ACIT, CIRCLE-1(1)(1), VADODARA V. MAKARPURA INDUSTRIAL ESTATE CO OPERATIVE BANK LTD, VADODARA

ITA 1250/AHD/2025

AI Insights

The case involves the Assistant Commissioner of Income Tax, Vadodara (Revenue) and Makarpura Industrial Estate Co-operative Bank Ltd. (Assessee) concerning the Assessment Year 2021-22. The dispute arose from an adjustment made by the CPC on the assessee's return, which pertained to a contingent liability of Rs.2,69,96,801 reported in the Tax Audit Report. The CIT(A) had deleted this addition, leading to the Revenue's appeal. The Tribunal found that the contingent liability was not debited to the Profit & Loss Account but was only reflected in the Balance Sheet, supporting the CIT(A)'s decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717109 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Appeal Filed On: 29-05-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHAKAR VERMA
• Assessee Lawyers: SAMIR PARIKH

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER ITA No.1250/Ahd/2025 Assessment Year: 2021-22 Assistant Commissioner of Income Tax, Circle-1(1)(1), Vadodara, Room No.102, 1st Floor, Aayakar Bhavan, Race Course, Vadodara – 390 007 (Gujarat). Vs. Makarpura Industrial Estate Co-operative Bank Ltd., 75-GIDC Estate, Makarpura, Vadodara – 391 110 (Gujarat) [PAN – AAAAT 1475 F] C.O. No.58/Ahd/2025 (In ITA No.1250/Ahd/2025) Assessment Year: 2021-22 Makarpura Industrial Estate Co-operative Bank Ltd., 75-GIDC Estate, Makarpura, Vadodara – 391 110 (Gujarat) [PAN – AAAAT 1475 F] Vs. Assistant Commissioner of Income Tax, Circle-1(1)(1), Vadodara, Room No.102, 1st Floor, Aayakar Bhavan, Race Course, Vadodara – 390 007 (Gujarat). (Appellants) (Respondents) Assessee by Shri Samir Parikh, AR Revenue by Shri Sudhakar Verma, DR Date of Hearing 18.08.2025 Date of Pronouncement 22.08.2025 Printed from counselvise.com ITA No.1250/Ahd/2025 & Cross Objection No.58/Ahd/2025 Assessment Year: 2021-22 Makarpura Industrial Estate Coop. Bank Ltd. vs. ACIT Page 2 of 5 O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER: The captioned appeal of the Revenue and the Cross Objection of the assessee is directed against the order of the Additional/Joint Commissioner of income Tax (A)-1, Ludhiana dated 20.03.2025 for the Assessment Year (A.Y.) 2021-22, which in turn has arisen from the order issued under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 16.11.2022 by the CPC. 2. The grounds raised by the Revenue in this appeal as under: - “(i) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.2,69,96,801/- made by the AO on account of contingent liability debited in P&L Account as reported by the Auditor in tax audit report. (ii) The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.” 3. The Cross Objection filed by the assessee supports the order of the Ld. CIT(A), deleting the addition of Rs.2,69,96,801/- pertaining to DAE fund and guarantee, which were contingent liabilities. 4. Shri Sudhakar Verma, the Ld. Sr. DR appearing for the Revenue, explained that while processing the return of the assessee for the A.Y. 2021-22, an adjustment of Rs.2,69,96,801/- was made by the CPC in respect of contingent liability. He explained that the auditor had reported contingent liability of Rs.2,69,96,801/- at Sl. No.21(g) of the Tax Audit Report. As the expenditure claimed by the assessee was in the nature of contingent liability, the same was rightly disallowed by the CPC while processing the return u/s 143(1) of the Act. Printed from counselvise.com ITA No.1250/Ahd/2025 & Cross Objection No.58/Ahd/2025 Assessment Year: 2021-22 Makarpura Industrial Estate Coop. Bank Ltd. vs. ACIT Page 3 of 5 5. Per contra, Shri Samir Parikh, the Ld. AR of the assessee, explained that the liability of contingent nature as reported at Sl. No.21(g) of Tax Audit Report was not debited to the Profit & Loss Account of the assessee. Therefore, the Ld. CIT(A) had rightly allowed the relief to the assessee. 6. We have considered the rival submissions. A copy of the Tax Audit Report has been brought on record. It is found that at Sl. No.21(g) of the Tax Audit Report “particulars of any liability of a contingent nature” was provided as under:- i) DEA Fund Rs.1,11,15,466/- ii) Guarantee issued Rs.1,58,81,335/- 6.1 The CPC, while processing the return, added this contingent liability of Rs.2,69,96,801/- on the presumption that the same was debited to Profit & Loss Account. On our specific query, the Ld. Sr. DR could not clarify whether any opportunity was allowed to the assessee before making the disallowance while processing the return. It is found that the Ld. CIT(A) has allowed relief to the assessee for the reason that this contingent liability of Rs.2,69,96,801/- was not debited to Profit & Loss Account. The Revenue has been unable to bring on record any evidence to controvert this finding of the ld. CIT(A). From the Tax Audit Report, it is noted that the Auditor had nowhere stated that the contingent liability of Rs.2,69,96,801/- was debited to the Profit & Loss Account. Thus the adjustment made while processing the return was based on mere presumption that this amount was debited to P&L account. It was explained that the contingent liabilities represented unrealised interest on Printed from counselvise.com ITA No.1250/Ahd/2025 & Cross Objection No.58/Ahd/2025 Assessment Year: 2021-22 Makarpura Industrial Estate Coop. Bank Ltd. vs. ACIT Page 4 of 5 NPAs and was reflected in the Balance Sheet only and not debited to the Profit & Loss Account. In view of this fact, we do not find any reason to interfere with the order of the Ld. CIT(A). He had rightly deleted the adjustment made while processing the return for the reason that the contingent liability of Rs.26,69,96,801/- was not debited to Profit & Loss Account and this fact has not been controverted by the Revenue. Therefore, the order of the Ld. CIT(A) is upheld and the appeal filed by the Revenue is dismissed. 7. The Cross Objection of the assessee was not pressed and, hence, the same is dismissed, 8. In the final result, the appeal of the Revenue as well as the Cross Objection of the assessee, both are dismissed. Order pronounced in the open Court on this 22nd August, 2025. Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Ahmedabad, the 22nd August, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) The PCIT (4) The CIT(A) (5) Departmental Representative (6) Guard File Printed from counselvise.com ITA No.1250/Ahd/2025 & Cross Objection No.58/Ahd/2025 Assessment Year: 2021-22 Makarpura Industrial Estate Coop. Bank Ltd. vs. ACIT Page 5 of 5 By order TRUE COPYE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Printed from counselvise.com "