Mudiali Club Vs ITO (ITAT Kolkata)
Blanket Disallowance of Expenses Not Permissible u/s 143(1): ITAT Kolkata Quashes CPC Intimation for Audit Report Delay
In Mudiali Club vs. ITO, Ward-1(4), Exemption (ITA No.2443/KOL/2025, AY 2018-19), the Kolkata ITAT “C” Bench allowed the Assessee’s appeal and quashed the intimation issued u/s 143(1) wherein the CPC had disallowed the entire expenditure merely on the ground that the audit report was not filed within the prescribed time.
The Tribunal first condoned a delay of 59 days in filing the appeal, noting that sufficient cause was shown and the Revenue raised no serious objection.
On merits, the Bench held that adjustments u/s 143(1) are limited to arithmetical errors and incorrect claims apparent from the return. A blanket disallowance of all expenses for non-filing or delayed filing of audit report does not fall within the scope of permissible adjustments under Section 143(1). If the Revenue intended to disallow expenses on such grounds, it would require a proper assessment and recomputation of income under normal principles, not a mechanical CPC adjustment.
The Tribunal further observed that there is no provision in law permitting wholesale disallowance of expenditure at the intimation stage. Consequently, the adjustment made by CPC was held to be without jurisdiction, and the intimation u/s 143(1) was quashed in entirety.
Accordingly, the appeal of the Assessee-club was allowed, granting complete relief.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
