Auditor's Incorrect Reporting of Income Already Credited to P&L Account Leads to ₹54,17,992 Addition: ITAT Orders Reassessment [Read Order]

The Allahabad Bench of Income Tax Appellate Tribunal ( ITAT ) ordered reassessment for the matter concerning the addition of Rs. 54,17,992 due to the Auditor’s misreporting of income which was already credited to the Profit and Loss Account.

SPS Automobiles, the assessee is a partnership firm engaged in automobile dealerships specifically the purchase and sale of tractors, filed its income tax return for the assessment year 2021-22.

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The assessee declared a total income of Rs. 3,54,460, but the Centralized Processing Centre ( CPC ), processed the return under section 143(1) of the Income Tax Act and increased the total income to Rs. 57,72,455 by adding Rs. 54,17,993.

The assessee delayed in challenging the assessment due to unawareness of the situation. The Advocate of the assessee misplaced the notice and forgot to tell the assessee about it. However, the tribunal condoned the delay citing the Supreme Court ruling in Rafiq vs. Munshilal, which observed that the litigant should not be penalized for the negligence of their advocate.

The assessee’s counsel submitted before the tribunal that the tax auditor mistakenly reported amounts already credited to the profit and loss account under the section for "Amounts not credited to the profit and loss account," causing the system to add them back during processing.

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The revenue counsel also acknowledged that the incorrect reporting of income led to double taxation and supported a review.

The two-member bench comprising Udayan Das Gupta, Judicial Member, and Nikhil Choudhary accountant Member heard the matter and recognized that the tax auditor had incorrectly reported the figures in the tax audit report, which led to the double addition of Rs. 54,17,992.

The tribunal also noted that the assessee was also at fault for approving the erroneous tax audit report without revision. The tribunal emphasized the need for thorough verification by the assessing officer ( AO ), stating that the error stemmed from a technical flaw in the audit report, which should have been corrected through a revised audit report.

Therefore, the tribunal remanded the matter back to the assessing officer for reassessment. The assessee’s appeal was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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