2022 (9) TMI 1360 - AT - Income Tax

ITAT emphasizes importance of accurate Tax Audit Report, remits matter for fresh decision

M/s A.P. Knit Fab Versus The Asstt. Director of Income Tax, CPC, Bangaluru

M/s A.P. Knit Fab Versus The Asstt. Director of Income Tax, CPC, Bangaluru - TMI Issues:- Disallowance of bonus payable mistakenly mentioned in Tax Audit Report- Addition under section 36(1)(ii) of the Income Tax ActIssue 1: Disallowance of bonus payable mistakenly mentioned in Tax Audit ReportThe assessee appealed against the order of the Ld. Commissioner of Income Tax (Appeals) for the assessment year 2020-21. The Chartered Accountant mistakenly mentioned a bonus payable amount of Rs. 17,19,015 in the wrong column of the Tax Audit Report. The bonus had been paid within the stipulated time as per the law. The Ld. CIT(A) confirmed the addition made by the CPC, Bangalore, based on the Tax Audit Report. The assessee contended that the bonus was paid to employees under the Bonus Act, 1965, and not as profit or dividend. The Chartered Accountant filed a certificate clarifying the error, along with documents proving the payment of bonus before the due date. However, the Ld. CIT(A) upheld the disallowance, stating that modification in the Audit Report via a certificate is not permissible.Issue 2: Addition under section 36(1)(ii) of the Income Tax ActThe assessee, engaged in the business of manufacturing and trading of Hosiery goods, Yarn, and Knitted cloth, filed its return of income for the relevant year. The Assessing Officer made additions under various sections, including section 36(1)(ii) of the Income Tax Act. The CIT(A) deleted some additions but confirmed the addition under section 36(1)(ii). The addition pertained to the inadvertent error in the Tax Audit Report where the bonus paid to employees was wrongly mentioned as payable to them as profit or dividend. The assessee argued that it was a clerical error by the Chartered Accountant and should not result in disallowance under the Act. The assessee sought admission of additional evidence in the form of a revised Tax Audit Report, which was considered vital for a just decision. The ITAT allowed the application for additional evidence and remitted the matter back to the AO for fresh consideration based on the revised report.In conclusion, the ITAT allowed the appeal of the assessee for statistical purposes, emphasizing the inadvertent error made by the Chartered Accountant and the importance of the revised Tax Audit Report as crucial evidence for a fair decision. The matter was remitted to the Assessing Officer for a fresh decision, with the direction to consider the revised report and provide a fair opportunity of hearing to the assessee.