADVERTISING & COMMUNICTION P. LTD,MUMBAI vs. ASST CIT 7(2), MUMBAI

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ITA 7426/MUM/2016Status: DisposedITAT Mumbai16 November 2017AY 2005-063 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the bonus payments were actually made before the due date of filing the return of income. Therefore, the assessee had complied with the provisions of Section 43B, and no disallowance could be made.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 2,39,017/- as bonus payment to employees under Section 43B, initiating action under Section 154 without providing an opportunity to the assessee. The CIT(A) confirmed this addition.

What were the issues?

Whether the bonus payment made before the due date of filing the return of income is disallowable under Section 43B, and if the AO's action under Section 154 was justified without providing an opportunity to the assessee.

Which sections of the Income-tax Act were involved?

Section 43B,Section 154,Section 139(1),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “J” BENCH, MUMBAI

This appeal by the Assessee is arising out of the order of Commissioner of Income Tax (Appeals)-13 Mumbai, [in short CIT(A)] in appeal No. CIT(A)-13/DCIT-7(3)(2)/887/2015-16 dated 03-10-2016. The Assessment was framed by the Deputy Commissioner of Income Tax, Circle 7(2), Mumbai (in short DCIT) for the assessment year 2005-06 vide order dated 27-12-2007 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’).

M/s Mullen Lintas Pvt. Ltd (A.Y. 2005-06) 2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO under section 43B of the Act being bonus payment to the employees amounting to Rs. 2,34,017/- actually paid on 24-10-2005 i.e. before the due date of filing of return of income under section 139(1) of the Act i.e. filed on 31-10-2005. For this assessee has raised following ground No.2: - “”2. Addition under section 43B a) The learned CIT(A) erred in confirming the addition under section 43B of ₹. 2,39,017, being a rectification order under section 154. b) The learned CIT(A) failed to take into consideration that the payments to the employees were actually paid (i.e. on 24-10- 2005) before the due date of filing the return under section.139(1) (i.e. 31-1-2005).”

3.

We have heard the rival contentions and gone through the facts and circumstances of the case. Briefly stated facts are that the original assessment was completed under section 143(3) of the Act by the ACIT circle 7(2), Mumbai vide his order dated 27-12-2007. Subsequently, the AO suo moto took cognizance from the records that as per clause 21 of the tax audit report, bonus payable to employees amounting to Rs. 2,39,017/-is inadmissible under section 43B of the Act and therefore, he initiated action under section 154 of the Act and passed an order without providing any opportunity to the assessee. Accordingly, the AO added the payments of bonus to the employees under section 154 of the Act amounting to ₹ 2,39,017/-. Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the AO. Aggrieved, now assessee is in second appeal before Tribunal.

M/s Mullen Lintas Pvt. Ltd (A.Y. 2005-06) 4. We find from the facts of the case that vide notice dated 18-01- 2011, the AO proposed for rectification of mistake as under: -

Bonus payable to employees of ₹. 2,39,017/- (as per clause 21 of tax audit report) is inadmissible under section 43B of I.T. Act 1961.

Now before us, assessee filed a complete detail of bonus payable as on 31-03-2005 amounting to ₹ 2,39,017/- but paid the same as on 24.10.2005. For this assessee filed a copy of ledger account for FY 2005- 06 and these payments are made from 03-05-2005 to 24-05-2005. The bonus payments to the employees are actually paid on or before the filling of return of income by the assessee for the relevant AY 2005-06, eventuality the return of income was filed on 31-10-2005. It means that the assessee has complied with the provisions of section 43B of the Act and no disallowance can be made on this account. We reversed the orders of the lower authorities and allow this issue of assessee’s appeal.

5.

In the result, the appeal of assessee is allowed.

Order pronounced in the open court on 16-11-2017.

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