TRANSPEK INDUSTRY LIMITED,VADODARA vs. DEPUTY COMMISSIONER OF NCOME TAX, CIRCLE-2(1)(1), VADODARA

This appeal by the Assessee is directed against the order dated 26-10-2023 passed by the Commissioner of Income Tax (Appeals)-[National Faceless Appeal Centre (NFAC)] [hereinafter referred as “CIT(A)”], which upheld the order under section 154 of the Income Tax Act, 1961 (the Act) passed by the CPC, Bengaluru.

Assessee has taken following Grounds of appeal: 1. The order passed by the Hon'ble CIT(A) is bad in law and on facts and therefore requires to be quashed.

The Hon'ble CIT(A) has erred in not directing the learned AO to give credit of Dividend Distribution Tax of Rs. 2,29,62,609/- paid by the appellant. Facts of the Case:

The Assessee filed its return of income for the assessment year 2020-21 declaring total income of Rs. 69,79,91,980/-. The return of income was processed by the CPC Bengaluru and intimation u/s 143(1) was sent to the assessee. The said intimation was not received by the assessee due to some technical issues. The CPC passed order u/s 154 giving the particulars of mistake (page no.23 of the order) as “DDT BBS Whitelisted cases”. While passing the order u/s 154 of the act, CPC made an addition of Rs.

Aggrieved by the order of the CIT(A), the Assessee is now in appeal before the Tribunal.

The learned Authorized Representative (AR) for the Assessee submitted that the CPC made the addition without any verification and merely based on the disclosures in the audit report and tax audit report. The AR contended that the addition under section 154 of the Act is unwarranted as there was no mistake apparent from the record, and the issue requires proper verification. The AR also argued that the CIT(A) passed the order without considering the merits of the case.

The learned Departmental Representative (DR) pointed out that the adjournment was granted, and fresh notice was issued to the assessee. Since no reply was received, the order was passed by the CIT(A) purely on the basis of material available on records.

On the ground number 2 and 3, the AR stated that the intimation u/s 143(1) was not received due to technical error and order u/s 154 dated 13- 07-2023 was passed by CPC suo-moto. We have gone through the material available on records and observed that the intimation u/s 143(1) with DIN – 2021202037031557573C which was sought to be rectified by CPC was passed on 29-12-2021. On 5-6-2023 assessee filed a grievance with CPC about non- receipt of intimation u/s 143(1) which was responded by CPC on 6-7-2023 with resolution remark “Dear Team, kindly look into the refund case”. The AR presented series of grievances raised with CPC which remain unresolved. Approach of CPC in resolving the grievance seems casual and need attention of the concerned authorities.

Now we deal with the addition made by CPC relating to contingent liabilities amounting to Rs. 10,25,58,110/-. It is observed that this addition was made by the CPC merely based on the disclosure in the clause 21(g) of the form 3CD i.e. tax audit report and without any verification. We have also noted that these amounts, as stated by the assessee, are not debited to profit and loss account.

It is a settled principle that for an addition to be made under section 154 of the Act, there should be a mistake apparent from the record. In the present case, the AO has not verified whether the contingent liabilities disclosed in the tax audit report are debited to profit and loss account and were actually liable to be added back to the total income of the Assessee.

As per sub-section (3) of section 154, any amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard. In the present case, CPC has not issued notice to give any such opportunity to the assessee and has passed the order u/s 154 as a unilateral exercise.

Ld. DR, agreed to this and stated that it is necessary to verify whether these amounts are debited to profit and loss account.

In view of the above discussions, we are of the considered opinion that the matter requires proper verification by the AO. Therefore, we set aside the order passed by CIT(A) and restore the matter back to the file of the jurisdictional AO for verification and adjudication afresh. The AO is directed to verify the nature of the contingent liabilities disclosed in the tax audit report and determine whether they are liable to be added back to the total income of the Assessee after giving the Assessee a proper opportunity of being heard. If on facts, it is found that this amount has never been claimed by the assessee in its profit and loss account, then the assessee may be granted appropriate relief after carrying out necessary verification.

Ground number 4 relates to credit of Dividend Distribution Tax of Rs.2,29,62,609/- paid by the appellant. The same is not pressed for the assessee, hence not adjudicated.