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Facts
The assessee filed its return of income, which was processed under Section 143(1) of the Income Tax Act. The AO enhanced the income by making additions related to provision for gratuity and disallowances under Section 43B. The assessee argued that these amounts were already accounted for in the ITR or tax audit report. The First Appellate Authority confirmed these additions.
Held
The Tribunal found that the addition regarding gratuity was made despite the assessee disallowing it and accounting for it in the ITR. Similarly, the disallowance under Section 43B was based on a mismatch between the ITR and tax audit report, which the assessee contended was due to reporting differences and not a disallowance. Therefore, the Tribunal decided to remit these issues back to the AO for fresh adjudication.
Key Issues
Whether the disallowances made by the AO for gratuity provision and under Section 43B were justified, considering the assessee's submissions and reporting in the ITR and tax audit report.
Sections Cited
143(1), 40A(7), 43B, 36(1)(va)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH, DELHI
Before: MS. MADHUMITA ROY & SHRI NAVEEN CHANDRA
The instant appeal filed by the assessee is directed against the order passed by the Ld. NFAC, Delhi dated 23.06.2023 arising out of intimation order dated 02.11.2019 passed by the CPC Bangalore, under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2018-19.
The assessee filed its return of income on 24.10.2018 declaring total income at Rs.4,96,39,170/- which was processed under Section 143(1) of the Act and intimation dated 02.11.2019 was served upon the assessee. In fact, by and under the said intimation order dated 02.11.2019 the income of the appellant has been enhanced to Rs.6,48,67,830/- upon making addition of Rs.1,52,28,657/- in the following manner:
Sr. Particular Amount (in Rs.) No. Income as per Income Tax Return 4,96,39,170/- Add: Additions: 1. Inconsistency in Provision for payment of 16,53,594/- gratuity [40A(7)] 2. Inconsistency in amount disallowed under 22,32,005/- Section 43B in any preceding previous year but allowable during the previous year 3. Contribution to any provident fund or 1,13,43,058/- superannuation fund or any fund set up under ESI Act or any other fund to the extent not credited to the employees account on or before due date [36(1)(va)] Total additions 1,52,28,657/- Total Income as per Order u/s 143(1) 6,48,67,830/-
The above addition was further confirmed by the First Appellate Authority. Hence, the instant appeal before us.
Heard the parties and perused the records. In fact, the addition on account of payment of gratuity amounting to Rs.16,53,594/- was made as per the tax audit report but it is the case of the assessee that the assessee itself disallowed the same in the ITR which is included in the disallowance of total amount of Rs.32,97,862/- made under Section 43B of the Act. The CPC while processing return identified the said amount of addition of Rs.16,53,594/- in the tax audit report and the income tax return and addition was made on the same amount. As the assessee has already made disallowance of Rs.16,53,594/-. Further disallowance made by CPC as above is not sustainable as the case made out by the assessee is supported by the following details:
Particulars Amount Tax Audit Report ITR Filed Correct Position Filed Provision for Gratuity 32,97,862/- Not required Column 11(b) of No reporting for AY 2018-19 Other Information required (P.B. 41) Paid during the year 16,44,268/- Clause 26(i)(B)(a) Column 10(b) of No reporting [P.B. 182] Other Information required (P.B. 40) Disallowed during the 16,53,594/- Clause 21(e) To be reported in year [P.B. 181] Column 9(c) of Other information
In support of the above contention made by the assessee the ledger account of provision of gratuity, the balance sheet, profit and loss account and ITR for Assessment Year 2018-19 has been filed before us. Under this facts and circumstances of the matter, we, therefore, find it fit and proper to remit the issue to the Ld. AO for deciding the same afresh as indicated hereinabove. This issue is, thus, allowed for statistical purpose. The Ld. AO is further directed to grant an opportunity of being heard to the assessee and to consider the evidence on record or any other evidence which the assessee may choose to file at the time of hearing of the matter.
2nd Ground:
Disallowance of Rs.22,32,005/- under Section 43B of the Act alleging inconsistency in the amount disallowed under Section 43B of the Act in preceding previous year. Such disallowance was made due to mismatch between ITR and tax audit report.
It is the case of the assessee that the assessee have paid liability of the same amount of Rs.22,32,005/- pertains to preceding previous year which has been reported in “Column 10th of Part A: OI-Other Information” of ITR. The details of the same are reproduced as under:
Sr. No. Particulars Amount (in Rs.) 10b Any sum payable by way of contribution to any provident 16,44,268/- fund or superannuation fund or gratuity fund or any other fund for the welfare of employees 10c Any sum payable to an employee as bonus or commission 5,87,737/- for services rendered Total 22,32,005/-
For the sake of convenience, the appellant company again provided relevant details in tabular form below for your kind reference:
Particulars Amount Tax Audit Report ITR Filed Correct Position Filed Bonus Payment 5,87,737/- Clause 26(i)(B)(a) Column 10(c) of No reporting during the year [P.B. 182] other information required in ITR (P.B. 41) Form Gratuity Payment 16,44,268/- Clause 26(i)(B)(a) Column 10(b) of during the year [P.B. 182] other Information (P.B.40)
In view of the above, the said disallowance is unjustified and unwarranted. It is requested before your honour to kindly consider the facts and circumstances of the case and delete the impugned addition.
In support of the same the assessee has furnished the following details before us:
Particulars Amount Tax Audit Report ITR Filed Correct Position Filed Bonus Payment 5,87,737/- Clause 26(i)(B)(a) Column 10(c) of No reporting during the year [P.B. 182] other information required in ITR (P.B. 41) Form Gratuity Payment 16,44,268/- Clause 26(i)(B)(a) Column 10(b) of during the year [P.B. 182] other Information (P.B.40)
Under this facts and circumstances of the matter this issue is disposed of by remitting the same to the file of the Ld. AO to consider the same afresh upon granting an opportunity of being heard to the assessee and upon considering the evidences on record or any other evidence which the assessee may chose to file at the time of hearing of the matter.
3rd Ground is not pressed. Hence, this ground is dismissed.
The appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 08.07.2025