Pravin Engineering Pvt. Ltd Vs ACIT (ITAT Ranchi)
The Income Tax Appellate Tribunal (ITAT), Ranchi, has sent the appeal of Pravin Engineering Pvt. Ltd. back to the Assessing Officer (AO) for a fresh examination. The case, related to the assessment year 2018-19, revolves around a ₹11.36 lakh commission paid to the company’s directors, which was initially disallowed by the AO.
During the assessment, the AO noted that the company’s tax audit report had listed the directors’ commission under a section of Form 3CD that relates to sums “otherwise payable as profits or dividends” under Section 36(1)(ii) of the Income Tax Act. The AO, treating this as a reporting admission, proceeded to disallow the commission.
Pravin Engineering Pvt. Ltd. appealed the decision, arguing before the CIT(A) that the entry in Form 3CD was a clerical error. The company claimed the commission was a legitimate business expense and not a disguised dividend. To support this, they submitted a certificate from their tax auditor confirming the mistake during the appellate proceedings. However, the CIT(A) did not consider the new evidence and simply upheld the AO’s order, dismissing the appeal.
In its judgment, the ITAT noted that the assessee’s contention about the incorrect reporting was not adequately addressed by the CIT(A). The Tribunal observed that the company had a valid point regarding the potential error in Form 3CD and that the CIT(A) had failed to provide the company with an opportunity to have the facts verified by the AO. Citing the principle of natural justice and the need for a thorough factual inquiry, the ITAT decided to remand the case.
