ASSISSTANT COMMISSIONER OF INCOME TAX - 4(1), INDORE, INDORE V. PATEL MOTORS INDORE PRIVATE LIMITED, INDORE

ITA 628/IND/2024

AI Insights

The case involves an appeal by the Assistant Commissioner of Income Tax-4(1), Indore against Patel Motors Indore Private Limited concerning the Assessment Year 2020-21. The appeal was directed against the order of the Commissioner of Income Tax (Appeals), Panchkula, which had deleted the adjustments made by the Central Processing Centre (CPC), Bengaluru. The CPC had initially disallowed a contingent liability of Rs. 4,98,25,079 claimed by the assessee due to a perceived mismatch between the income tax return and the audit report. The CIT(A) found that since the contingent liability was not charged to the Profit and Loss Account but was disclosed in the notes to the audited accounts, it should not have been disallowed while processing the return under section 143(1) of the Income Tax Act, 1961.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312297 (ITAT-INDORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2020-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIASHISHPORWAL
• Assessee Lawyers: SHRIASHISH GOYAL; SHRIN.D
• Section: 37

Judgement Text

"आयकरअपीलȣयअͬधकरण, इंदौरÛयायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI PARESH M JOSHI, JUDICIAL MEMBER आयकरअपीलसं./I.T.A. No. 628/Ind/2024 (Ǔनधा[रणवष[ / Assessment Year : 2020-21) Assistant Commissioner of Income Tax-4(1) Indore बनाम/ Vs. Patel Motors Indore Private Limited 96/97, Maharani Road, Indore, Madhya Pradesh – 452007 èथायीलेखासं./जीआइआरसं./PAN/GIR No. : AABCP1892R (Appellant) .. (Respondent) अपीलाथȸ ओरसे/Appellant by : Shri Ashish Porwal, Sr. DR Ĥ×यथȸ कȧ ओरसे/Respondent by : Shri Ashish Goyal & Shri N. D. Patwa, Advocates Date of Hearing 17/04/2025 Date of Pronouncement 28 /04/2025 O R D E R PER SMT. ANNAPURNA GUPTA, AM: The present appeal has been filed by the Revenue against the order passed by the Commissioner of Income Tax (Appeals), Panchkula (in short ‘the CIT(A)’) under Section 250 of the Income Tax Act, 1961 (in short ‘the Act’) dated 20.06.2024 pertaining to Assessment Year 2020-21. ITA No. 628/Ind/2024 [ACIT vs. Patel Motors Indore Pvt. Ltd.] A.Y. 2020-21 - 2 – 2. The solitary ground raised in the appeal by the Revenue is as under: “1. Whether on the facts and in the circumstances of the case Ld. CIT(A) was justified to ignore the merits of the case and the fact that the AO, CPC has made disallowance of Rs.4,98,25,079/- on account of contingent liability to total taxable income due to the mismatch between the return of income and the audit report.” 3. The brief facts leading to this case are that the return of income filed by the assessee for the impugned A.Y. 2020-21 was processed u/s.143(1) of the Act and several adjustments made to its income including the disallowance of Rs.4,98,25,079/- on account of contingent liability claimed by the assessee. The Ld. CIT(A) deleted all the adjustments made by CPC, Bengaluru and the Revenue has come up in appeal only against the deletion of adjustment of Rs.4.98 Crores on account of disallowance of contingent liability. 4. The Ld. CIT(A)’s order deleting the adjustment so made as contained at para 6.1 of his order reads as under: “6.1 On Issue of Appeal No 1. The issue of appeal no.1 is against disallowance u/s 37 made of contingent liability of Rs. 4,98,25,079/- in the intimation u/s 143(1) of the Act dated 28.10.2021. The contention of the appellant is that while processing the return u/s 143(1), the AO. CPC has made disallowance of Rs. 4,98,25,079/- on account of contingent liability to total taxable Income due to the mismatch between the return of income and the audit report. The said amount was disclosed in notes to audited accounts at para 21(g) of Form 3 CD lax audit report. Since, disputed Income tax liability of Rs. 4,98,25,079/- is not debited to P&L account and it is simply disclosed in notes to audited accounts and disclosed at para 21(g) of Form 3CD, the same is not ITA No. 628/Ind/2024 [ACIT vs. Patel Motors Indore Pvt. Ltd.] A.Y. 2020-21 - 3 – required to be adjusted / disallowance to be made to the total taxable Income while processing the return u/s 143 (1) of the Act. The grounds of appeal, statement of facts, Intimation u/s 143(1) of the Act and submission of the appellant are duly considered. The AO, CPC Bengaluru while processing the return observed the \"There is inconsistency in Any other amount not allowable under section 37 claimed in return in schedule OI and audit report” amounting to Rs. 4,98,25,079/-, Thereafter the AO/CPC made the adjustment to that extent to the total income by making disallowance while processing the return of income u/s 143(1) of the Act. Apparently, the said amount was disputed Income Tax liability which was of contingent nature also not debited to Profit and Loss A/c hence same was not claimed as expenditure by the appellant. The said contingent Lability was reflected in the notes to accounts in Form 3CD as a disclosure. Therefore, the question of its adjustment/disallowance did not arise while processing the return of income. The contingent liability was disclosed in the Audit Report for reporting purposes which has not been debited to the P & L Account, therefore the disallowance is not sustainable and hereby deleted. The ground of appeal raised in issue no. 1 is hereby allowed.” 5. As is evident from the above, the Ld. CIT(A) has recorded a finding of fact that the impugned contingent liability was not debited to the P&L account by the assessee and, therefore, there was no question of making any disallowance of the same. 6. This fact was confronted to Ld. DR during the course of hearing before us and he was specifically asked whether he had anything to say to contradict this finding of fact of Ld. CIT(A). To this, the Ld. DR responded in the negative. He had nothing to controvert this finding of fact. 7. In the light of same, we have no hesitation in holding that there is absolutely no merit in the ground raised by the Revenue before us. Since it is an admitted fact that the disallowance of contingent liability made by the CPC in the intimation u/s.143(1) ITA No. 628/Ind/2024 [ACIT vs. Patel Motors Indore Pvt. Ltd.] A.Y. 2020-21 - 4 – of the Act was not debited by the assessee to its P&L account, the Ld. CIT(A) was absolutely correct in holding that no question arose for disallowing the same. The order of the Ld. CIT(A) is confirmed on this count. The ground of appeal raised by the Revenue is dismissed. 8. In the result, the appeal filed by the Revenue is dismissed. This Order pronounced on 28 /04/2025 Sd/- Sd/- (PARESH M JOSHI) (SMT. ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore Ǒदनांक/Dated : 28/04/2025 Dev/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore 1.Date of dictation on 22.04.2025 2.Date on which the typed draft is placed before the Dictating Member 22.04.2025 3.Date on which the approved draft comes to the Sr.P.S./P.S. 4.Date on which the fair order is placed before the Dictating Member for Pronouncement 5.Date on which the fair order comes back to the Sr.P.S./P.S 6.Date on which the file goes to the Bench Clerk 7.Date on which the file goes to the Head Clerk…………. 8.The date on which the file goes to the Asstt. Registrar for signature on the order…………………… 9.Date of Dispatch of the Order……… Date on which the typed draft is placed before the Dictating Member 19.12.2019Other Member…………………Date on which the approved draft comes to "