DARSHIT GUNWANTBHAI SHAH,AHMEDABAD V. THE ITO, WARD-1(2)(1), AHMEDABAD

ITA 571/AHD/2025

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The case involves an appeal by Darshit Gunantbhai Shah against the order of the National Faceless Appeal Centre (NFAC), which confirmed a disallowance of Rs.4,67,802 under section 43B of the Income-tax Act, 1961. The disallowance was initially made by the Centralized Processing Centre (CPC) due to a reported inconsistency in the Tax Audit Report and the income tax return regarding TDS payments. The assessee contended that the amount had been paid before the due date but was incorrectly reported due to a clerical error. The Income Tax Appellate Tribunal (ITAT) found merit in the assessee's arguments and restored the matter to the Assessing Officer for verification of the actual payment dates.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712826 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2021-2022
• Other Referred Cases: Collector, Land Acquisition v. Mst. Katiji & Others [(1987) 167 ITR 471 (SC)]
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: UMESH KUMAR AGRAWAL
• Assessee Lawyers: HARDIK VORA
• Keywords: Condonation of delay; Set aside; Additional evidence; Period of limitation; TDS; Rectification of order; Time period of passing order; Procedural lapse
• Section: 154; 43B

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘SMC’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD ]BEFORE MS.SUCHITRA R. KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER ITA No.571/Ahd/2025 Asstt.Year : 2021-22 Darshit Gunantbhai Shah B/2/236, Madhuvrund Society Ghatlodia Ahmedabad 380 061. PAN : AWMPS 9760 R Vs. ITO, Ward-1(2)(1) Ahmedabad. (Applicant) (Responent) Assessee by : Shri Hardik Vora, Advocate Revenue by : Shri Umesh Kumar Agrawal, Sr.DR सुनवाई क तारीख/Date of Hearing : 24/07/2025 घोषणा क तारीख /Date of Pronouncement: 29/07/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: This appeal filed by the assessee is directed against the order passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “The Act”] dated 25.01.2023 for the assessment year 2021– 22, wherein the disallowance of Rs.4,67,802/- made under section 43B of the Act by the was confirmed. 2. Condonation of Delay 2.1 The appeal filed by the assessee is delayed by 717 days beyond the prescribed limitation period. In support of the condonation, the assessee has filed a sworn affidavit dated 18.07.2025, wherein it has been stated that the order under section 250 passed by the CIT(A),NFAC, on 25.01.2023, was not brought to the notice of the assessee in a timely manner. It is Printed from counselvise.com ITA No.571/Ahd/2025 2 averred that the appellant is primarily engaged in the business of trading and does not possess formal knowledge of tax laws or procedural compliances under the Income-tax Act, 1961, and that the appeal before the CIT(A) had been filed by his earlier consultant, whose email address had been used for e-proceedings. 2.2 The appellant has further deposed that he is not conversant with technology and did not regularly monitor the email account or the e-filing portal. He became aware of the appellate order only in March 2025 during a routine portal check conducted by his tax auditor CA Monil Shah. Upon learning of the order, and after seeking legal guidance, he engaged Advocate Hardik Vora and filed the present appeal on 17.03.2025 before the Tribunal. The assessee has explained that the delay was neither deliberate nor mala fide but occurred due to lack of technical awareness and clerical lapses, especially since all notices were marked to the earlier tax consultant’s email ID. 2.3 On a perusal of the affidavit and in light of the facts explained therein, we find the reasons furnished for the delay to be bona fide. It is well settled that technical lapses should not come in the way of substantial justice. Reliance is placed on the decision of the Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji & Others [(1987) 167 ITR 471 (SC)], wherein it was held that liberal approach should be adopted while considering applications for condonation of delay, provided the explanation is not mala fide or a device to delay the proceedings. Moreover, the learned Departmental Representative has not raised any serious objection to the condonation of delay. Accordingly, in the interest of justice, the delay of 717 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits. 3. Facts of the Case 3.1 The assessee filed his return of income for A.Y. 2021–22 on 12.03.2022 declaring total income of Rs.7,17,240/-. The return was Printed from counselvise.com ITA No.571/Ahd/2025 3 processed under section 143(1) of the Act by the Centralized Processing Centre (CPC), Bangalore. An intimation dated 22.07.2022 was issued proposing an adjustment of Rs.4,67,802/- under section 143(1)(a)(iv), based on a mismatch between the computation of income and disclosures in the Tax Audit Report in Form 3CD. The intimation was sent by e-mail on email ID – [e-mail]. Specifically, the CPC highlighted that there was an inconsistency in the claim of deduction for TDS payments under section 43B, which had been debited in the profit and loss account but were reflected in Form 3CD under clause 26(B)(b) as not paid on or before the due date prescribed under section 139(1). 3.2 The CPC adjustment summary recorded the following: Sl. No. Particulars Amount in ITR Amount in Form 3CD Proposed Adjustment 1 There is inconsistency in any amount debited to profit and loss account of the previous year but disallowable under section 43B claimed in return and audit report Rs. 4,67,802/- Rs. 4,67,802/- Rs. 4,67,802/- 3.3 The adjustment was thus made under section 143(1)(a)(iv) for \"disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return\". 3.4 The assessee filed a rectification application under section 154 on 01.08.2022, contending that the amount of Rs.4,67,802/- had in fact been paid through various challans before the due date of filing return under section 139(1), but due to inadvertent clerical error, the same was reported in clause 26(B)(b) instead of 26(B)(a). It was submitted that no disallowance under section 43B was warranted. However, the AO passed a rectification order on 01.08.2022 rejecting the explanation, stating that the Tax Audit Report had not been revised and hence, no rectification could be allowed. Printed from counselvise.com ITA No.571/Ahd/2025 4 3.5 The assessee filed appeal before the CIT(A), NFAC, on 29.08.2022. The appeal was disposed of ex parte by the CIT(A) on 25.01.2023 on the ground that the assessee failed to respond to notices issued on 16.12.2022, 10.01.2023, and 17.01.2023. On merits, the CIT(A) held that in the absence of a revised Form 3CD, the claim of deduction under section 43B could not be accepted and upheld the adjustment made by CPC. 4. Aggrieved by the order of CIT(A), NFAC, the assessee is in appeal before us raising following grounds of appeal: 1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals) has erred in passing order without providing enough opportunities to represent the case of the assessee. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals) has erred in passing order without considering that assessee was unaware about the hearing notices. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming ex-parte rectification order passed by the Assessing Officer without providing any opportunities of being heard. 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 4,67,802/- u/s 43B of the Act. 5. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 4,67,802/- u/s 43B of the Act without considering that it was inadvertently stated in under clause 26(B)(b) of 3CD Report (i.e. taxes not paid before due date) instead of clause 26(B)(a) (i.e. taxes paid on or before the due date). 6. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs. 4,67,802/- u/s 43B of the Act without considering that TDS payments were made before the due date of fling of Income Tax Return. 7. It is therefore prayed that the above addition/disallowance made by the assessing officer may please be deleted. 8. Appellant craves leave to add, alter or delete any grounds) either before or in the course of hearing of the appeal. 5. During the course of hearing before us, the learned Authorised Representative reiterated the facts and submitted additional evidence in the form of payment challans, ledger extracts, and computation sheets, substantiating that the entire TDS amount of Rs.4,67,802/- was paid before the due date of filing return (i.e., 12.03.2022). The learned AR submitted that the error in clause 26(B)(b) was a clerical oversight and that the documentary evidence now placed on record directly establishes factual correctness of payment within time. The application for admission of Printed from counselvise.com ITA No.571/Ahd/2025 5 additional evidence was supported by a certificate from Tax Auditor Monil R Shah & Associates acknowledging the clerical error. 6. The learned Departmental Representative did not raise any serious objection to the admission or the prayer for remand. 7. We find that the entire disallowance under section 43B amounting to Rs.4,67,802/- has arisen solely on account of the tax auditor’s reporting under clause 26(B)(b) of the Tax Audit Report in Form 3CD, which states that the said amount was not paid before the due date of filing return. In support of his contention that this was a clerical oversight, the assessee has furnished a certificate issued by CA Monil R. Shah, the statutory tax auditor for A.Y. 2021–22, certifying that the return, audit report, and Form 3CD were finalized by him, and due to audit season workload, he inadvertently misreported the TDS payment under clause 26(B)(b) instead of clause 26(B)(a). The auditor has admitted that all the TDS payments were in fact made before the due date of filing the return and that the mistake was clerical. The certificate further affirms that challans were duly verified and TDS deposits were completed before 12.03.2022, the due date for filing return in the present case. This explicit admission by the auditor, supported by contemporaneous payment challans and ledger extracts now placed on record, strengthens the case for factual verification by the Assessing Officer. 7.1 Section 43B of the Act allows deduction of certain statutory liabilities, including taxes and duties, only on actual payment basis, irrespective of the method of accounting. However, the proviso to section 43B provides relief to the assessee by allowing deduction in the year of accrual itself, if such payments are made before the due date of filing the return of income under section 139(1). 7.2 It is the consistent judicial view that if statutory dues are actually paid before the due date of filing return, then the deduction under section 43B cannot be denied. In the present case, the CPC, while processing the return under section 143(1)(a)(iv), made an adjustment on the basis of the Printed from counselvise.com ITA No.571/Ahd/2025 6 Tax Audit Report, wherein the TDS of Rs.4,67,802/- was disclosed under clause 26(B)(b), which is meant for taxes not paid before due date. This triggered the default adjustment under the Centralised Processing Scheme logic as a \"disallowance indicated in audit report but not taken into account in return.\" In our opinion mere reporting inconsistency by the tax auditor in Form 3CD cannot override actual compliance with the statute. 7.3 It is settled law that substantive rights should not be defeated by procedural lapses, especially when the assessee has made the payments in accordance with law but suffered adverse adjustment due to technical misreporting. However, we also note that the Tax Audit Report has not been formally revised, which is a factual aspect relied upon by the lower authorities. In the absence of a revised report, and in view of the consistent line taken by CPC and CIT(A), we are not inclined to straightaway allow the claim at this stage. Nonetheless, the genuineness of payment is supported by primary evidence and auditor’s acknowledgment, and therefore deserves to be verified afresh by the Assessing Officer. We are thus inclined to restore the matter for a limited purpose of verifying the actual dates of payment of the TDS amount disallowed under section 43B. 7.4 We also find that the disallowance in this case is not based on any incriminating finding or substantive doubt on the genuineness of payment, but merely on a clerical tagging error. Disallowance under section 43B is not automatic if the assessee has actually fulfilled the statutory conditions. In fact, such a disallowance, if continued without verification of facts, would lead to taxation of income which never accrued, thereby offending the principles of real income doctrine and causing unjust enrichment to the Revenue. 7.5 In view of the foregoing, we set aside the order of the CIT(A), NFAC and restore the matter to the file of the Jurisdictional Assessing Officer with a direction to verify the correctness of the assessee’s claim that TDS of Rs.4,67,802/- was paid before the due date of filing return under section 139(1) of the Act for A.Y. 2021–22. The Assessing Officer shall take into Printed from counselvise.com ITA No.571/Ahd/2025 7 consideration the challans, ledger extracts, and the certificate issued by the tax auditor acknowledging the clerical misreporting, and re-adjudicate the allowability under section 43B in accordance with law. The assessee shall be granted reasonable opportunity to furnish necessary evidence in support of his claim. 8. In the result, the appeal is allowed for statistical purposes. Order pronounced in the Court on 29th July, 2025 at Ahmedabad. Sd/- SD/- (SUCHITRA R. KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 29/07/2025 vk* Printed from counselvise.com "