Introduction: The Income Tax Appellate Tribunal (ITAT) Kolkata has directed re-adjudication in a case involving Nine Star Commodities Private Limited. The case revolves around an error committed by an auditor who inadvertently posted an incorrect disallowance sum under Section 43B of the Income Tax Act in an audit report uploaded to the Income Tax portal.
This case highlights the criticality of correct representation in audit reports and the role it plays in income tax assessments. The ruling is significant as it underlines the possibility of human error and the need for opportunities to rectify such errors.
The ITAT, while dismissing the appeal concerning the disallowance of employees’ contribution to PF & ESI, allowed a re-adjudication for the disallowance under Section 43B. This decision was based on the company’s claim that the alleged sum was paid before the due date for the income return, but it was mistakenly reported in the audit report.
The ruling emphasizes the role of transparency, accuracy, and the opportunity for rectification in audit processes. It opens the door for businesses to seek redress in instances where inadvertent errors may lead to unfavorable income tax assessments. The case is a reminder for auditors to exercise caution and thoroughness while preparing audit reports, given their significance in determining tax liabilities.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is the appeal preferred by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the ld. CIT(A)”], passed u/s 250 of the Income-tax Act, 1961 (hereinafter the ‘Act’), dated 31/01/2023 for the Assessment Year 2019-20.
2. The sole grievance of the assessee is that the ld. CIT(A) erred in confirming the disallowance made u/s 43B of the Act at Rs.3,91,525/- and disallowance of employees’ contribution to PF & ESI at Rs.6,037/-
3. We have heard rival contentions and perused the material placed before us. So far as the disallowance of PF & ESI of Rs.6,037/- is concerned raised in Ground No. 3 of this appeal, it is an admitted fact that the alleged sum was paid after the due date prescribed under the relevant Act. The Hon’ble Supreme Court in the case of Chekmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) has held that “deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees’ contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B of the Income-tax Act,1961.” Accordingly, the sum is not allowable u/s 36(1)(va) of the Act and is deemed to be income u/s 2(24)(x) of the Act. Accordingly, we dismiss this ground raised by the assessee.
4. So far as Ground No. 2 regarding disallowance of Rs.3,91,525/- u/s 43B of the Act is concerned, we note that before the ld. CIT(A), the assessee has claimed that the alleged sum has been paid before the due date of furnishing of the return of income u/s 139(1) of the Act but in the tax auditor report, the tax auditor has inadvertently mentioned the said sum in the wrong column which is meant for those amounts which fall under the category of expenses mentioned u/s 43B of the Act but they are not paid before the due date of furnishing of return of income u/s 139(1) of the Act and are disallowable. Based on this observation, the CPC had made the said disallowance. However, all the alleged sum has been paid before the due date of furnishing of the return of income. But the ld. CIT(A), in the absence of the certificate from the auditor, did not allow the claim of the assessee. It was submitted before us by the ld. Counsel for the assessee that if an opportunity is granted, then, the assessee can file all relevant details including the copy of proof of payment and certificate from auditor before the Assessing Officer for necessary verification. The ld. D/R was fair enough in not opposing to this request made by the assessee.
6. We, therefore, restore the issue of disallowance of Rs.3,91,525/- u/s 43B of the Act to the file of the jurisdictional Assessing Officer before whom, the assessee shall file details of proof of payment showing that the said liability has been paid off before the due date of furnishing of return of income u/s 139(1) of the Act and also produce the certificate from the auditor who made the inadvertent mistake in the audit report uploaded on the income tax portal. Needless to mention that the assessee should be provided reasonable and proper opportunity of being heard and to place relevant material on record in support of the ground raised by it.
5. In the result, appeal of the assessee is allowed for statistical
Order pronounced in the Court on 5th June, 2023 at Kolkata.