2025 (8) TMI 353 - AT - Income Tax

Rectification Allowed for Double Disallowance Error Under Section 143(1) and Section 36(1)(va)

The ITAT Ahmedabad held that the CIT(A) erred in not allowing the rectification of disallowance made under section 143(1). The tribunal found that the ... Disallowance made in the intimation u/s.143(1) - not allowing the rectification - HELD THAT:- CIT(A) has erred on facts while not considering that in the intimation u/s. 143(1) under which section the disallowance has been made in the intimation and the amount tallies with the disallowance made by the appellant company in the intimation u/s 143(1) wherein under para no. 6(f) wherein the disallowance made by the appellant company is shown u/s 36(1)(va) and similarly the same has been accepted u/s 143(1) column also. Similarly, in the intimation u/s 143(1) disallowance made by the appellant company is mentioned as nil and as per intimation u/s 143(1) has been disallowed, from the same page no. 6 of the intimation u/s 143(1) it is seen and verifiable that same amount has been added/disallowed twice of Rs. 58,153/-. We hold that the disallowance made in the intimation u/s.143(1) and not allowing the rectification filed by the assessee is required to be allowed. ISSUES: Whether disallowance for late payment/deposit of PF/ESI shown under incorrect section in the return of income constitutes a technical or substantive error affecting tax liability.Whether the disallowance under section 36(1)(iv) instead of section 36(1)(va) or section 43B leads to double disallowance and double taxation.Whether the rectification application filed to correct the disallowance section should be allowed when the Assessing Officer rejects it.Whether the disallowance made in the intimation under section 143(1) is justified when the same amount appears to have been disallowed twice. RULINGS / HOLDINGS: The Court held that the incorrect classification of the disallowance under section 36(1)(iv) instead of section 36(1)(va) or section 43B was a 'technical and venial breach and mistake' and did not amount to a substantive default, as the disallowance was in fact made.The Court found that disallowance under two different sections for the same amount results in 'double disallowance and double taxation,' which is impermissible.The Court ruled that the rectification application filed by the assessee to correct the section under which disallowance was claimed should be allowed, as the Assessing Officer erred in rejecting it.The Court held that the disallowance made in the intimation under section 143(1) was not justified because the same amount of Rs. 58,153/- was disallowed twice, once under section 36(1)(va) and again elsewhere, leading to double disallowance. RATIONALE: The Court applied the provisions of the Income Tax Act, 1961, particularly sections 36(1)(iv), 36(1)(va), 43B, and 143(1), focusing on the principle that disallowance must be correctly classified but cannot result in double taxation.The Court emphasized that a 'technical and venial breach' in classification does not negate the fact that disallowance was made, and the revenue cannot benefit from double disallowance on the same amount.The Court relied on the rectification mechanism under the Income Tax Act to correct errors apparent from the record, underscoring that rejection of such rectification without merit constitutes an error.No dissenting or concurring opinions were noted; the Court uniformly found that the Assessing Officer and Commissioner of Income Tax (Appeals) erred in their approach to the disallowance and rectification application.