Case Law Details
DCIT Vs Medica Hospitals Pvt Ltd (ITAT Kolkata)
Introduction: The Income Tax Appellate Tribunal (ITAT) in Kolkata has rendered a significant decision in the case of DCIT Vs Medica Hospitals Pvt Ltd, for the assessment year 2018-19. The Tribunal delved into the issues concerning the deletion of addition made by the Assessing Officer on account of outstanding dues under Section 43B and 40A(7) of the Act. The decision revolves around the timeliness of payment of bonus outstanding, a matter pertinent to many businesses.
Analysis:
1. Background: The AO made disallowances on account of bonus outstanding and gratuity provisions, which were contested by the assessee. The bonus outstanding amounting to Rs. 1,14,64,199/- was paid within the due date of filing the return.
2. The CIT(A) Order: The Ld. CIT(A) found that the bonus was paid before the due date and accordingly deleted the addition. Furthermore, the CIT(A) recognized a double disallowance on gratuity provisions and directed its deletion.
3. ITAT’s Decision: Upholding the CIT(A)’s decision, ITAT noted that the bonus outstanding was paid before the due date, and hence, the disallowance was correctly deleted. Regarding gratuity provisions, ITAT concurred that the amount was disallowed twice and upheld the deletion.
Conclusion: The ruling by ITAT Kolkata in favor of the assessee, Medica Hospitals Pvt Ltd, sets a precedent by emphasizing compliance with the statutory provisions related to bonus payments. It reaffirms that if the bonus is paid within the due date of filing the return, the disallowance should not be made. The decision also showcases meticulous scrutiny by the appellate authorities, ensuring that errors like double disallowance do not undermine taxpayers’ rights. This case serves as a reminder to taxpayers and practitioners alike about the importance of following the prescribed timelines and being vigilant against errors in tax assessments and reporting.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)”] dated 12.08.2022 for the AY 2018-19.
2. After hearing the ld DR , we note that the delay in filing the appeal of 144 days is due time taken in completing the formalities connected with the preparation of appeals papers. The DR also stated that due to huge work load and pre-occupation of the departmental officials in completing the time barring assessments , penalties and writs filed various assessee on the issue of 148A of the Act , the appeal was late filed by 144 days. Considering all the facts into consideration we are of the view that there is a reasonable cause for delayed filing of appeal which deserves to be treated leniently. Accordingly we are inclined to condone the delay of 144 days and admit the appeal for adjudication.
3. Issue raised in ground no. 1 by the revenue is against the deletion of addition of Rs. 1,14,64,199/- by Ld. CIT(A) as made by the AO on account of outstanding dues u/s 43B of the Act.
4. Facts in brief are that the assessee filed return of income on 30.10.2018 which were processed u/s 143(1) of the Act on 21.12.2019. In the order u/s 143(1) of the Act the AO CPC made disallowance on account of bonus outstanding of Rs. 1,14,64,199/-and gratuity provisions of Rs. 1,45,57,599/- besides making other disallowances on account of contribution to PF & ESI. The assessee moved rectification application on 29.02.2020 which was also rejected by the AO on 3.6.2020. In fact the auditor of the assessee has shown bonus outstanding Rs. 1,14,64,199/- on the date of audit which was much prior to the due date of filing the return and the said bonus was paid between 29.09.2018 to 29.10.2018 within the due date of filing of return of income. Accordingly the assessee claimed that the said amount was paid within the due date as contemplated u/s 139(1) of the Act.
5. In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee by giving finding a fact that the bonus payable amount of Rs. 1,14,64,199/- as reported in tax audit report dated 28.09.2018 has been paid by the assessee before 29.10.2018 and accordingly the addition was deleted by the Ld. CIT(A) by holding that the said amount is to be allowed as it was paid before the due date of filing of return as the payment is not covered u/s 43AB of the Act.
6. After perusing the TAR and other evidences filed before us we note that the outstanding amount of bonus of Rs. 1,14,64,199/- was paid after 29.09.2018 but on or before 29.10.2018 . Thus the bonus was paid before the due date of filing of return Therefore the Ld. CIT(A) has correctly allowed this amount to the assessee by directing the AO to delete the disallowance. Consequently we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground no. 1 in the appeal of the revenue.
7. Issue raised in ground no. 2 is against the deletion of addition of Rs. 1,45,57,599/- as made by the AO u/s 40A(7) of the Act.
8. Facts in brief are that the AO CPC disallowed and added Rs. 1,45,57,599/- u/s 40A(7) on account of gratuity provisions. In the appellate proceedings, the Ld. A.R submitted that the tax auditor has disallowed the provisions of gratuity twice by reporting the same first time in column 21(e) of the TAR wherein the amount not allowable u/s 40A(7) of the Act was mentioned and again disallowed in column no. 26(i)(B)(b)(10) in the Tax audit report wherein the amount not paid before specified date is to be mentioned and thus this resulted double disallowance. The Ld. CIT(A) after taking into account of the assessee’s submissions and tax audit report recorded a finding that this amount was disallowed twice and directed the AO to delete the amount of Rs. 1,45,57,599/-.
9. After hearing the rival contentions and perusing the materials on records , we find that amount of gratuity provisions have been disallowed twice as stated above which has been correctly deleted by the ld CIT(A) after taking into account the facts on record , appellate order and contentions made by the assessee. In view of this we are inclined to uphold the order of Ld. CIT(A) by dismissing the appeal of the revenue.
10. In the result, the appeal of the revenue is dismissed.
Order is pronounced in the open court on 18th July, 2023
