ITC Infotech India Limited Vs DCIT (ITAT Kolkata)
The ITAT Kolkata allowed the assessee’s appeal against the order of the Joint Commissioner of Income Tax (Appeals) concerning disallowances under Section 43B of the Income-tax Act.
The assessee’s return for AY 2021-22 was processed under Section 143(1), wherein deductions aggregating to ₹11,25,44,273 under Section 43B were disallowed despite the tax audit report stating that the amounts, comprising bonus of ₹8,25,74,086, miscellaneous items of ₹71,09,943, and leave encashment of ₹2,08,60,243, had been paid during the financial year and were allowable. The assessee’s rectification application under Section 154 was rejected, and the CIT(A) dismissed the appeal, holding that the rectification order had merged with the subsequent assessment order passed under Section 143(3) read with Section 144B.
The Tribunal observed that the disputed amounts had been disallowed in earlier years for non-payment under Section 43B and became allowable in the relevant year upon payment, as also certified by the tax auditor. It further found that the subsequent scrutiny assessment merely adopted the income determined under Section 143(1) and did not examine or adjudicate the Section 43B disallowances. Accordingly, it held that the Section 143(1) intimation had not merged with the scrutiny assessment in respect of those unadjudicated issues.
The Tribunal set aside the CIT(A)’s order and directed the Assessing Officer to delete the disallowances. The assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal is preferred by the assessee against the order of the Learned Addl./Joint Commissioner of Income Tax (Appeals), Kochi (hereinafter referred to as the “Ld. JCIT(A)”], dated 03.10.2025 for the Assessment Year (AY) 2021-22.
2. The only issue raised by the learned Authorized Representative (ld. AR) of the assessee during the course of hearing is against the order of ld. CIT(A) upholding the order passed by the Assessing Officer (In short, ‘the AO’) u/s 154 of the Income-tax Act, 1961 (In short, ‘the Act’), which in turn arises from the intimation passed u/s 143(1) of the Act wherein payments covered u/s 43B of the Act aggregating to Rs.11,25,44,273/- were not allowed despite the fact that the same were paid during the financial year and duly reported by the tax auditor in the tax audit report.
3. The facts of the case in brief are that the assessee filed its return of income on 31.03.2022, declaring total income of Rs.597,52,93,915/-, which was processed by the AO, CPC u/s 143(1) of the Act wherein the AO disallowed the impugned claim by the assessee u/s 43B of the Act of Rs.11,25,44,273/- despite the fact that in the tax audit report, the tax auditor has stated the same to be allowable in para 10 of the tax audit report. We note that the said ground comprises of Rs.8,25,74,086/- in respect of bonus paid during the year, Rs.71,09,943/- in respect of miscellaneous items and Rs.2,08,60,243/- on account of leave encashment claim. The assessee moved a rectification application against the said order of the AO u/s 143(1) of the Act, but the same was rejected. The assessee filed an appeal before the ld. CIT(A) and the ld. CIT(A) also dismissed the appeal of the assessee by noting that rectification order against which the present appeal has been filed has merged with the subsequent assessment order dated 26.12.2023 passed u/s 143(3) r.w.s. 14B of the Act and thus, the present appeal against the rectification rejection order dated 15.11.2022 is treated as infructuous and hence dismissed.
4. After hearing the rival submissions and perusing the materials available on record, we note that the assessee has disallowed three items in the earlier assessment years on account of non-payments u/s 43B of the Act. We note that these items were paid during the year and accordingly, the assessee claimed the deduction in terms of section 43B of the Act. We also note that the tax auditors have also reported the same to be related to the previous assessment years, which were disallowed earlier but allowable during the year as the same were paid during the year. We, further observe from the assessment order that the assessment order dated 26.12.2023 passed u/s 143(3) r.w.s. 144B of the Act that the income has been assessed by taking the income as order passed u/s 143(1) of the Act at Rs.6,08,78,38,190/- and therefore, the objection of ld. CIT(A) with regards to the intimation u/s 143(1) of the Act having been merged with the assessment order is not correct and cannot be accepted so far as the payments made u/s 43B are concerned. In our opinion, the AO has not dealt with the said disallowances made by the AO, CPC while faming the assessment. Therefore, the assessee is legitimately entitled to challenge in appeal before the ld. CIT(A), which is filed against the rectification order passed by the AO.
5. It is also undisputed that these payments were disallowed in earlier years for non-payment in terms of section 43B of the Act. We note that during the year, assessee has made payments in respect of three items and accordingly, claiming the same as deduction is correct, which have also been certified by the tax auditor in the tax audit report. Accordingly, we set-aside the order of ld. CIT(A) on this issue and direct the AO to delete the disallowances made. The appeal of the assessee is allowed.
6. In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 16/07/2026.
