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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax, Appeals, Addl./JCIT(A) – 1, Chennai [‘CIT(A)’ in short] dated 23.09.2025 arising from the assessment order dated 28.10.2021 passed by DEL-C-(57)(1), Delhi under Section 143(3) of the Income Tax Act, 1961 (‘the Act’) concerning Assessment Year (A.Y.) 2020-21.
The grounds raised by the assessee are as under :
1.That the CIT(A) is erred in law by confirming the Order of AO passed u/s 143(1), which is bad in law and not as per the provision of Income Tax Act, 1961.
2.That the appellant was denied a fair opportunity to present additional evidence and clarifications, which were material to the adjudication of the issue.
3.The Ld. CIT (A) has erred in law and on facts in upholding the disallowance of ₹9,35,490/- made under section 36(1)(ii) on account of "Bonus and Leave Encashment," which was never claimed as expenditure by the appellant in the Profit & Loss Account. The disallowance, being based on an inadvertent reporting error in the Tax Audit Report, is unwarranted and unjustified.
4.The Learned CIT(A) erred in not appreciating that the entry made under Clause 20(a) of Form 3CD in the Tax Audit Report was a clerical error, inadvertently carried forward by the tax auditor. The said entry had no corresponding transaction or record in the appellant's books of accounts. The appellant had duly filed a revised Tax Audit Report to correct the mistake, and the revised report reflects the accurate financial position. The disallowance made on the basis of the erroneous entry is therefore unjustified. The appellant had duly explained and substantiated this mistake before the CIT (А), supported by the audited financial statements and reconciliation.
5.The Ld. CPC and CIT (A) have erred in making/sustaining a disallowance which is debatable in nature and requires further verification of facts. Such issues are outside the limited scope of adjustments permissible under section 143(1) (a).
6.The Ld. CIT (A) erred in disposing of the appeal without affording the appellant any opportunity for virtual hearing or personal submission, contrary to the mandate of section 250 and the guidelines governing Faceless Appeals. The order is, therefore, vitiated in law.
7.That the order is contrary to settled judicial precedents which distinguish between salary/bonus and dividend, especially when the payment is made for services rendered.
8.The appellant prays to add, alter, modify and withdraw any ground(s) before or at the time of hearing.”
Brief facts of the case are that the assessee is an individual engaged in the business of manufacturing of solder rods and iron. The Assessee electronically filed its Income Tax Return on 25.12.2020 declaring a total income of Rs. 75,00,640/-. An intimation issued under section 143(1) of the Act on 28.10.2021 wherein the learned AO has made a disallowance of Rs.9,35,490/- under section 36(1)(ii) of the Act on account of bonus & leave encashment. The assessee claims that this figure has been taken from Column No. 20 (a) of Form 3CD in the Tax Audit report which is a clerical error in the tax audit report. It is submitted that no such amount on account of bonus & leave encashment was paid or claimed as expenditure by the assessee. Further, such disallowance is debatable in nature hence beyond the purview of section 143(1). On appeal, the CIT(A) upheld the addition.
Being aggrieved by the order of the Ld. CIT(A), the Appellant has come before the ITAT.
At the outset, learned Counsel of the assessee stated that there was a clerical error in the entry being made under Clause 20(a) of Form 3CD in the Tax Audit Report. It is stated that the said entry has no corresponding transaction or record in the assessee’s books of account. Further, the assessee had duly revised the Tax Audit Report to correct the mistake, and the revised report reflects the accurate financial position. Therefore, the disallowance made on the basis of erroneous entry is not warranted under section 143(1)(a) of the Act.
Per contra, learned DR relied on the orders of the AO and CIT(A).
We have heard the rival submissions and perused the material available on record. We find that in the intimation under section 143(1) of the Act, a disallowance of Rs.9,35,490/- was made under section 36(1)(ii) of the Act on account of “Bonus and Leave Encashment”. We find that the assessee has claimed that this expense was never reflected in the Profit and Loss account of the assessee and the said disallowance is only based on an inadvertent error in the entry made under Clause 20(a) of Form 3CD of the Tax Audit Report. It is also the claim of the assessee that the assessee filed revised tax audit report which reflects the actual financial position. In such factual matrix, we are of the considered view that the issue be set aside to the file of the AO to verify the claim of the assessee and if found correct, carry out the necessary modification in the order under section 143(1) of the act.
In the result, appeal of the assessee in ITA No.7030/Del/2025 is allowed for statistical purposes.