U K PAINTS INDIA PVT. LTD., NEW DELHI V. ACIT, CIRCLE- 27(1), NEW DELHI

ITA 118/DEL/2020

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9124 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 12-10-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 06-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BARNWAL
• Keywords: TDS
• Section: 43B; 14A; 143(2); 139(1); 44AB; 22

Judgement Text

1 ITA No. 118/Del/2020 U K Paints India Pvt. Ltd. Vs. ACIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘H’ NEW DELHI BEFORE SHRI B. R. R. KUMAR, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S., JUDICIAL MEMBER I.T.A. No. 118/DEL/2020 (A.Y 2015-16) U K Paints India Pvt. Ltd. 19, DDA Commercial Complex, Kailash Colony Extension, New Delhi-48 Vs. ACIT, Range : 27(1), New Delhi Appellant Respondent ORDER PER YOGESH KUMAR U.S., JM This appeal is filed by the assessee for assessment year 2015-16 against the order of the ld. Commissioner of Income Tax (Appeals)-9, New Delhi [hereinafter referred to as CIT (Appeals)] dated 14.11.2019. 2. The assessee has raised the following grounds of appeal:- Appellant by Shri Anil Bhalla, C. A. Respondent by Shri M Barnwal, CIT(DR) Date of Hearing 13.10.2022 Date of Pronouncement 02.11.2022 2 ITA No. 118/Del/2020 U K Paints India Pvt. Ltd. Vs. ACIT “1. The CIT(A) has erred, both on facts and in law, in upholding the addition/ disallowances u/s 43B Rs. 14,18,067/- 2. The CIT(A) has erred, both on facts and in law, in upholding the addition/ disallowances u/s 40A(7) Rs'27'59'188/- 3. In upholding the additions/ disallowances made by the AO u/s 43B and 40A(7), the CIT(A) has ignored the material available on record/ submitted both at the assessment stage and the appellate stage 4. The action of the CIT(A) in placing reliance solely on the Tax Audit Report of the assessee while ignoring the audited accounts and explanations provided is unjust, illegal, arbitrary, unwarranted. 5. The action of the CIT(A) in upholding the additions/ disallowances u/s 40A(7) and 43B is unjust, illegal, arbitrary, unwarranted and the addition deserves to be deleted. 6. The appellant craves leave to add, alter, modify or delete any ground of appeal either before or at the time of the hearing.” 3. Brief facts of the case are that the return of income was filed by the assessee declaring total income at Rs. 10,29,20,434/- . The case was selected for scrutiny under section 143(2) of the Act, statutory notices have been issued, the Representative of the assessee participated in the assessment proceedings. An assessment order came to be passed on 16.12.2017 by making disallowance under section 14A read with rule 8D at Rs. 1,88,08,529/-, sum of Rs. 41,72,011/- has been disallowed u/s 43B of the Act, further an amount of Rs. 51,084/- has been found to be paid towards interest on TDS which has been added back to the income of the assessee and a sum of Rs. 81,17,646/- being provision for gratuity has also added back in computation of income. 3 ITA No. 118/Del/2020 U K Paints India Pvt. Ltd. Vs. ACIT 4. As against the assessment order dated 16.12.2017 the assessee has preferred an appeal before the Ld. CIT(A). Ld. CIT(A) vide order dated 14.11.2019 partly allowed the appeal wherein the Ld. CIT(A) upheld the addition/disallowance made under section 43B of the Act at Rs. 14,18,067/- and further upheld the addition/disallowance under section 40A(7) at Rs. 27,59,188/-. 5. Aggrieved by the order of the Ld. CIT(A) dated 14/11/2019 assessee has preferred the present appeal on the grounds mentioned above. GROUND NO. 1 6. The Ld. Counsel for the assessee drawn our attention to the balance sheet produced at page 85 and 83 and the copy of leave with wages payable for the year ended 31.03.2015 for the year under consideration which depicts the details hereunder:- As per Copy of Account(Rs.) As per Balance Sheet (Rs.) Opening balance of leave with wages payable as at 01.04.2014 (PB 138) 46,10,159 (P 85) 4,82,769 Less: Paid (PB 138) 3,04,428 (P 83) 41,27,390 _______________________________________ 43,05,728 46,10,159 ______________________________________ Add: Amount of leave with wages payable liability debited for the year ended 31.03.2015 PB 138 11,69,480 (P 85) 9,89,738 (Rs.54,75,211 - 43,05,731) (P 83) 44,85,473 ____________________________ 4 ITA No. 118/Del/2020 U K Paints India Pvt. Ltd. Vs. ACIT 54,75,211 54,75,211 ______________________________ 7. Thus as per the Ld. AR the amount debited to the profit and loss account was of Rs. 11,69,480/-. Therefore submitted that the amount disallowable will be Rs. 11,69,480/- - Rs. 3,040,428/- = Rs. 8,65,052/- which has been added back in the computation. But submitted that Ld. AO has erroneous disallowed Rs. 41,32,801/-. Ld. Counsel for the assessee further submitted that both the Ld. AO and Ld. CIT(A) have picked up the figure of Rs. 49,97,853/- from audit report which was in the row 26(i)(B)(b). The said information given in the Tax Audit Report was not for the purpose of disallowance under section 43B of the Act, on the contrary the Ld. AO and the Ld. CIT(A) have not considered the figure of Rs. 4,77,358/- paid against the leave encashment in the upper row against 26(i)(B)(a). Ld. Counsel for the assessee further submitted that figure in the Tax Audit Report cannot bind the assessee if the figures are contrary to laid down law or to the existing facts. 8. Per contra Ld. DR submitted that the Tax Audit Report has been produced by the assessee in himself which is binding on him. Therefore the assessee cannot find fault with the department in making the addition. 9. We have heard the parties, perused the material on record and gave our thoughtful consideration. 10. On going through the balance sheet, copy of account of leave with wages payable for the year ended 31.03.2015, profit and loss account it is found that the actual disallowable will be Rs. 11,69,480-Rs. 3,04,428 = 8,65,052 which has been added back in the computation. Ld. AO and the Ld. CIT(A) have considered and picked up the figure of Rs. 49,97,853/- mentioned in the Tax 5 ITA No. 118/Del/2020 U K Paints India Pvt. Ltd. Vs. ACIT Audit Report wherein the assessee has specifically mentioned the figure of Rs. 4,77,358/- paid against leave encashment in the upper row against 26(i)(B)(a). 11. The Ld. CIT(A) observed that the disallowance made on the basis of observation of tax audit report u/s 44AB of the Act and the assessee fail to give proper explanation on that count. It is found that the Ld. A.O has not raised the query on the said issue but suo-moto disallowed the claim of the expenditure. In our opinion, it has to be seen whether the assessee has paid this expenditure before the due date of filing of the return u/s 139(1) of the Act. If the same is paid within the due date filing of return there cannot be any disallowance on this count. The AO cannot make addition only based on the figure picked from the Tax Audit Report which is contrary to the existing facts. Since in the present case, the actual disallowance i.e. Rs. 11,69,480/- (-) Rs. 3,04,428/- = 8,650,52/- has been added back to the computation by the assessee, we are of the opinion that, the addition/disallowance made u/s 43B of the Act at Rs. 14,18,067/- is deserves to be deleted. Accordingly, we allow the Ground No. 1 of the assessee. Ground No. 2 12. Ground No. 2 is regarding gratuity provision. Ld. Counsel for the assessee submitted that the amount of provision for gratuity debited in the profit and loss account and which was credited to the provision of gratuity account is only Rs. 24,27,081/-. But the Ld. AO has erroneously disallowed sum of Rs. 81,17,646/- under section 40A(7) of the Act. 13. The ledger account of the assessee depicts that opening balance of Rs. 81,17,646/-. The payment of Rs. 1,83,935/- was made and the residual account out of the opening balance was reversed amounting to Rs. 79,33,711/- the amount debited on account of gratuity for the year ended 31.3.2015 is Rs. 24,27,081/- Rs. 1,03,60,792/- - Rs. 79,33,711/- ). The said 6 ITA No. 118/Del/2020 U K Paints India Pvt. Ltd. Vs. ACIT figure of Rs. 24,27,081/- can also be corroborated with the profit and loss account the gratuity account produced in the paper book. It is also found that the difference between opening and closing balance amounting to Rs. 22,43,146/- has been added back in the computation of income at page 22 of the paper book (Rs. 1,03,60,792/- - Rs. 81,17,646/-). As per the gratuity payable account produced at paper book at page 141 wherein a sum of Rs. 74,919/- + 84785/- + 24231/- has been paid aggregating to Rs. 1,83,935/-. The computation of income at page 22 which is as under:- Gratuity 22,43,146 Bonus 17,398 Liability for leave encashment 8,65,052 ___________________ 31,25,596 ____________________ 14. We find force in the contention of the Ld. Counsel for the assessee that the Ld. AO as well as Ld. CIT(A) could not understand the tax audit report and made the addition which has been confirmed by the Ld. CIT(A). The Lower Authorities have disallowed total closing balance at the end of the previous year (i.e. 31/03/2015) u/s 40A(7) of the Act without understanding the tax audit report in proper sense. 15. The Ld. A.O. and the Ld. CIT(A) ought to have appreciated the tax audit report in proper sense the computation. The Lower Authorities ought to have appreciated the fact that the amount of provision for gratuity debited in the profit and loss account and which was credited to the provision of the gratuity account is only Rs. 24,27,081/- and should not have made disallowance of Rs. 81,17,646/- u/s 40A(7) of the Act. Therefore, the Ground No. 2 of the Assessee is deserves to be allowed, accordingly, the Assessee’s Ground No.2 is allowed. 7 ITA No. 118/Del/2020 U K Paints India Pvt. Ltd. Vs. ACIT 16. Ground No. 3 to 6 being general in nature, requires no adjudication. 17. In the result, appeal of the Assessee is allowed . Order pronounced in the Open Court on 02 nd November, 2022. Sd/- Sd/- (B. R. R. KUMAR) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 02/11/2022 Veena/R. N. Sr. PS Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI