Possible Double Disallowance of Bonus and Interest u/s 43B: ITAT Remands for Verification to Prevent Duplication [Read Order]

The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) has directed verification of potential duplication in the disallowance of unpaid bonus and interest under Section 43B of the Income Tax Act.

During scrutiny assessment for AY 2012–13, the Assessing Officer disallowed ₹31.38 lakh under Section 43B, comprising unpaid bonus and interest liabilities not cleared within the statutory time limit under Section 139(1).

The assessee company, Intas Biopharmaceuticals Ltd, contended that these items had already been disallowed in earlier years when they were first accrued, and the same liabilities continued in the balance sheet due to pending payment. It argued that disallowing them again in the current year amounted to duplication.

The Commissioner (Appeals) upheld the AO’s action, noting that the assessee had not produced supporting records from earlier years to demonstrate that the same sums had been previously disallowed. In the absence of verification, the CIT(A) affirmed that the AO’s treatment under Section 43B was justified. Aggrieved by this order, the assessee filed an appeal before the Tribunal.

The assessee submitted before the Tribunal that both the unpaid bonus and interest amounts were already reflected as disallowed expenses in the tax audit report and computation of income of earlier years.

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It stressed that these items were not claimed as deductions in the current year’s profit and loss account, and the AO failed to reconcile the figures with prior assessment data. The assessee argued that the intent of Section 43B is to ensure deduction only on actual payment, not to permit multiple disallowances of the same liability.

The Department argued that the onus lay on the assessee to substantiate the claim with supporting ledgers and tax computation records.

It maintained that the disallowance was correctly made since no evidence was filed before the AO or CIT(A) showing earlier-year disallowances or subsequent payments. The Revenue contended that the plea of duplication could not be entertained merely on assertion without verification.

The Tribunal observed that the issue involved a factual reconciliation of past and current disallowances and could not be decided conclusively without examination of earlier assessment records.

It noted that the assessee’s claim of duplication was plausible but required verification of the corresponding ledger accounts, audit reports, and prior-year assessment orders.

Accordingly, the two-member bench of Suchithra Kamble (Judicial Member) and Makarand Vasant Mahadeokar (Accountant Member) remanded the issue to the AO to verify whether the same liabilities were already disallowed in earlier years.

If duplication is established, the AO was directed to grant appropriate relief to prevent double taxation. The appeal was partly allowed for statistical purposes, with the Bench emphasising that Section 43B should be applied fairly to ensure no repetitive disallowance of the same liability.

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