Disallowance of ₹2.26 Lakh Bonus as Dividend Due to Audit Report Error: ITAT Deletes Addition Based on CA’s Certificate [Read Order]

The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the addition of ₹2.26 lakh made by the Assessing Officer (AO ), based on the Chartered Accountant’s (CA) corrective certificate, where bonus paid to employees had been wrongly reported as dividend in the tax audit report.

Ponnusamy Raja,appellant-assessee, through the counsel submitted that the bonus had been paid to the employees and was duly reflected in the paper book at page 16. It was explained that the Chartered Accountant, who carried out the audit under section 44AB of the Act, had by oversight wrongly certified the bonus as profit or dividend.

A corrective certificate from the Chartered Accountant was also furnished at page 17 of the paper book, and deletion of the addition was requested.

The Departmental counsel fairly accepted these submissions.

A 9-day delay had occurred in filing the appeal. The assessee submitted an affidavit seeking condonation, explaining the reasons for the delay. After considering the submissions of both sides and examining the affidavit, the Tribunal accepted the reasons as bona fide and held that they had genuinely prevented timely filing.

The delay was therefore condoned, and the appeal was admitted for adjudication.

The two member bench comprising S.S Viswanethra Ravi (Judicial Member) and S.R.Raghunatha (Accountant Member) heard both sides and reviewed the records. It noted that the Assessing Officer had disallowed ₹2,26,000 as bonus, treating it as profit or dividend, since the tax audit report had wrongly reported the amount and no supporting evidence was filed during assessment. The CIT(A) had also confirmed the disallowance.

The tribunal observed that the assessee later produced a certificate from the Chartered Accountant clarifying that the bonus was actually paid to employees and was wrongly reported in the audit report due to oversight. Relying on this certificate, the bench deleted the addition and allowed the appeal.

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