Case Law Details
Maruti Enterprise Vs ADIT(CPC) (ITAT Rajkot)
The case of Maruti Enterprise versus the Assistant Director of Income Tax (CPC) (ITAT Rajkot) revolves around the disallowance of a deduction under section 43B of the Income Tax Act, 1961. Here’s a detailed summary of the order:
Maruti Enterprise filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, concerning the intimation generated under section 143(1) of the Income Tax Act for the Assessment Year 2019-2020.
The only issue raised by the assessee was the disallowance of Rs. 47,83,396/- in the intimation generated under section 143(1) of the Act.
The disallowance was made because the deduction claimed by the assessee under section 43B of the Act was not matching with the information provided in the tax audit report. Consequently, the amount was added to the total income of the assessee.
The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the decision of the Assessing Officer (AO).
Before the ITAT, the Authorized Representative (AR) of the assessee argued that the deduction was disallowed merely due to a mismatch in the tax audit report, even though the deduction was legitimately claimed based on actual payments made. The AR contended that genuine claims of the assessee should not be denied solely on the basis of discrepancies in documents, especially when all necessary details were available to the revenue authorities.
On the other hand, the Departmental Representative (DR) supported the decisions of the authorities below.
The ITAT observed that the disallowance was primarily based on the discrepancy between the deduction claimed by the assessee and the information in the tax audit report. However, the ITAT emphasized that the tax audit report, while significant, cannot be the sole determinant for denying a genuine claim of the assessee.
Citing a ruling by the Hon’ble Gujarat High Court in the case of S.R. Koshti vs. CIT, the ITAT underscored that legitimate deductions entitled to the assessee should not be denied even if there are mistakes made by the assessee. The court emphasized the obligation of tax authorities to assist taxpayers and ensure that only legitimate taxes due are collected.
Based on this principle, the ITAT held that the legitimate deduction claimed by the assessee under section 43B on a payment basis should be allowed, especially when other evidence on record supported the claim. Therefore, the ITAT directed the AO to delete the addition made to the income of the assessee.
In conclusion, the ITAT allowed the appeal of the assessee, emphasizing that genuine claims should not be denied solely on technical grounds. The order was pronounced on 20/03/2024 in Ahmedabad.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
The captioned appeal has been filed at the instance of the Assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi, arising in the matter of the intimation generated under s. 143(1) of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2019-2020.
2. The only grievance raised by the assessee is that the Ld. CIT(A), erred in confirming the disallowance of Rs. 47,83,396/- in the intimation generated u/s 143(1) of the Act.
3. In the present case, the assessee has claimed deduction u/s 43B of the Act in the computation of income amounting to Rs. 47,83,396/- which was disallowed in the intimation generated u/s 143(1) of the Act dated 04/01/2021. It was disallowed on the reasoning that the claim made in the computation of income was not matching with the tax audit report. Thus, the addition was made for the sum of Rs. 47,83,396/- to the total income of the assessee.
4. Aggrieved assessee preferred an appeal to the Ld. CIT(A), who has also confirmed the order of the AO.
5. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
6. The Ld. AR before us filed a paper book running from pages 1 to 77 and contended that the sum of Rs. 47,83,396/- was disallowed in the AY 2018-19 on account of non-payment in pursuance to the provision of section 43B of the Act. However, the same was claimed as deduction in the year under consideration on payment basis. But the same was disallowed on account of mismatch in tax audit report. As per the Ld. AR a genuine claim of the assessee cannot be denied merely on account of mismatch in the document. As per the Ld. AR all the details were available before the revenue about the disallowance made in the earlier AY and details of payment made in the year under consideration and therefore the same should have been allowed as deduction.
7. On the other hand, the Ld. DR vehemently supported the order of the authorities below.
8. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the basis of making the disallowance is that such deduction was not claimed in the tax audit report. To our understanding, the tax audit report is a significant piece of evidence/ document but based on that the genuine claim of the assessee cannot be denied especially in the circumstances when other details are available on records. As such the assessee has claimed deduction u/s 43B of the Act on payment basis and therefore in our considered view, the same should have been allowed by the authorities below. We note that the Hon’ble Gujarat High Court in the case of S.R. Koshti Vs. CIT reported in 276 ITR 165 has held as under:
Section 43B deduction cannot be denied merely for non-claim in tax audit report
18. The position is, therefore, that, regardless of whether the revised return was filed or not, once an assessee is in a position to show that the assessee has been over-assessed under the provisions of the Act, regardless of whether the over-assessment is as a result of assessee’s own mistake or otherwise, the CIT has the power to correct such an assessment under section 264(1) of the Act. If the CIT refuses to give relief to the assessee, in such circumstances, he would be acting de hors the powers under the Act and the provisions of the Act and, therefore is duty-bound to give relief to an assessee, where due, in accordance with the provisions of the Act.
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20. A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. This Court, in an unreported decision in case of Vinay Chandulal Satia v. N.O. Parekh, CIT [Spl. Civil Application No. 622 of 1981 dated 20-8-1981], has laid down the approach that the authorities must adopt in such matters in the following terms:
“The Supreme Court has observed in numerous decisions, including Ramlal v. Rewa Coalfields Ltd. AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah Municipality AIR 1972 SC 749 and Babutmal Raichand Oswal v. Laxmibai R. Tarte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt.”
9. From the above, it is revealed that the income of the assessee should not be over assessed even if there is a mistake made by the assessee. As such the legitimate deduction for which the assessee is entitled should be allowed while determining the taxable income. In view of the above and after considering the facts in totality, we are of the view that the claim of the assessee cannot be denied as it was not reported in the tax audit report especially in the circumstances where other evidence is available on record suggesting the deduction in pursuance to the provisions of section 43B on payment basis is available. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 20/03/2024 at Ahmedabad.
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