Punyashila Automobiles Vs ITO-2 (ITAT Indore)
Partners’ Remuneration Deduction Cannot Be Denied for ITR Reporting Error: ITAT Indore Remands for Verification
The Indore Bench of the ITAT allowed the assessee-firm’s appeal for AY 2016-17 for statistical purposes, holding that a legitimate deduction of partners’ remuneration under section 40(b) cannot be denied merely due to an inadvertent reporting mistake in the return of income.
In this case, the assessee had actually paid partners’ remuneration of ₹13.95 lakh, duly reflected in the audited Profit & Loss Account and Balance Sheet, but while filing the return, the figure was mistakenly reported as “0”, leading CPC to disallow the claim in the intimation under section 143(1). The CIT(A) confirmed the disallowance, resulting in a demand of ₹5.36 lakh.
Before the Tribunal, the assessee demonstrated:
- Actual payment of remuneration to partners supported by audited accounts (pages 3–4 of the order),
- Double taxation, as the partners had already offered the same remuneration to tax in their individual returns, and
- Consistency, since an identical mistake in AY 2021-22 was later rectified by the CPC under section 154, granting full relief.
The ITAT held that substantive statutory deductions cannot be defeated by a clerical or reporting error, especially when the factual payment is undisputed and allowable in law. With consent of both parties, the Tribunal remanded the matter to the AO, directing deletion of the disallowance after factual verification.
FULL TEXT OF THE ORDER OF ITAT INDORE
