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Judgment
PER MANISH AGARWAL, AM:
This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals)-1, Kolkata [ld. CIT(A)] dated 19.12.2024 u/s 250 of the Income Tax Act, 1961 (“the Act” in short) arising out of the intimation order passed u/s 143(1) of the Act dated 14.01.2022 for Assessment Year 2020-21.
Brief facts of the case are that the assessee has filed its return of income on 17.12.2020 declaring an income of Rs.28,32,920/-. The said return was processed by the CPC u/s 143(1) of the Act on 24.12.2021 wherein various adjustments / additions were made based on the Tax Audit Report (TAR).
Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A) who had dismissed the appeal of the assessee, therefore, the assessee is in Tribunal by taking following grounds of appeal:
“1.That the CIT(A) has erred in rejecting the revised Tax Audit Report (TAR) filed by the appellant, without appreciating the fact that the original TAR contained Incorrect figures and required correction in accordance with tax laws.
2.That the CIT(A) has failed to provide a proper opportunity for the appellant to explain the revision of the Tax Audit Report, and the rejection of the revised TAR is unjustified, especially when factual errors were present in the original TAR.
3.That the Learned Commissioner of Income Tax (Appeals) [CIT(A)] has erred in law and in facts by upholding the disallowance of Rs. 21,52,017/ on account of unpaid Leave Encashment, despite the fact that the appellant had already added the amount in the return of income and made proper disclosures.
4.That the CIT(A) has erred in upholding the disallowance of Rs. 21,16,563/- on account of Bonus Payable, despite the fact that the amount was already disallowed in the computation of income, and proper disclosure was made in the revised ITR.
5.That the CIT(A) has incorrectly upheld the addition of Rs. 7,57,487/- towards Employees' Contribution to PF & ESI under section 36(1) (va), without considering that the payments were made before the due date of filing the income tax return under section 139(1) and in light of various High Court decisions supporting the appellant's claim.
6.That the CIT(A) has erred in dismissing the appeal in its entirety without appreciating the merits of the case and without giving proper weightage to the explanations and evidence provided by the appellant.
7.That the appellant craves leave to add, alter, amend, or withdraw any of the grounds of appeal before or at the time of the hearing.”
Grounds of appeal No.1 & 2 are with respect to the rejection of the revised Tax Audit Report filed by the assessee. Before us, the Ld. AR for the assessee submitted that the assessee has filed Tax Audit Report alongwith return of income wherein certain errors were reported in para 26 relating to the amount disallowable 43B of the Act. Therefore, the assessee has filed the revised Audit Report on 24.01.2022. In the said revised report amount disallowable on account of leave encashment payable at Rs.21,52,017 was reduced to Rs.5,62,997/- and also the bonus payable which was incorrectly shown at Rs.21,16,563/-, was reduced to Rs.14,43,018/- in revised Tax Audit Report. The Ld. AR submits that CPC has already accepted the revised report and reduced the additions made on this account. However, the Ld. CIT(A) has rejected the revised Tax Audit Report by referring to the Rule-6G(3) of the Act as. the said Rule was introduced from AY 2021-22 and therefore, the assessee was not entitled for filing the revised return from AY 2021-22 and onwards. However, as there was no statutory bar in the Act to file the revised Tax Audit Report, therefore CPC itself has accepted the revised tax audit report, and reduced the disallowances as per revised Tax audit report. As per ld. AR, action of the Ld. CIT(A) in not accepting the revised Audit Report is not correct and the Tax Audit Report filed by the assessee be admitted. He prayed accordingly
Ground of appeal No. 3 is with respect to the confirmation of disallowance of Rs.21,52,017/- made on account of unpaid leave encashment. In this regard, the Ld. AR submits that assessee itself has added that this amount in the computation income based on which the return of income filed, however, CPC has again added back this amount to the total income of the assessee. The Ld. AR submits that even otherwise in the revised Tax Audit Report, the amount of disallowance was reduced to Rs.5,62,997/- which was accepted by the CPC in the revised Tax Audit Report and ITR and therefore, 7ld. AR requested to delete the addition.
Ground No.4 is with respect to confirmation of disallowance of Rs.21,16,563/- on account of bonus payable u/s 43B of the Act. Before us, similar arguments are made by the Ld. AR and submits that the amount was reduced by Rs.1,43,018/- and since the said amount was added back to the total income, no further disallowance should be made.
Ground No. 5 & 6 are with respect to the additions made of Rs.7,57,487/-towards Employees’ Contribution of PF & ESI u/s 36(1)(va) of the Act.
During the course of hearing, the assessee has raised one additional ground of appeal wherein the assessee has challenged the order of CPC passed u/s 143(1) without providing an opportunity to the assessee as provided in first Proviso to section 143(1)(a) of the Act. The Ld. AR submits that the issue being purely legal in nature, therefore, deserves to be admitted in view of the judgment of the Hon’ble Supreme Court in the case of NTPC Limited vs. CIT 229 ITR 383 (SC). On careful consideration of the additional ground of appeal taken by the assessee, it is observed that the said ground is purely legal in nature and, therefore, the same be admitted for adjudication. In support of additional ground, the Ld. AR for the assessee submitted that in terms of first proviso to Section 143(1) before making adjustment, the CPC is required to issue an intimation to the assessee of proposed adjustment and should provide 30 days’ time to the assessee for making response to the same. However, in the instant case, neither any such intimation of proposed adjustments was issued to the assessee nor assessee was provided with any statutory time limit for response. Therefore, he prayed that the order passed by the CPC u/s 143(1) is bad in law and liable to be quashed. In this regard, reliance is placed on the judgment of the Hon’ble Bombay High Court in the case of Bax India Ventures Pvt. Ltd. v. CPC (183 taxmann.com 395 and further in the case of Rallis India Pvt. Ltd. vs. CPC reported in [2026] 183 taxmann.com 176 (Bombay) and further on the judgment of the Co-ordinate Bench of ITAT, Delhi in the case of Samsung C and T Corporation India (P.) Ltd. vs. DCIT reported in [2025] 176 taxmann.com 764 (Delhi Trib.). It is thus prayed that the order so passed without providing the opportunities to the assessee as provided under the statute is bad in law and, therefore, liable to be quashed.
On the other hand, the Ld. Sr. DR vehemently supported the order of the lower authorities and requested for confirmation of the orders.
Heard both the parties and perused the materials available on record. In the instant case before going into grounds of appeal taken on merits, we first take up the additional ground of appeal raised by the assessee wherein the assessee has challenged the validity of the order passed u/s 143(1)(a) of the Act on the ground of not providing any opportunity as per the Act. Before going further, we may refer to first and second proviso as to section 143(1)(a) of the Act are reads as under:
“Provided that no such adjustment shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:
Provided further that the response received from the assessee, if any shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:]
As per the first proviso, pre-intimation of the proposed adjustments should be sent to the assessee and it is compulsory before making any adjustment under the section 143(1)(a) of the Act. Further, the assessee should be allowed minimum time of 30 days for making response during which there is a bar under the Act to pass the order making any adjustment as observed in the instant case, no such intimation was issued to the assessee by the CPC before making adjustment in the order passed u/s 143(1)(a) of the Act. In this regard, we may refer the judgment of Hon’ble Bombay High Court in the case of Bax India Ventures (P.) Ltd. vs. CPC (supra) wherein the Hon’ble High Court by placing reliance on the judgment of the Hon’ble Court on Rallis India Ltd. vs. CPC (supra) has held that the CPC has to issue intimation as contemplated under the first proviso to section 143(1)(a) before passing the order u/s 143(1(a) making the adjustment in the hands of the assessee. Similar view was taken by the Coordinate Bench of Delhi Tribunal in the case of Samsung C and T Corporation India (P.) Ltd. vs. DCIT. Considering the aforesaid judgment of the Hon’ble Bombay High Court and the Co-ordinate Bench we hold that the adjustments in the intimation order passed u/s 143(1)(a) of the Act and, therefore, we allow the additional ground of appeal and quashed the intimation order so passed.
Since, we have allowed the additional ground of appeal and quashed the order intimation order, therefore, the other grounds of appeal taken on merits became academic, thus, not adjudicated.
In the result, the appeal filed by the assesse is allowed.