Tax Audit Report is a vital piece of evidence – ITAT admit additional evidence

Anil Kumar Jain Vs ADIT (ITAT Chandigarh)

Ld. AR further submitted that the assessee has filed an application seeking permission to file additional evidence before the ITAT which was the revised Tax Audit Report from the same C.A. wherein the inadvertent clerical error as aforementioned has been rectified. Drawing my attention to the revised Tax Audit Report placed at pages 21 to 52 of the paper book, the Ld. AR submitted that the same is a vital piece of evidence, which goes to prove the case of the assessee and, therefore, the above Revised Tax Audit Report may be admitted as additional evidence by the Bench in view of the judgement of the Hon’ble Supreme Court in the case of Tek Ram (Dead) Through LRs V/s Commissioner of Income Tax as reported in 357 ITR 133 (SC) and the judgement of the jurisdictional High Court in the case of Mukta Metal Works as reported in 336 ITR 555 (P&H) wherein the Hon’ble Supreme Court and the Hon’ble Punjab and Haryana High Court have held that where the additional evidence is must for just decision of the case, the same deserves to be admitted.

ITAT agree with the contention of the Ld. AR that the revised Tax Audit Report is a vital piece of evidence which goes to the very root of the matter and should be admitted for the furtherance of cause of justice. Accordingly, I admit the additional evidence and since the lower authorities have not had any occasion to examine the same, I further deem it expedient to restore the issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh after duly considering the revised Tax Audit Report which I have admitted as additional evidence. The AO is further directed to grant adequate opportunity to the assessee prior to the passing of order in accordance with law.

FULL TEXT OF THE ORDER OF ITAT CHANDIGARH

This appeal has been preferred by the assessee against the order dated 30.05.2022 passed by the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana [herein referred to as ‘CIT(A)’] for assessment year 2020-21.

2.0 The brief facts of the case are that the assessee is an individual carrying on business of manufacturing and trading of hosiery goods, yarn and knitted cloth in the name and style of M/s A.P. Hosiery Industries. The return of income for the captioned year was filed declaring an income of Rs. 26,78,580/-. The return of the assessee was processed u/s 143(1) Income Tax Act, 1961 [in short ‘the Act’] assessing the income at Rs. 49,17,260/- after making the following additions:-

a) Disallowance u/s 36(1)(viii) of the Act to the tune of Rs. 45,680/-

b) Addition u/s 36(1)(va) of the Act to the tune of Rs. 766/-

c) Addition u/s 36(1)(ii) to the tune of Rs. 21,92,232/-

2.1 Aggrieved, the assessee preferred an appeal before the Ld. Ld. First Appellate Authority who partly allowed the assessee’s appeal by deleting the disallowance of Rs. 45,680/- made u/s 36(1)(iii) of the Act and addition of Rs. 766/- made u/s 36(1)(va) of the Act. The Ld. CIT(A), however, confirmed the addition of Rs. 21,92,232/- made u/s 36(1)(ii) of the Act.

2.2 Against this sustenance of addition of Rs. 21,92,232/-, the assessee has approached this Tribunal challenging the same by raising the following grounds of appeal:-

1. That the Ld. CIT(A) has erred in confirming the addition on account of disallowance of Rs. 21,92,232/- on account of bonus payable which was mistakenly mentioned by the Chartered Accountant while filing the Tax Audit Report in the wrong column, though, the same had been paid within time as per law.

2. That the finding of the Ld. CIT(A) in confirming the addition of Rs. 21,92,232/- as made by the CPC, Bangalore is against the factual facts & circumstances.

3. That the appellant craves leave to add, amend any ground or grounds of appeal before the appeal is finally heard or disposed-off.

3.0 The Ld. AR submitted that the background leading to the addition of Rs. 21,92,232/- was that the assessee had paid this amount to the employees during the year under consideration in terms of the provisions of the Payment of Bonus Act, 1965. It was further submitted that the said amount was paid in four installments as under:-

3.1 The Ld. AR submitted that all these payments had been paid before the due date of the filing of return of income which was 24.12.2020. However, due to an inadvertent error, the Chartered Accountant (C.A.) of the assessee mentioned the said amount under clause 20(a) of the Tax Audit Report under “amount payable to employees as Bonus or Commission where such sum was otherwise payable to him as profits or dividend”. It was submitted that this was the factual situation. The Ld. AR submitted that, however, due to this inadvertent mistake by the CA, while processing the Return, the Central Processing Centre, Bangluru (CPC) added to the same of the income of the assessee.

3.2 It was further submitted that an affidavit from the C.A. pointing out the error was filed before the Ld. CIT(A) wherein, it had been certified by the C.A. that due to inadvertent error the impugned amount had been wrongly reflected under clause 20(a) of the Tax Audit Report. My attention was drawn to the copy of the said affidavit from the C.A placed at page 53 of the paper book. It was further submitted that even the employee wise details of bonus paid and copy of wage register duly signed by the employees was filed before the Ld. CIT(A) and copy of the same were placed at pages 54 to 96 of the paper book . The Ld. AR submitted that the Ld. CIT(A), however, did not accept the contention of the assessee and held that any modification in the Audit Report through filing of an affidavit was not permissible and, therefore, the disallowance made by the Central Processing Centre, Bangluru was confirmed.

3.3 The Ld. AR submitted that the issue under dispute is merely a clerical error and the same should be viewed in the light of the evidences on record which establish beyond doubt that the impugned payments had been made to the workers under the provisions of Payment of Bonus Act, 1965. It was further submitted that it is settled law that the assessee should not suffer on account of mistakes which have been made by the counsel or the C.A. of the assessee.

3.4 The Ld. AR further submitted that the assessee has filed an application seeking permission to file additional evidence before the ITAT which was the revised Tax Audit Report from the same C.A. wherein the inadvertent clerical error as aforementioned has been rectified. Drawing my attention to the revised Tax Audit Report placed at pages 21 to 52 of the paper book, the Ld. AR submitted that the same is a vital piece of evidence, which goes to prove the case of the assessee and, therefore, the above Revised Tax Audit Report may be admitted as additional evidence by the Bench in view of the judgement of the Hon’ble Supreme Court in the case of Tek Ram (Dead) Through LRs V/s Commissioner of Income Tax as reported in 357 ITR 133 (SC) and the judgement of the jurisdictional High Court in the case of Mukta Metal Works as reported in 336 ITR 555 (P&H) wherein the Hon’ble Supreme Court and the Hon’ble Punjab and Haryana High Court have held that where the additional evidence is must for just decision of the case, the same deserves to be admitted.

4.0 Per contra, the Ld. Sr. Departmental Representative (DR) had no objection to the additional evidence being admitted and the issue being restored to the AO.

5.0 I have heard both the parties and have also perused the material on record. I agree with the contention of the Ld. AR that the revised Tax Audit Report is a vital piece of evidence which goes to the very root of the matter and should be admitted for the furtherance of cause of justice. Accordingly, I admit the additional evidence and since the lower authorities have not had any occasion to examine the same, I further deem it expedient to restore the issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh after duly considering the revised Tax Audit Report which I have admitted as additional evidence. The AO is further directed to grant adequate opportunity to the assessee prior to the passing of order in accordance with law.

6.0 In the final result, the appeal of the assessee stands allowed for statistical purposes.

Order pronounced on 13.09.2022.