The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) has held that deduction under the Income Tax Act cannot be denied due to wrong classification in Income Tax return ( ITR ).
National Contracting Company, the appellant/assessee the assessee filed its return of income on 18.12.2020 declaring a total income of Rs.38,10,910/-. The return of income was processed under section 143(1) of the Income Tax Act, 1961 (‘Act’). The CPC Bengaluru determined the total income and made disallowances. The assessee argued that CIT (A) erred in confirming the disallowance on the basis of the audit report in the intimation generated under Section 143(1) of the Income Tax Act.
The assessee has disclosed the gratuity paid of Rs. 79,25,442 as allowances under Section 43B in ‘Part-A OI Schedule under 10(b)’ instead of showing it under any other allowance ‘Schedule BP A-33’ Column in the Income Tax Return.
The assessee submitted that the amount has been incorrectly claimed as a deduction instead of being claimed under any other allowance. Since there was no reporting of such an amount by the auditor in its audit report in Form 3CD, CPC Bengaluru disallowed it while processing under Section 143(1).
The appellant filed a revised tax audit report and revised ITR-6 for AY 2020–21. The assessee, by rectification request, prayed to rectify the technical error. However, CPC Bengaluru has not acceded to the prayer of the assessee.
The assessee contended that the sum was disallowed in the AY 2020-21 for the reason that the assessee has disclosed the gratuity paid of Rs. 79,25,442/- as allowances under Section 43B in ‘Part-A OI Schedule under 10(b)’ instead of showing it under any other allowance, ‘Schedule BP A-33’ Column in the Income Tax Return.
The two-member bench of Manu Kumar Giri ( Judicial Member ) and Manoj Kumar Aggarwal ( Accountant Member ) has observed that inadvertent non-reporting in tax audit report by the auditor is bonafide when all details are available in ITR on records although such deduction was find mentioned in wrong classification in ITR as the discussed supra. Deductions based on the genuine claim of the assessee cannot be denied especially in the circumstances as narrated above. As such the assessee has claimed deduction under section 43B of the Act and the same should have been allowed by the authorities below.
While allowing the appeal, the Tribunal held that inadvertent non-reporting in a tax audit report by the auditor is bona fide when all details are available in the ITR on records, although such a deduction was found to be in the wrong classification in the ITR. The deductions based on the genuine claim of the assessee cannot be denied.
The ITAT set aside the finding of the CIT (A) and directed the AO to delete the addition made by him.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
