Case Law Details
Unimech Aerospace and Manufacturing Limited Vs ITO (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore, allowed the assessee’s appeal on the issue of deduction of bonus paid under Section 43B of the Income Tax Act, holding that a mismatch between the Income Tax Return (ITR) and Form 3CD alone could not justify denial of a deduction where the payment was genuine and supported by evidence.
The assessee, engaged in the manufacture of tooling for the aerospace, defence and power generation industries, filed its return of income for Assessment Year (AY) 2023-24 declaring a total income of ₹3,53,26,790. The return was processed under Section 143(1), and the Centralised Processing Centre (CPC) made an addition of ₹15,15,767, increasing the total income to ₹3,68,42,560.
The dispute arose from a provision of ₹17,91,225 created towards bonus payable for Financial Year 2021-22, relevant to AY 2022-23. The provision was shown as a long-term provision in the books of account, and since the amount remained unpaid during that year, the assessee itself disallowed the entire provision under Section 43B while computing income for AY 2022-23. Subsequently, the assessee paid ₹15,15,767 to employees on various dates between 3 October 2022 and 12 October 2022 and claimed deduction of the amount in the return for AY 2023-24.
The CPC disallowed the deduction on the ground that there was an inconsistency between the return of income and the tax audit report in Form 3CD. According to the CPC, Form 3CD did not disclose payment of the outstanding bonus, resulting in a mismatch. The Commissioner of Income Tax (Appeals) upheld the disallowance, observing that the tax audit report at serial number 26 did not support the assessee’s claim.
Before the Tribunal, the assessee produced financial statements, details of bonus payments, employee-wise break-up, bank statements evidencing payment, and Form 3CD. It submitted that the omission in Form 3CD was an error and that the actual payment had been made during the relevant previous year. The assessee argued that since the bonus had been disallowed in the earlier year under Section 43B and was subsequently paid, the deduction was allowable in the year of payment. It contended that the omission to mention the payment correctly in Form 3CD should not result in denial of a deduction otherwise admissible under the Act.
The Revenue argued that there was an inconsistency between the return of income and the tax audit report because Form 3CD did not disclose payment of the outstanding bonus, although the deduction had been claimed in the return. It also submitted that the assessee had been issued a notice before the adjustment was made and that the orders of the lower authorities were therefore justified.
The Tribunal examined the records and found that, as on 31 March 2022, the assessee had created a provision of ₹17,91,225 for bonus payable to employees and had disallowed the amount under Section 43B in AY 2022-23 because no payment had been made during that year. It noted that bonus relating to 41 employees was subsequently paid between 3 October 2022 and 12 October 2022, amounting to ₹15,15,767. The payments were supported by entries in the bank account and books of account.
The Tribunal observed that while filing the return for AY 2023-24, the assessee claimed deduction of the bonus paid. However, in Form 3CD, the assessee had incorrectly shown “Nil” against the details of pre-existing liabilities paid during the previous year, resulting in an inconsistency between the return and the tax audit report. It noted that this omission alone led to the CPC adjustment, which was affirmed by the CIT(A).
The Tribunal held that when the discrepancy was brought to the notice of the CIT(A), and it was evident from the records that the bonus had actually been paid during the year, the deduction ought to have been allowed. It concluded that the assessee was entitled to deduction of ₹15,15,767 in accordance with Section 43B and directed the Assessing Officer to delete the disallowance. Accordingly, the appeal was partly allowed.
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FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is filed by the UNIMECH AEROSPACE AND MANUFACTURING LIMITED [the Appellant/Assessee] against the order of Addl/JCIT(Appeals), Bhubaneswar [ld. CIT(A)] dated 12-Aug-2025 for the Assessment Year 2023-24 wherein the appeal filed by the assessee against the intimation passed u/s. 143(1) of the Income Tax Act, 1961 [the Act] dated 15.5.2024 by the CPC, Bengaluru was partly allowed.
2. The Assessee is aggrieved and the solitary issue involved is that the disallowance u/s. 43B of the Act of Rs.15,15,770 is not correct.
3. Briefly stated that the facts of the case show that assessee is engaged into manufacturing of tooling etc. for aerospace, defence and power generation industries, filed its return of income on 25.10.2023 at a total income of Rs.3,53,26,790. This return was processed u/s. 143(1) of the Act on 15.5.2024. The CPC made an addition of amount payable of Rs.15,15,767 and determined the total income of Rs.3,68,42,560. The fact of disallowance is that assessee has made a provision of Rs.17,91,225 towards bonus payable for FY 2021-22 relevant to AY 2022-23. This was classified s long term provision in the books of account. Thus assessee itself disallowed the above amount of Rs.17,91,225 u/s. 43B of the Act for AY 2022-23. Upto 3.10.2022 the assessee made payment to employees of Rs.15,15,767. Thus assessee claimed such bonus paid as deduction in the return of income for AY 2023-24. The CPC noted that there is inconsistency in the sum payable to employees as bonus claimed in the return of income and as per Audit Report Form 3CD and thus disallowed Rs.15,15,767. In this case, Form 3CD was prepared on 29.9.2023, return of income was filed on 1.10.2022 and bonus was paid by the assessee evidencing the employees wise break-up of bonus payment supported by the bank statement.
4. The assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) noted that the tax audit report at sl.No.26 does not support the claim of the assessee and therefore same was disallowed.
5. The assessee is in appeal before us.
6. The ld. AR furnished a paperbook containing 105 pages wherein the ld. AR referred to the financial statements, details of bonus paid, bank statement evidencing such bonus paid, copy of Form 3CD. It was submitted that merely because Form 3CD did not mention the details of payment of bonus, therefore there is an error. However, when the correct details are produced before the ld. CIT(A), the assessee should have been granted deduction at the correct amount. He submits that the outstanding bonus of the earlier year which was disallowed in the computation of earlier year has been paid to the employees during the current year, such payment is allowable to the assessee in the current year according to the provisions of section 43B of the Act. Omission in mentioning the correct detail in Form 3CD should have resulted into disallowance.
7. The ld. DR submitted that there is inconsistency in the return filed by the assessee and the tax audit report. In the tax audit report, the assessee did not mention that it is paid bonus outstanding of earlier year during this year. But in the return of income it claimed deduction, therefore there is inconsistency in the return of income and the tax audit report. The assessee was also given a notice prior to making an adjustment, therefore the order of the ld. lower authorities cannot be found fault with.
8. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. As on 31.3.2022 in the annual accounts assessee has made a provision of Rs.17,91,225 disclosed in Note No.2.04 under the long term provision. Thus for AY 2022-23 assessee made a provision for meeting payment of bonus to its employees of the above amount. While filing the return of income, assessee made disallowance of above sum under the provisions of section 43B of the Act as it did not pay any sum. The provision of bonus made by the assessee is relating to 41 employees. These employees were paid the above bonus on various dates starting from 3.10.2022 to 12.10.2022. Therefore, the bonus payable as on 31.3.2022 was paid upto 12.10.2022 of Rs.15,15,767. The payment of bonus to the employees is supported by entries of such payment in the bank account as well as in the books of account. For assessment year ended on 31.3.2023, the assessee filed its return of income wherein the assessee claimed deduction of Rs.15,15,767 as bonus payable to the employees for AY 2022-23 paid out in AY 2023-24. However, while filing the tax audit report, assessee was supposed to give this information at sl.No.26 of Form 3CD wherein the details of pre-existed liability paid during the previous year and outstanding during the previous year were shown as Nil. Thus admittedly the assessee in Form 25 did not mention the details of payment of bonus of Rs.15,15,767. Thus only there was inconsistency between the return of income filed by the assessee as well as the tax audit report in Form 3CD prepared by the assessee. The ld. CIT(A) confirmed the above adjustment of CPC. When the ld. CIT(A) was shown the above discrepancy, though he confirmed the action of the CPC, but if found that assessee is entitled to deduction of the bonus paid during the year, he should have allowed the claim of the assessee.
9. We find that the assessee is entitled to deduction of Rs.15,15,767 in accordance with the provisions of section 43B of the Act. Therefore, we allow the claim of the assessee and direct the ld. AO to delete the above disallowance. Thus, ground No.2 of the appeal of the assessee is allowed.
10. All other grounds are general or consequential in nature, does not require separate adjudication and therefore dismissed.
11. In the result, appeal filed by the Assessee is PARTLY ALLOWED.
Order pronounced in the open court on 04th June, 2026
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