Bonus Paid Before Due Date Despite Audit Report Error: ITAT Deletes ₹14.03 Lakh Disallowance Citing Timely Payment [Read Order]

The Jaipur Bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the disallowance of Rs. 14,03,538/- towards bonus expenditure on grounds of timely payment before the due date of filing the return.

Rajasthan Knowledge Corporation Ltd. (assessee) filed its Income Tax Return ( ITR ) for Assessment Year (AY) 2018-19. The return was processed by the Central Processing Centre ( CPC ), resulting in an intimation, which included additions disallowance of Rs. 14,03,538/- for bonus amount and Rs. 5,172/- for employees' PF contribution deposited late.

The assessee filed a rectification application which was rejected by the Assessing Officer (AO). Aggrieved by the CIT(A)’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)].

The CIT(A) confirmed both disallowances and treated the bonus as not allowable under Section 43B due to perceived late payment of the Bonus and the PF under Section 36(1)(va) for delayed deposit.

Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The assessee submitted evidence including bank statements from Kotak Bank, ledger accounts for performance-linked award cum bonus, and TDS on salary, demonstrating that the bonus was paid before the due date of filing the ITR.

The assessee argued that the disallowance arose due to an error in the audit report, but actual payments were timely and compliant with Section 43B. For the PF, the assessee conceded the late deposit but challenged the applicability.

The two-member bench comprising Gagan Goyal (Accountant Member) and Narendra Kumar (Judicial Member) observed that the bonus payment was made before the due date of filing the return.

The bench noted that the CIT(A) erred in confirming the disallowance without appreciating the evidence of timely payment, despite the audit report discrepancy. The bench upheld the disallowance of Rs. 5,172/- for employee's PF contribution, as it was deposited late. It directed the Assessing Officer to recalculate the tax liability accordingly.

The Tribunal set aside the CIT(A)’s order on the bonus disallowance. The appeal of the assessee was partly allowed.

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