Escorts Heart & Super Speicality Hospital Ltd. Vs ADIT (ITAT Delhi)
Audit Report Misread: Capital Fees Adjusted in Balance Sheet Can’t Be Disallowed-ITAT Checks CPC Overreach u/s 143(1)
Delhi ITAT, Delhi Bench ‘C’, in Escorts Heart & Super Speciality Hospital Ltd. Vs Asst. DIT (CPC) (ITA No.858/Del/2025; AY 2019-20; order dated 19-12-2025), allowed the assessee’s appeal and deleted CPC adjustment of ₹38.02 lakh made while processing return u/s 143(1). The adjustment related to stamp duty/ROC fees paid for increase in authorised share capital, which CPC treated as disallowable expenditure based on tax audit report.
The Tribunal noted that the amount was never debited to the Profit & Loss Account nor claimed as deduction in the return. Instead, it was directly adjusted against “retained earnings” under “Other Equity” in the balance sheet, a fact expressly recorded by the tax auditor himself in Form 3CD. Once no deduction was claimed in computation of income, there was no scope for disallowance or adjustment u/s 143(1). The Tribunal held that CPC as well as CIT(A) erred in mechanically relying on audit reporting without examining the balance sheet treatment. Accordingly, the entire adjustment was deleted and the appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal is filed by assessee against the order dated 17.12.2024 by Ld. Commissioner of Income Tax (A)/ADDL/JCIT(A)-1, Nashik [“Ld.CIT(A)”] in Appeal No. NFAC/2018-19/10019921 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] against the intimation order dated 25.10.2020 passed u/s 143(1) of the Act pertaining to Assessment Year 2019-20.
