TWIN DISC POWER TRANSMISSSION PVT LTD,CHENNAI vs. ITO, CORP CIRCLE 1(3) CHE, CHENNAI

This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in Order No.ITBA/NFAC/S/250/2023- 24/1058041157 (1) dated 17.11.2023. The return of income for the assessment year 2020-21 was processed and intimation u/s.143(1) of the Income Tax Act, 1961 (hereinafter the ‘Act’) was issued by - 2 - Asst. Director of Income Tax, Central Processing Center (CPC), Bengaluru vide order dated 11.10.2022.

The only issue in this appeal of assessee is against the order of CIT(A)-NFAC not allowing opportunity of being heard to the assessee and has unilaterally accepted the rectification order passed by CPC, Bengaluru and not at all adjudicated anything on merits.

The brief facts of the case are that the assessee filed its return of income for the relevant assessment year 2020-21 on 28.02.2022. The CPC, Bengaluru processed the return and intimation u/s.143(1) of the Act was issued by making following additions:- 1) Gratuity provision written back in books u/s.43B – Rs.17,43,037/- 2) Leave Encashment u/s 43B – Rs.5,33,487/- The assessee moved rectification vide application dated 08.11.2022 and the CPC, Bengaluru passed order by observing as under:- The above return was processed u/s 143(1) vide DIN CPC/2122/A6/287606694 dated 11/10/2022.The assessee vide rectification request No 974147370081122 dated 08/11/2022 has stated that there is a mistake(s) in the said intimation u/s 143(1) which was apparent from record within the meaning of Seciton 154 of Income Tax Act, 1961.The details of the mistake(s) as per the assessee is as under:

Before CIT(A), the assessee made clear contention in regard to gratuity provision written back in books of accounts u/s.43B amounting to Rs.17,43,037/- stating that during the assessment year 2020-21 relevant to financial year 2019-20, the assessee has made a provision for gratuity which was duly disallowed u/s.43B of the Act for the respective year and was offered to tax. However, the Chartered Accountant in the tax audit report has reported the same in clause 26(b) instead of clause 26(aa) and therefore, the CPC without application of mind disallowed the entire amount written back of Rs. 17,43,037/- u/s.143(1) of the Act.

We have heard rival contentions and gone through facts and circumstances of the case. We have perused the order passed by CPC u/s.154 of the Act and also return processed u/s.143(1) of the Act. We also perused the order of CIT(A)-NFAC and facts narrated by assessee before CIT(A)-NFAC. We noted that the CIT(A)-NFAC has to give a finding on merits whether the assessee is eligible for - 5 - the claim of deduction in regard to gratuity and leave encashment. As the CIT(A)-NFAC has not at all adjudicated on merits and simpliciter non-speaking order without any iota of fact, we set aside the order of CIT(A)-NFAC and remand the same to the file of the CIT(A) for fresh adjudication. The CIT(A) is directed to pass a speaking order on the issues raised before him. In term of the above, the matter remanded back to the file of the CIT(A) and the appeal of the assessee is allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for statistical purposes.