SPS Automobiles Vs ITO (ITAT Allahabad)
The Income Tax Appellate Tribunal (ITAT), Allahabad Bench, in SPS Automobiles vs. ITO (ITA No. 106/Alld/2024, order dated 30.09.2024), dealt with two issues—condonation of delay in filing the appeal before the first appellate authority, and addition made by the Centralised Processing Centre (CPC), Bengaluru, while processing the return under Section 143(1) of the Income Tax Act, 1961.
The assessee, a partnership firm engaged in automobile dealership (purchase and sale of tractors), had filed its return of income along with the tax audit report (TAR) and audited financial statements declaring total income of ₹3,54,460. The CPC, however, processed the return under Section 143(1) and determined total income at ₹57,72,460, resulting in an addition of ₹54,17,992 and corresponding tax liability of ₹17.31 lakh. The addition was based on figures reported by the tax auditor in Clause 16(d) of Form 3CD under the head “Amounts not credited to the profit and loss account.”
The assessee contended that the said figures—comprising commission (₹4,66,301), interest income (₹2,85,619), and other income (₹46,66,072)—were already credited to the profit and loss account and had been duly considered in arriving at the returned income. Hence, their inclusion in Clause 16(d) was erroneous and led to double taxation. The assessee argued that this was a case of inadvertent reporting error by the tax auditor, and that CPC’s automated system had mechanically added back these figures during processing without manual verification.
Before ITAT, the Revenue acknowledged that the addition appeared to result from wrong reporting, though the Departmental Representative (DR) relied on the order of the first appellate authority (CIT(A)), who had dismissed the assessee’s appeal in limine. The CIT(A) had refused to condone the 440-day delay in filing Form 35, holding that sufficient cause for the delay was not shown.
The assessee explained that the delay arose because its counsel, Mr. Dinesh Mishra, Advocate, had inadvertently failed to file the appeal in time. He admitted in a sworn affidavit that the intimation order under Section 143(1) was received at his email ID but was misplaced by his staff, and the lapse was not communicated to the assessee. The appeal was filed immediately upon discovery of the omission.
The Tribunal took note of this explanation and held that the assessee should not be penalized for the professional negligence of its counsel. Referring to the Supreme Court’s landmark ruling in Rafiq and Another v. Munshilal and Another (AIR 1981 SC 1400), the Tribunal reiterated that a litigant cannot be made to suffer injustice merely due to the default of an advocate. The Apex Court had observed that once a party has engaged a lawyer and performed its obligations, it cannot be expected to monitor the lawyer’s conduct or court procedures. Guided by this principle, the ITAT condoned the delay in filing the appeal before the CIT(A).
On the substantive issue of addition, the Tribunal observed that the CPC’s system-generated processing was based solely on TAR data and had mechanically added the amounts due to erroneous reporting. However, ITAT also held that the assessee bore partial responsibility, as it had digitally approved the uploaded TAR without correction and failed to file a revised TAR upon discovering the error.
Considering these technical aspects, the Tribunal refrained from deciding the issue on merits and remanded the matter to the Assessing Officer (AO) for factual verification. The AO was directed to reconcile the figures in the audited accounts, ITR-5, and Form 3CD, and determine whether the disputed income had already been accounted for in the profit and loss account. The AO was instructed to provide the assessee with a reasonable opportunity of being heard.
Accordingly, the appeal was allowed for statistical purposes. The ruling reinforces the judicial principle that taxpayers should not suffer for professional lapses by counsel and underscores the need for careful validation of tax audit reports before submission, as automated CPC processing depends heavily on audit data accuracy.
FULL TEXT OF THE ORDER OF ITAT ALLAHABAD
