Henna Industries Pvt Ltd Vs ADIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, allowed an appeal filed by Henna Industries Pvt. Ltd. and directed the deletion of an addition of Rs. 9,30,705 made by the Centralized Processing Centre (CPC) under Section 143(1) of the Income-tax Act, 1961. The sole issue in the appeal for the Assessment Year (A.Y.) 2022-23 was the adjustment made by the CPC based on a perceived disallowance of expenditure under Section 43B of the Act, which reduced the assessee’s claimed business loss.
Background and Clerical Error
Henna Industries Pvt. Ltd. filed its return of income with a Tax Audit Report under Section 44AB. The CPC subsequently issued an intimation under Section 143(1), reducing the assessee’s carry forward loss by disallowing Rs. 9,30,705 as expenditure under Section 43B. Section 43B of the Act mandates that certain deductions, like payments of tax, duty, cess, fees, and employee contributions to welfare funds, are only allowed in the year of actual payment, regardless of the accounting method, though an exception is provided if payment is made before the due date for filing the return of income.
The assessee argued that the disallowance was a result of a typographical or clerical error made by the auditor’s staff while filing the Tax Audit Report (Form No. 3CA). Specifically, the amount was wrongly entered in column 26(i)(B)(b) instead of 26(i)(B)(a), which led the CPC to automatically trigger the disallowance based on the data mismatch in the report. The assessee pointed out that they had already disagreed with the proposed adjustments in their reply to the Section 143(1)(a) notice.
