TAKENAKA INDIA PVT LTD,GURGAON vs. JCIT,CIRCLE-25(1), DELHI

Thus, aggrieved by the said order, the assessee is in appeal before the Tribunal by taking the following grounds of appeals:-

1. The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the action of AO CPC in disallowing the amount of Rs.40,44,267/- claimed as bonus paid under section 43B of the act in effect reducing the current year business loss by the same amount owing to the mismatch between the return of income (ROI) and tax audit report. 1.1 The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the action of AO CPC by not accepting the fact that the mismatch was because the amount of Rs. 40,44,267/- was shown as allowance in tax audit report of AY 2022-23 (immediate earlier Assessment Year) as it was paid on or before filing of the ROI but was inadvertently not claimed as allowance in ROI of AY 2022-23 (immediate earlier Assessment Year). The learned Commissioner of Income Tax (Appeals) has failed to take cognisance of the fact that the said amount was therefore claimed as allowance in the ROI of AY 2023-24 on payment basis. 1.2 The learned Commissioner of Income Tax (Appeals) in its order has erred both on facts and in law by disallowing the amount of Rs. 40,44,267/- claimed as bonus paid under Section 438 of the act, by completely misunderstanding the facts of the case by claiming that the bonus payment was made in FY 2021-22 (AY 2022-23 (immediate earlier Assessment Year)], and hence as per payment basis should be claimed by the appellant in AY 2022-23 (immediate earlier Assessment Year) and not in AY 2023-24. The Commissioner of Income Tax (Appeals) though has accepted the proposition of the appellant that the amount is entitled to be claimed on payment basis under section 43B of the act but has failed to understand that the bonus amount of Rs. 40,44,267/- was actually paid in FY 2022-23 (AY 2023-24), as duly reported in Clause 26(b) of the Tax Audit Report for AY 2022-23 and not in FY 2021-22 [AY 2022-23 (immediate earlier Assessment Year)].

2. The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the action of AO CPC in making an addition of Rs.1,10,13,000/which was Takenaka India Pvt. Ltd. vs. JCIT claimed as deduction during the year towards reversal of the provision created for payment to the employees as the said provision was already disallowed in the ROI of AY 2022-23 (immediate earlier Assessment Year), it being an unascertained liability. 2.1 The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law by confirming the action of AO CPC in not accepting the facts that the said provision was already offered to tax in the ROI of AY 2022-23 (immediate earlier Assessment Year) and also reported in the tax audit report under ICDS-1 as it was an unascertained liability. The learned Commissioner of Income Tax (Appeals) has failed to take cognisance of the fact that since the said amount was already disallowed in AY 2022-23 (immediate earlier Assessment Year), it was claimed as allowance in the ROI of AY 2023-24 on its reversal for which no disclosure was required in the Tax audit report and hence the mismatch arose. 2.2 The learned Commissioner of Income Tax (Appeals) has erred, both on facts and in law, in holding that the appellant did not disallow the provision for payment to employees amounting to Rs.1,10,13,000/- for FY 2021-22 [AY 2022-23 (immediate earlier Assessment Year)], and in incorrectly concluding that only an amount of Rs.1,10,60,854/-shown as "Provision for doubtful debts written back" was disallowed, further alleging that the appellant wrongly claimed this disallowance as relating to the provision for employee payments. In doing so, the learned CIT(A) has misinterpreted the appellant's submissions and failed disallowance of Rs.1,10,13,000/- towards provision for to recognize payment to employees was duly made and clearly reflected in the 'Other Information' and ICDS schedules of the Return of Income for AY 2022-23 (immediate earlier Assessment Year), thereby offering the said amount to tax.”

4. Heard both the parties and perused the materials available on record. At the outset, it is seen that both the issues relating to disallowance taken u/s 43B on account of bonus payable and provisions of payment to employees of Rs.1,10,13,000/-, it was claimed by the assessee that bonus was paid before due date of filing of return and it was related to the financial year ending of 31.03.2022 relevant to AY 2022-23. However, since the same was not claimed as expenses in the return filed for Ay 2022-23 thus the same was claiedm as expenses int eh year under appeal on payment basis. This amount was duly reported in the tax audit for Assessment Year 2022-23 to which bonus payable was charged to P&L A/c and offered for tax. Therefore, the CPC has disallowed the same being mismatch between return of income and tax audit report. The ld. AR submits that assessee claimed this amount as expenditure in the year under appeal though it was related to Takenaka India Pvt. Ltd. vs. JCIT preceding year as the same was paid during the year and no deduction was claimed in preceding year, therefore, the same is allowable in the year. The arguments put forth by the assessee appears to be convincing. Accordingly, we direct the AO to verify the fact that if no expenditure was claimed on this account in Assessment Year 2022-23 on account of bonus, the same be allowed in the year under appeal on payment basis. With these directions, this issue is partly allowed for statistical purposes. 4.1 Second issue is with respect to the addition towards the provisions of Rs. 1,10,13,000/-. As per the assessee, said amount was added back to the total income and offered for tax in the return of income filed for Assessment Year 2022-23. In the year under appeal, the said provision was written back in the books and credited to the Profit & Loss account and since the same was already offered for tax, deduction was claimed in the computation of income. This being the factual aspect we direct the AO to verify the fact narrated by the assessee and if it is found that the same is offered for tax in preceding year, no further addition is required to be made in the year under appeal. With this direction this issue is partly allowed for statistical purposes.