SANGIR PLASTICS PVT LTD, MUMBAI V. DCIT, CPC, BANGALORE

ITA 1061/MUM/2023

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Sangir Plastics Private Limited filed two appeals before the Income Tax Appellate Tribunal Mumbai 'G' Bench, challenging the orders related to the assessment year 2018-19. The first appeal contested the intimation issued under section 143(1), which included disallowances under sections 40A(7) and 43B based on the tax audit report. The second appeal challenged the assessment order under section 143(3), which upheld the disallowances. The Tribunal found merit in the assessee's arguments, particularly noting the voluntary disallowance already made by the assessee under section 40A(7) and the timely payment of provident fund contributions, leading to the decision to delete the disallowance and restore the issue of provident fund contributions for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124011 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 27-06-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 02-04-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 43B; 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘G’ BENCH, MUMBAI. Before Shri B.R. Baskaran (AM) & Shri Rahul Chaudhary (JM) I.T.A. No. 1061/Mum/2023 (A.Y. 2018-19) I.T.A. No. 1062/Mum/2023 (A.Y. 2018-19) Sangir Plastics Private Limited 3 rd Floor, Mandhana Enclave Bangur Nagar, Goregaon West Mumbai-400 104. PAN : AABCS3737J Vs. National Faceless Appeal Centre, Delhi (Appellant) (Respondent) Assessee by Shri Prakash Jotwani Department by Shri Paresh Deshpande Date of Hearing 28.06.2023 Date of Pronouncement 30.06.2023 O R D E R Per B.R.Baskaran (AM) :- Both the appeals filed by the assessee relate to the assessment year 2018-19 and they are directed against the separate orders passed by Ld CIT(A), NFAC, Delhi. One appeal is related to the intimation issued u/s 143(1) of the Act and another appeal is related to the assessment order passed u/s 143(3) of the Act. Both the orders are related to AY 2018-19. 2. The facts relating to the case are discussed in brief. The assessee company is engaged in the business of manufacture and sale of pipes, sheets, fittings made of HDPE, PP, HIPS, PVDF, fabrication and installation works, garbage chute etc. It filed its return of income for the year under consideration declaring a total income of Rs.13.72 crores. The same was processed u/s 143(1) of the Act, wherein following disallowances were made:- Disallowance u/s 40A(7) - 23,17,343 Disallowance u/s 43B - 1,52,240 Sangir Plastics Private Limited 2 The CPC made the above said disallowance on the basis of information given in Tax audit report in Form 3CD. Accordingly, the CPC computed the total income of the assessee at Rs.13,98,77,189/-. The assessee did not take any action at this stage. 3. The return of income of the assessee was taken up for scrutiny subsequently. In the assessment order it is mentioned that the return of income was taken up for complete scrutiny in order to examine the issues relating to (a) Duty Drawback and (b) ICDS Compliance and Adjustment. It appears that the AO was satisfied with both the above said issues and accordingly determined the total income at the very same amount of Rs.13,98,77,189/-, which was determined in the intimation issued u/s 143(1) of the Act, which included both the above said disallowances. 4. Aggrieved by the assessment order, the assessee filed two separate appeals before ld CIT(A), the first one was against the intimation issued u/s 143(1) of the Act and the second one was against the assessment order passed u/s 143(3) of the Act. 5. The appeal filed before Ld CIT(A) against the intimation issued u/s 143(1) of the Act was delayed by 517 days, since it was filed after completion of assessment u/s 143(3) of the Act. The assessee explained that it has requested its authorized representative to file objections against the adjustment proposed by CPC, but due to oversight the said request was sent after expiry of 30 days, i.e., the time period available for filing objections. Since the return of income was taken up scrutiny, the tax counsel advised the assessee to take up the issues in the scrutiny proceedings. Hence the assessee did not file appeal in time before Ld CIT(A) against the intimation issued u/s 143(1) of the Act. Since the AO did not grant any relief against the adjustments made by CPC, it has filed appeal belatedly against the intimation. Sangir Plastics Private Limited 3 6. The Ld CIT(A) was not convinced with the explanations given by the assessee for the delay and accordingly dismissed the appeal of the assessee in limine. 7. With regard to the appeal filed against the assessment order passed u/s 143(3) of the Act, the Ld CIT(A) noticed that the return of income was selected for scrutiny for examination two issues, viz., Duty drawback and ICDS compliance and adjustment. Further, he observed that the AO has not made any addition relating to 40A(7) and 43B in the assessment order, meaning that both the above said issues do not arise out of assessment order passed u/s 143(3) of the Act. Accordingly, the Ld CIT(A) dismissed the appeal of the assessee filed against assessment order passed u/s 143(3) of the Act. 8. Hence the assessee has filed two appeals before the Tribunal, one against the order of Ld CIT(A) passed against the intimation issued u/s 143(1) of the Act and the second one against the order of Ld CIT(A) passed against assessment order passed u/s 143(3) of the Act. The assessee is contesting identical issues, viz., the addition made u/s 40A(7) and sec. 43B of the Act in both the appeals. Hence both the appeals are being disposed of by this common order. 9. We noticed that the Ld CIT(A) has dismissed the appeal filed by the assessee against the intimation issued u/s 143(1) of the Act without condoning the delay. However, we notice from the reasons given by the assessee that it was acting on the basis of advice given by its tax counsel and further, it was under bonafied belief that both the above said additions could be pursued before the AO in the scrutiny proceedings. Thus, it is not a case, where the assessee remained lethargic. Accordingly, we are of the view that there was sufficient cause for the assessee in not filing appeal in time before Sangir Plastics Private Limited 4 Ld CIT(A). Accordingly, we condone the delay in filing appeal before Ld CIT(A). 10. With regard to the appeal filed against the assessment order passed u/s 143(3) of the Act, we notice that the Ld CIT(A) has observed that the return of income was selected for scrutiny for examination two issues, viz., Duty drawback and ICDS compliance and adjustment. However, on a perusal of the assessment order, we notice that the AO has observed as under:- “The case was selected for Complete Scrutiny assessment under the E-assessment Scheme, 2019 on the following issues:-” Thus, we notice that the return of income has been selected for Complete scrutiny assessment and hence the observation of the Ld CIT(A) in this regard is liable to be rejected. 11. Considering the issues contested in these appeals, we prefer to dispose of the appeal on merits, in order to avoid multiplicity of proceedings. We shall first take up the appeal relating to intimation issued u/s 143(1) of the Act. 12. The first issue disputed by the assessee relates to disallowance made under section 40A(7) of the Act. The Learned AR submitted that the assessee himself has voluntarily disallowed the sum of Rs. 23,17,343/- u/s 40A(7) of the Act while filing return of income and hence there was no requirement for CPC to make the said disallowance again. Accordingly the Ld A.R submitted that the disallowance so made by CPC has resulted in double disallowance. 13. The Learned DR fairly accepted the above said factual aspect. Accordingly, we hold that the disallowance of Rs.23,17,343/- made by Sangir Plastics Private Limited 5 learned CPC under section 40A(7) is not warranted and accordingly we direct the Assessing Officer/CPC to delete the same. 14. The next issue contested by the assessee relates to disallowance of Rs. 1,52,240/- made under section 36(1)(va) of the Act in respect of employees’ contribution. The Learned AR submitted that the provident fund dues received from employees for the month of May, 2017 amounting to Rs. 1,52,240/- was paid to the Provident Fund organization along with employer’s contribution and administration charges aggregating to Rs.3,19,068/- on 15.6.2017 itself. In support of the same, the learned AR invited our attention to page No. 71 of the paper book, wherein copy of the challan mentioning the date of deposit stated in the said challan. We noticed that it is stated that “this is a system generated challan on 15 June 2017 at 22.56.” He submitted that the above said payment was debited to the assessee’s bank account on 16-06-2017 Hence tax auditor has reported the date of payment in Form No. 3CD as “16.6.2017”. He submitted that delay in debiting the account of the assessee should not be a reason for adding the above said amount of Rs.1,52,240/- u/s 36(1)(va) of the Act when the fact remains the above said payment was made on 15.6.2017, i.e. within the due date prescribed under the Provident Fund Act. The Learned AR submitted that the Assessing Officer/CPC has added the above said amount on the basis of information given in tax audit report. Accordingly, he submitted that the above said disallowance should also be deleted. 15. The Learned DR, on the contrary, supported the order passed by Assessing Officer/CPC. 16. Having heard the rival contention, we are of the view that this issue requires examination at the end of the AO, since the tax authorities have not examined the relevant documents. Accordingly, we restore this issue to the Sangir Plastics Private Limited 6 file of AO for examining the claim of the assessee along with the supporting documents. 17. We shall now take up the appeal filed by the assessee against the assessment order passed under section 143(3) of the Act. In the assessment order the Assessing Officer has adopted the total income as determined in the intimation given under section 143(1) of the Act. We noticed earlier that the Assessing Officer/CPC has recomputed the total income by making the above said two disallowances. Out of the same, disallowance made sec. 40A(7) have been deleted by us in the preceding paragraph and the other disallowance has been restored to the file of the AO for examining it afresh. Hence, the total income determined under section 143(1) will undergo a check and consequently the Assessing Officer is directed to adopt total income as determined u/s 143(1) in the set aside proceedings. Accordingly, the matters contested in this appeal is restored to the file of the Assessing Officer for adopting correct total income as per the intimation given u/s 143(1) of the Act. 18. In the result, the appeal of the assessee in ITA No. 1061/Mum/2023 is treated as partly allowed and other appeal of the assessee is treated as allowed for statistical purposes. Pronounced in the open court on 30.6.2023. Sd/- Sd/- (RAHUL CHAUDHARY) (B.R. BASKARAN) Judicial Member Accountant Member Mumbai; Dated : 30/06/2023 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(Judicial) 4. PCIT Sangir Plastics Private Limited 7 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai