Factual Mistake committed by Tax auditor: ITAT restores Disallowance of employer contribution to PF/ESIC for verification [Read Order]

The Surat Bench of the Income Tax Appellate Tribunal (ITAT) restored the matter related to the disallowance of employer contributions to Provident Fund (PF) and Employees' State Insurance Corporation (ESIC) for fresh verification, citing a factual mistake committed by the tax auditor.

Binay Rambahal Singh (assessee) in which the Centralized Processing Centre (CPC) disallowed the contribution amount of the assessee to the PF and ESIC. The CPC disallowed the contribution of Rs. 1.53 Crores.

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Aggrieved by the CPC order the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) rejected the application filed by the assessee and confirmed the action of CPC.

Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT challenging the disallowance of Rs. 1,53,67,750 made by the CPC. The Counsel for the assessee contended that the disallowance was due to a factual error in the tax audit report where the tax auditor had mistakenly reported both employer and employee contributions under Column 20(b) of Form 3CB.

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The counsel highlighted that the actual amount of employee contribution to PF was Rs. 61,39,988 and ESIC was Rs. 7,16,036, while the remaining contributions of Rs. 67,25,981 and Rs. 17,85,745 pertained to the employer.

On the other hand, the counsel for the revenue argued that the CPC had processed the return based on the information provided in the tax audit report and that there was no apparent mistake in the CPC’s order.

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The two-member bench comprising Shri Pawan Singh (Judicial Member) and Shri Bijayananda Pruseth (Accountant Member) observed that the disallowance was the result of a factual error by the tax auditor in reporting contributions.

The tribunal noted that the assessee had presented bifurcated details of employee and employer contributions, which required factual verification by the Assessing Officer.

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The tribunal also observed that the additional ground of appeal raised by the assessee before the CIT(A) regarding the factual error was not considered during the appellate proceedings.

The tribunal restored the matter for fresh adjudication by the Assessing Officer and directed the assessee to provide requisite details during the verification proceedings. The appeal of the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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