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Case Law Details

Case Name : National Contracting Company (India) Private Limited Vs DCIT (ITAT Chennai): ITA No.455/Chny/2024
Appeal Number : 24/06/2024
Date of Judgement/Order : 2020-2021
Related Assessment Year :
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National Contracting Company (India) Private Limited Vs DCIT (ITAT Chennai)

Introduction: The Chennai Income Tax Appellate Tribunal (ITAT) recently delivered a significant ruling in the case of National Contracting Company (India) Private Limited vs. Deputy Com-missioner of Income Tax (DCIT). The decision, pronounced on June 24, 2024, addresses the issue of whether a wrong classification in an Income Tax Return (ITR) can result in the denial of a legitimate deduction.

Background of the Case: National Contracting Company (India) Private Limited, the appellant, filed its return of income for the assessment year 2020-21 on December 18, 2020, declaring a total income of ₹38,10,910. The return was processed by the Centralized Processing Center (CPC) in Bengaluru, which determined the total income at ₹1,18,30,990 after making several disallowances. Among these disallowances was an amount of ₹79,25,442 for gratuity, which was claimed under Sec-tion 43B of the Income Tax Act but incorrectly classified in the ITR.

Issues Raised: The primary issue in this appeal was whether the incorrect classification of gratuity under Section 43B instead of the appropriate allowance schedule in the ITR could justify the disallowance of a genuine deduction. The appellant contended that the mistake was inadvertent and should not result in the denial of a legitimate claim. Additionally, the appellant had submitted a revised tax audit report and ITR but was still denied relief by the Commissioner of Income Tax (Appeals) [CIT(A)].

Arguments and Findings: The appellant argued that the disallowance was purely due to a technical error and that all relevant details were available on record. The Counsel for the appellant cited precedents and circulars from the Central Board of Direct Taxes (CBDT) that emphasized the duty of tax authorities to assist taxpayers in claiming rightful deductions and not to exploit their ignorance or errors. The ITAT examined the appellant’s contentions and the tax authorities’ responses. It highlighted the distinction between a revised return and a correction of an existing return, referencing the Allahabad High Court ruling in CIT v. Dhampur Sugar Ltd, which underscored that a correction does not equate to filing a new return. The tribunal also referred to the Gujarat High Court’s decision in S.R. Koshti vs. CIT, which held that tax authorities must correct over-assessment resulting from taxpayer mistakes, ensuring only legitimate taxes are collected.

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