Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A (SMC
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
Present for: Appellant by : Shri Siddharth Jhajharia, AR Respondent by : Shri Susanta Saha, Sr.DR Date of Hearing : 26.09.2024 Date of Pronouncement : 20.11.2024 O R D E R
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), ADDL/JCIT(A)-1,Nashik (hereinafter referred to as “the Ld. CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2018-19 vide Appeal No. ITBA/APL/S/250/2024-25/1066330128(1) dated 02.07.2024.
Grounds of appeal raised by the assessee are as under:
“1. For that in view of the facts and in the circumstances Ld. CIT(A) erred in affirming the disallowance of Rs.6,62,454/- towards provision for gratuity without appreciating the fact that the appellant had duly paid the impugned sum and Rs.5,84,005/- should have been further allowed in the computation of income and as such it may be held accordingly.
Dulichand Motors Pvt. Ltd., AY: 2018-19 2. For that in vie3w of the facts and in the circumstances Ld. CIT(A) was wholly unjustified in affirming the action of the AO, CPC in restricting the brought forward business loss and in view of the facts and in the circumstances it may be held accordingly.
3. For that your petitioner craves the right to put additional grounds and/or to alter/amend./modify the present grounds at the time of hearing.
We have heard the rival contentions and also perused the material available on record and the paper book filed.
Ground No.3 is general in nature and does not require any adjudication.
Ground No.1 is against the order of the Ld. CIT(A) in confirming the disallowance of Rs.6,62,454/- towards provision for gratuity without appreciating the fact that the assessee had paid the impugned sum and further Rs.5,84,005/- which should have been allowed in the computation of income.
Brief facts of the case as culled out from the order of the Ld. CIT(A) are that the assessee had filed its income tax return on 29.10.2018 u/s.143(1) of the Income Tax Act,1961 for the assessment year 2018-19 vide acknowledgment number 354860711291018, declaring taxable income of Rs. Nil/-. Aforesaid return was processed u/s 143(1) of the Act vide DIN: CPC/1819/A6/1901876588 for the AY 2018-19. The CPC, Bengaluru has made adjustment u/s 143(1) of Rs. 1,477/- and disallowed the amount of gratuity u/s 40A of Rs. 6,62,454/- vide intimation u/s 143(1) dated 10.06.2019.
In the course of the appeal before the Ld. CIT(A), the assessee gave an overview of the circumstances of the case, which is as under: “Your Petitioner is a company engaged in the business of purchase and sale of motor car and its accessories. For the AY 2018-19, income tax return of your petitioner-company was filed on 29.10.2018 declaring total income of NIL after claiming brought forward loss of Rs. 8,59,529/-. Later on 15.03.2019 a communication was received from CPC u/s 143(1)(a)(iv) in respect of proposed adjustment/disallowance of Rs. 1,477/- on account of Dulichand Motors Pvt. Ltd., AY: 2018-19 depreciation claimed u/s 32. On perusal of such intimation vis-a-vis return of income filed it was found that the proposed adjustment was correct, however, the time to file revised return was till 31.03.2019 only hence, no revised return could be filed. Later, on 10.06.2019 the said return was processed and the total income was assessed at Rs.6,63,930/- after allowing brought forward loss for Rs.8,59,529/- as was claimed in the return of income though the proposed adjustment was for Rs.1,477/- only. On perusal of an annexure attached to intimation u/s. 143(1) it appears that an upward adjustment of Rs.6,62,454/- was made on account of provision for gratuity disallowable u/s. 40A as point no. 9f of Part A-Ol of return of income filed. It may kindly be appreciated that during the FY 2017-18 provision of gratuity made in books of accounts for Rs.6,62,454/- as against which the actual payment made by the company was for Rs.12,46,459/- duly reflected in Note No. 25 attached to audited accounts of the assessee company and hence Rs.6,62,454/- should have been added and Rs.12,46,459/- should have been reduced from net profit as per Profit & Loss account while computing taxable business income. The only upward adjustment without considering the downward adjustment in computing business income as per intimation u/s. 143(1) is wholly unjustified, illegal and bad in law. Moreover, any such adjustment without giving any opportunity of being heard is wholly unjustified, illegal and bad in law and is liable to be deleted. Even otherwise and without prejudice the assessee company has b/f loss and unabsorbed depreciation duly reflected in schedule CFL and UD which was also not allowed to be adjusted against the income computed u/.s. 143(1) as the loss was allowed to be set off to the extent of Rs.8,59,529/- as was claimed ignoring the fact that as per petitioner the income was computed for Rs.8,59,529/- only and hence the balance available were carried forward.”
After considering the submissions of the assessee, the Ld. CIT(A) observed and held as under: “5.3 Ground no.2 is related to disallowing a sum of Rs. 6,62,454/- being provision for gratuity. On the fact of the case and submission made by the appellant it is observed that as per the Actuarial Report the Provision for Gratuity during the Assessment Year 2018-19 to be charged to the Profit and Loss A/c is Rs. 6,62,454. The same has been disallowed by the Tax Auditors in the Tax Audit Report as 'Payment of Gratuity not allowable u/s 40A(7) amounting to Rs. 6,62,454/-. S. No. Date of Nature of Amount in Name of the Permanent payment payment Rs. payee Account Number of the payee, if available (e) Provision for payment of gratuity not allowable under section 40A(7) 662454 (f) Any sum paid by the assessee as an employer not allowable u/s. 40A(9)
Dulichand Motors Pvt. Ltd., AY: 2018-19 Accordingly, the CPC has disallowed this amount of provision for gratuity not allowable u/s 40A(7) of the Act. In this connection the power of the CPC u/s. 143(1) of the Act is reproduced as under:- 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments, namely:- (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii)disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv)disallowance of expenditure 97 [or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under 98 [section 10AA or under any of the provisions of Chapter VI-A under the heading "C.-Deductions in respect of certain incomes", if the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 1 which has not been included in computing the total income in the return: In view of the facts of the case, it is observed that the action of the CPC in disallowing a sum of Rs. 6,62,454/- being provision for gratuity is justified within the provisions of Section 143(1) of the Act. Therefore, the addition made by the CPC is upheld. The ground raised by the appellant is dismissed.”
9. The assessee contended that the gratuity of Rs.12,46,459/- was paid during the year and was asked to furnish details of the employees to whom the gratuity was paid. In this regard a chart was filed. Since the assessee had made the provision for gratuity, the same is not allowable; however, the gratuity actually paid is allowable as per the provisions of the Act. Therefore, on this limited issue, the order of the Ld. CIT(A) is set Dulichand Motors Pvt. Ltd., AY: 2018-19 aside to the Ld. AO, who shall verify the claim of the assessee and allow necessary relief for the gratuity actually paid during the year. The assessee is directed to file necessary evidence for the payment before the Ld. AO.
As regards ground no. 3, it is contended that the Ld. CIT(A) was wholly unjustified in confirming the action of the Ld. AO and restricting the carried forward business loss. In this regard, Ld. CIT(A) in para 5.4 has held that the same is consequential to the ground relating to the deduction for gratuity payment and, therefore, this ground was not adjudicated and dismissed. Since the assessee made a claim that the carried forward business loss was not correctly allowed it was incumbent upon the Ld. CIT(A) to give a finding in this regard which has not been done. Accordingly, on this issue also, Ld. AO is directed to verify the carried forward loss as per record and allow the same in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purposes.