JILA SAHAKARI KENDRIYA BANK MARYADIT,KHARGONE vs. THE INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE DELHI, DELHI
What did the Tribunal hold?
The Tribunal held that an addition cannot be made if the auditors made a reporting mistake and the assessee did not claim the item as a deduction. They also noted that the issue of appealing against a Section 154 order instead of a Section 143(1) intimation had been settled in favor of the assessee by the same bench.
What were the facts?
The Assessing Officer (AO) made an addition of Rs. 13,26,71,110/- under Section 37(1) based on an auditor's report. The assessee argued that this reporting was a mistake and no such amount was debited in their Profit & Loss account. The CIT(A) dismissed the appeal on a technicality, stating the appeal should have been against the initial intimation under Section 143(1) and not the rectification order under Section 154.
What were the issues?
Whether an addition based on a mistaken auditor's report, where the amount was not debited by the assessee, is valid? Whether an appeal against a Section 154 rectification order is maintainable when the original cause of action arose from a Section 143(1) intimation?
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 08.02.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of rectification-order dated 05.07.2023 passed by learned CPC [“AO”] u/s 154 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2021-22, the assessee has filed this appeal on the grounds mentioned in Form No. 36 (Appeal Memo).
The issue involved in present case is an addition of Rs. 13,26,71,110/- made by AO u/s 37(1). Page 1 of 6
Jila Sahakari Kendriya Bank Mydt., Khargone AY 2021-22 3. Ld. AR for assessee carried us to the impugned order passed by CIT(A) which also narrates the factual background of case and decision of CIT(A); the same is re-produced below:
“4. CIT’s decision :
All the grounds of appeal are clubbed together for the sake of convenience and disposed as under : 4.1 The appellant has filed the return of income for A.Y. 2021-22 on 09.03.2022 declaring a total income of Rs. 22,50,11,180/-. The CPC processed the return u/s 143(1) of the Income-tax Act, 1961 on 26.12.2022 by making addition of Rs. 13,26,71,110/- u/s 37(1) of the Income-tax Act, 1961. Thereafter, the appellant filed a rectification application u/s 154 on 05.07.2023 before the CPC which has been rejected by the CPC and passed the order on 05.07.2023. The appellant has challenged the order u/s 154 in the present appeal. 4.2 In this case, the CPC had had made addition of Rs. 13,26,71,110/- u/s 37(1) of the Income-tax Act, 1961 during the year under consideration while processing the return u/s 143(1). The appellant could have filed an appeal against the intimation u/s 143(1) as per the provisions of the Act. However, it appears that the appellant has not filed an appeal against the intimation u/s 143(1). Thereafter, the appellant has filed an application u/s 154 before the CPC which has been rejected and hence the appellant has filed the present appeal against the order u/s 154. In this regard, it is stated that the original cause of action in the present case had arisen at the stage of the proceedings u/s 143(1) and not u/s 154. The appellant is trying to make a back door entry by filing an appeal against the order u/s 154, the original cause of action for which had arisen at an earlier point of time during the proceedings u/s 143(1). Therefore, as the original cause of action has arisen at the stage of 143(1), the issue cannot be adjudicated upon in the present appeal and further there is no mistake apparent from record at the stage of 154. Therefore, the grounds of appeal are dismissed.
5. In the result, appeal is dismissed.”
4. Thereafter, Ld. AR made two-fold submissions as under:
(i) That the AO has made addition of Rs. 13,26,71,110/- u/s 37(1) by picking a figure of Rs. 13,26,71,110/- reported by auditors of assessee in Jila Sahakari Kendriya Bank Mydt., Khargone AY 2021-22 Clause 21(g) of audit-report in Form No. 3CD (Page 91 of Paper-Book) which reads thus:
“21(g). Particulars of any liability of a contingent nature: 1. Disputed Income-tax payable – Rs. 13,26,71,110/-”.
But this reporting by auditors is a mistake. Ld. AR submitted that there is no debit entry of Rs. 13,26,71,110/- in assessee’s P&L A/c. There is, however, a debit entry of Rs. 6,25,00,000/- in the P&L A/c (Page 121 of Paper-Book) with the caption “Income-tax payable” which the assessee has already disallowed while computing taxable income and also reported in “Entry No. 55 – Provisions for tax and appropriations” section of Income-tax Return (Page 16 of Paper-Book). Thus, the impugned addition of Rs. 13,26,71,110/- has trigged only because of incorrect reporting by the auditors in Form No. 3CD but the fact remains that there is no such item debited/claimed by assessee in P&L A/c as deduction and therefore the addition deserves to be deleted.
(ii) That the CIT(A) has dismissed asessee’s appeal on a technical reason that the assessee has not filed appeal against the intimation u/s 143(1) in which the impugned disallowance was originally made by AO. According to CIT(A), the assessee has gone into rectification u/s 154 and thereafter filed appeal against order u/s 154 which is not acceptable. However, this technical issue raised by CIT(A) is already settled in favour of assessee by this very bench in the case of ITA 29/Ind/2024 Nancy Ann Miller
Jila Sahakari Kendriya Bank Mydt., Khargone AY 2021-22 Educational Trust Vs. Income-tax Officer, Ward-Exemption, Indore.
Therefore, the assessee deserves benefit of decision.
Ld. DR for revenue fairly agreed to the submissions of Ld. AR but proposed to remand this matter to the AO for factual verification.
After a careful consideration, we adjudicate this appeal as under:
(i) On perusal of audit-report (Form 3CD), it is clearly discernible that the auditors have made the reporting as narrated in earlier paragraph. We agree that no addition can be made to assessee’s income if the auditors have made a mistake in reporting but the assessee has not debited/claimed any such item in P&L A/c.
(ii) So far as the point raised by CIT(A) that the assessee ought to have appealed against the intimation u/s 143(1) and not against rectification- order u/s 154 is concerned, a similar dispute has already been settled by this very bench in ITA 29/Ind/2024 Nancy Ann Miller Educational Trust Vs. Income-tax Officer, Ward-Exemption, Indore; the relevant paras of order are as under:
“10(iii) The third and last point raised by CIT(A) is such that the assessee ought to have appealed against the intimation u/s 143(1) and not against rectification-order u/s 154. A similar dispute was decided by ITAT, Jodhpur in Akbar Mohammad Vs. CPC & 109/Jodh/2021 order dated 31.01.2022 wherein it was held thus:
“6.0 We have considered the submission of both the parties and perused the material available on record. In the present cases, it is not Jila Sahakari Kendriya Bank Mydt., Khargone AY 2021-22 in dispute that the assessee deposited the contribution of PF & ESI belatedly in terms of section 36(1)(va) of the Act. However, the said deposits were made prior to filing of return of income u/s 139(1) of the Act.
6.1 Of course, it is a case in point that the assessee did not file any appeal against the intimations passed us 143(1) of the Act and the Ld. Sr. DR is right to the extent that the assessee cannot be given relief for that reason. However, it is also a settled law that the assessee cannot be taxed on an amount on which tax is not legally imposable. Although, the assessee might have chosen a wrong channel for redressal of his grievance, all the same, it is incumbent upon the Tax authorities to burden the assessee only with correct amount of tax and not to unjustly benefit at the cost of tax payer. Therefore, in the interest of substantial justice, we deem it expedient to restore the issue to the file of the Assessing officer with a direction to pass appropriate orders deleting the addition / disallowance after duly considering the settled judicial position in this regard, which have been decided in the three cases as enumerated above in Para 5.”
Therefore, we hold that addition made by AO deserves to be deleted if the assessee has not debited/claimed in P&L A/c as deduction. However, the Ld. DR for revenue is very much correct in submitting that the matter should be remanded to the AO for verification. Hence, we remand this matter back to the file of AO for necessary factual verification and thereafter delete the addition if he is satisfied that the assessee has not debited/claimed the impugned sum in P&L A/c as deduction. Ordered accordingly.
Jila Sahakari Kendriya Bank Mydt., Khargone AY 2021-22 8. Resultantly, this appeal is allowed for statistical purpose.
Order pronounced in open court on 28.06.2024.
More judgments on Section 37(1)
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- Rajesh Maru, Mhow vs ITO-5(1), IndoreITA 839/IND/2025[2023-2024]Status: Disposed12 Oct 2026AY 2023-2024
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