Senior Flexonics India P. Ltd. vs Assistant Commissioner Of Income Tax

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of the Additional/Joint Commissioner of Income Tax (Appeals)-2, Chennai [in short ‘the CIT(A)’] dated 17.11.2025, for Assessment Year 2021-22.

Ms. Taranjeet Kaur, appearing on behalf of the assessee submits that in the present appeal the assessee has assailed two adjustments made by Centralized Proceeding Center (CPC) in proceedings u/s.143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). In the first instance, addition of Rs.11,61,62,834/- has been made on account of alleged inconsistency in amount mentioned in the return at Sl. No. 5(a) of Part A-OI “items falling within the scope of section 28” and Tax Audit Report. The Id. Counsel for the assessee submits that the said reporting was only for disclosure purposes. The assessee has been consistently following ‘exclusive method of accounting’ for GST. The CIT(A) has accepted the contention of the assessee and has restored the issue to the Assessing Officer (AO) for examination. Likewise, the second adjustment made by CPC is on account of gratuity amounting to Rs.22,41,668/-. The said amount has already been disallowed suo motu by the assessee. This fact has also been recorded by the CIT(A). The ld. Counsel submits that, firstly, CPC could not have made the aforesaid adjustments under the provisions of section 143(1) of the Act. Secondly, after having recorded that the adjustments are unwarranted, the CIT(A) ought to have deleted the additions instead of restoring the matter back to the AO. She thus prayed for deleting of the aforesaid additions. She further pointed that consequent to adjustments made u/s.143(1) of the Act, the loss was reduced to Rs.57,27,863/-and thereafter further reduced to NIL in Schedule CFL without assigning any reason. She prayed for directions to the AO to re-compute loss in accordance with law.

Per contra, Shri Manoj Kumar, representing the Department submits that the CIT(A) has already granted relief to the assessee by restoring the matter to the AO, therefore, there should be no further grievance to the assessee.

Both sides heard, orders of the authorities below examined. I find that in the impugned order, the CIT(A) has recorded that the assessee has been consistently following ‘exclusive method of accounting’ for GST, which has been accepted in the past. If that be so, no adjustment in the impugned assessment year could have been made u/s 143(1)(a) of the Act. In any case, CPC is not empowered to make such adjustments under the provisions of section 143(1)(a) of the Act. In so far as disallowance u/s.43B of the Act on account of gratuity is concerned, the assessee has already disallowed the same suo motu. Therefore, both the adjustments made by CPC are directed to be deleted.

The Id. Counsel for the assessee has further submitted that the assessee had claimed a loss of approximately Rs.7.93 crore, which has been reduced to Nil. The AO is directed to re-examine the same in the light of the fact that the adjustments made u/s 143(1)(a) of the Act have been directed to be deleted. Accordingly, the loss shall be recomputed, in accordance with law.

In the result, appeal of the assessee is partly allowed in the terms aforesaid.