Rs 9.30 Lakh Disallowed Due to Clerical Error in Tax Audit Report: ITAT Allows Appeal and Deletes Addition [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the appeal of the assessee and deleted the Rs 9.30 lakh disallowance, that arose due to a clerical error in the Tax Audit Report.

Henna Industries Pvt Ltd, appellant-assesee, had filed its income tax return along with the Tax Audit Report under section 44AB on 28.10.2022, reporting a NIL income and claiming a refund of Rs 2,47,400.

Subsequently, on 17.01.2023, the assessee received an intimation under section 143(1) reducing the reported business and profession loss from Rs 1,84,91,663 to Rs 1,75,60,958 by disallowing expenses of Rs 9,30,705 under section 43B of the Act.

The assessee counsel argued that the adjustments had wrongly reduced the carry forward loss due to a typographical error in the Tax Audit Report, where column 26(i)(B)(b) was mistakenly used instead of 26(i)(B)(a). The assessee had opposed the adjustments under section 143(1)(a) in its reply dated 15.12.2022.

The counsel also stated that the intimation adjustments were beyond the powers of the CPC under Rule 8 of the Centralized Processing of Returns Scheme, 2011, which only covered routine processing and administration tasks.

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The counsel added that the Assessing Officer, CPC, Bangalore, made the disallowance without verifying documents and relied only on the Tax Audit Report, violating natural justice, and requested the adjustments be quashed.

The Departmental counsel did not dispute that the payments were made before the due date but asked that the matter be sent to the Assessing Officer for verification.

The two member bench comprising Madhumita Roy (Judicial Member) and Naveen Chandra (Accountant Member) considered the submissions and reviewed the relevant records. The assessee had submitted a reconciliation showing that deposits of Rs 57,952, Rs 6,18,078, Rs 81,381, and Rs 1,73,298 were made in April 2022.

The appellate tribunal accepted that a clerical error in Form No. 3CA, where amounts were entered in the wrong column, had caused the discrepancy. It held that the assessee should not be penalized for this mistake and found no need to refer the matter back to the Assessing Officer, as the payment details clearly confirmed the clerical nature of the error.

The tribunal directed the deletion of the addition made under section 143(1) of the Act and allowed the assessee’s appeal

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