2023 (2) TMI 744 - AT - Income Tax

Tribunal remands case for further verification on Gratuity disallowance under Income Tax Act

The Tribunal remanded the case to the Assessing Officer for further examination and verification of details regarding the disallowance of Provision for ... Disallowance under section 43B - disallowance under section 40A(7) - double disallowance - tax audit report compliance in return - remand for verification and de novo adjudication - opportunity of being heardDisallowance under section 43B - tax audit report compliance in return - double disallowance - Whether the disallowance of Rs.12,16,766 under section 43B should be sustained or deleted on account of alleged prior disallowance under section 40A(7) resulting in double disallowance. - HELD THAT: - The Tribunal examined the tax audit report and the return of income and found a mismatch: the auditor reported Rs.12,16,766 as disallowable under section 43B while the assessee's return showed an aggregate disallowance of Rs.12,86,458 under section 40A(7) and nil against section 43B. Given this inconsistency and the assessee's claim that the section 43B amount was inadvertently not reflected under the correct head in the return, the Tribunal held that factual verification is required. If verification establishes that the provision of Rs.12,16,766 was already disallowed under section 40A(7) in computing income, the corresponding disallowance under section 43B would be a double disallowance and must be deleted; if not, the disallowance under section 43B may stand. The Tribunal therefore remanded the matter to the Assessing Officer for de novo adjudication and verification of records before any final order is passed, directing that the assessee be afforded a reasonable opportunity of being heard. [Paras 7]Remanded to the Assessing Officer for de novo adjudication and verification; if double disallowance is established, delete the section 43B disallowance.Disallowance under section 40A(7) - remand for verification and de novo adjudication - opportunity of being heard - Whether the amount of Rs.69,692, claimed by the assessee as paid during the year and included within the return disallowance under section 40A(7), is allowable. - HELD THAT: - The assessee contended that Rs.69,692 was actually paid during the year and thus should not be disallowed. The Tribunal observed that the tax auditor's report shows nil against clause relating to section 40A(7) and that factual inquiry is necessary to determine whether the payment was made in the relevant year. The Tribunal directed the Assessing Officer to verify the payment records and, if it is established that the amount was paid during the year, grant relief to the assessee in accordance with law. The AO must afford the assessee a reasonable opportunity to be heard before passing any order. [Paras 7]Remanded to the Assessing Officer for verification of payment of Rs.69,692 and grant of relief if payment during the year is established.Final Conclusion: The appeal is allowed for statistical purposes and the disputed issues concerning the section 43B disallowance and the claimed payment of Rs.69,692 are remanded to the Assessing Officer for de novo adjudication and verification, with directions to afford the assessee a reasonable opportunity of being heard. Issues:Challenge to order under section 250 of the Income Tax Act, 1961 for assessment year 2020-21 regarding disallowance of Provision for Gratuity under section 43B of the IT Act.Analysis:The appeal filed by the assessee challenges the order passed under section 250 of the Income Tax Act, 1961, for the assessment year 2020-21, regarding the disallowance of Provision for Gratuity under section 43B of the IT Act. The assessee raised grounds arguing against the disallowance made by the Commissioner of Income Tax (Appeals), Pune. The Tax Auditor suggested a disallowance of Rs. 12,16,766 under section 43B of the Act, which the assessee inadvertently did not account for while filing the return of income. The Commissioner upheld the disallowance, stating that the disallowance under section 40A(7) made by the assessee was different from the disallowance under section 43B. The Commissioner concluded that the disallowance under section 43B was correctly made based on the Tax Audit Report, and upheld the disallowance of Rs. 12,16,766.The assessee contended that the disallowance under section 43B would result in double disallowance as the assessee had already disallowed Rs. 12,86,458 under section 40A(7) of the Act. The assessee argued that an amount of Rs. 69,692 had been paid during the year and should not be disallowed. The learned Authorised Representative submitted that the assessee had inadvertently mentioned the disallowance under the wrong provision while filing the return of income. The Departmental Representative argued that the assessee did not file a revised return despite knowing about the mistake.Upon considering the submissions, the Tribunal found discrepancies between the Tax Audit Report and the return of income filed by the assessee. The Tribunal noted that the disallowance under section 43B as per the audit report was not accounted for in the return filed by the assessee. It was observed that the disallowance under section 40A(7) made by the assessee was different from the disallowance under section 43B as indicated in the audit report. The Tribunal remanded the issue to the Assessing Officer for further examination and verification of details. The Tribunal directed that if the disallowance under section 40A(7) had already covered the amount disallowed under section 43B, then the latter should be deleted to avoid double disallowance. The Tribunal also instructed that if the amount of Rs. 69,692 had been paid during the year, relief should be granted to the assessee accordingly. The Tribunal allowed the appeal for statistical purposes.In conclusion, the Tribunal remanded the issue to the Assessing Officer for a fresh adjudication after verifying the details to avoid double disallowance and ensure relief for the amount paid during the year. The Tribunal allowed the appeal for statistical purposes, providing an opportunity for the assessee to be heard before any final decision is made.