2026 (1) TMI 740 - AT - Income Tax

Addition under section 36(1)(va) based on tax audit figures restored to AO for fresh verification and speaking order

Addition under alleged delayed deposit of employees' provident fund and ESI contributions was challenged as arising from erroneous entries in the original ... Addition u/s 36(1)(va) - Adjustment u/s 143(1) on delayed deposit of employees’ PF/ESI contributions based on figures appearing in the tax audit report (TAR) in Form 3CD - as argued entries reported in the original Form 3CD, which admittedly contained PF/ESI data that belonged not to the assessee, but to another client of the CA - HELD THAT:- The assessee has demonstrated that she had no employees liable under PF/ESI laws and the alleged PF/ESI amounts did not pertain to her business. It was also established that the Chartered Accountant of the assessee has accepted the error and filed a revised audit report on 13.07.2022 correcting the wrong figures and the revised Form CD has been duly uploaded and acknowledged on the Income tax portal. Once it is shown that the tax audit report contained an inadvertent error subsequently corrected through a validly uploaded revised report, principles of natural justice warrant that the matter be examined afresh by the jurisdictional Assessing Officer. Accordingly, in the interest of justice, the matter is restored to the file of the Jurisdictional Assessing Officer (JAO) to verify the revised Form 3CD, the assessee’s claim of having no employees, to determine the applicability of section 36(1)(va) of the Act and to pass a speaking order, after granting adequate opportunity of being heard. Appeal of the assessee is allowed for statistical purposes. Issues: Whether the addition of Rs.12,81,710 under section 36(1)(va) based on figures in the originally uploaded Form 3CD (tax audit report) that later proved to be erroneous should stand, and whether the revised Form 3CD uploaded subsequently by the assessees Chartered Accountant warrants fresh examination by the Assessing Officer.Analysis: The originally processed return and the adjustment under section 36(1)(va) were based solely on entries in the original Form 3CD which mistakenly contained another clients PF/ESI figures. The assessee demonstrated she had no employees liable to PF/ESI and the Chartered Accountant accepted and corrected the error by uploading a revised Form 3CD with acknowledgment. Given the correction on the income-tax portal and the absence of employees, principles of natural justice require that the jurisdictional Assessing Officer verify the revised report, examine the claim regarding applicability of section 36(1)(va), and pass a speaking order after granting opportunity of being heard. The matter therefore requires remand for fresh consideration rather than affirmation of the original automated adjustment.Conclusion: The appellate relief is in favour of the assessee to the extent that the matter is restored to the jurisdictional Assessing Officer for verification of the revised Form 3CD, determination of applicability of section 36(1)(va), and passing of a speaking order after granting adequate opportunity of being heard; the appeal is allowed for statistical purposes.Ratio Decidendi: Where a tax audit report uploaded on the income-tax portal is shown to contain an inadvertent error subsequently corrected by a duly acknowledged revised report, the taxing authority must re-examine the corrected report and decide afresh after affording the assessee an opportunity of hearing rather than mechanically sustaining an adjustment arising from the erroneous original upload.