THE MALAD SAHAKARI BANK LTD, MUMBAI V. ADIT CPC, BANGALORE

ITA 1796/MUM/2022

AI Insights

The case involves The Malad Sahakari Bank Limited appealing against the order of the National Faceless Appeal Centre, which confirmed adjustments made by the Centralized Processing Centre, Bangalore, under section 143(1) of the Income Tax Act, 1961. The adjustments included the addition of \\u20b94,49,14,968 as contingent liabilities and disallowances related to late payments of provident fund contributions and other dues. The Tribunal examined whether these amounts were correctly added or disallowed, considering the submissions and evidence presented by the bank, including revised audit reports and rectification applications.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299187 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 19-10-2022
• Assessment Year: 2020-2021
• Appeal Filed On: 10-07-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIPUL JOSHI DINKAL
• Keywords: Principle of natural justice
• Section: 154; 43B; 37(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI PAVAN KUMAR GADALE, JM ITA No. 1796/MUM/2022 (Assessment Year 2020-21) T he Malad Sahakar i Bank Lim ited,6, Su jata N iketan, Rani Sati Ma r g, Malad ( E), Mum bai 400 097 Vs. ADIT CPC Bangalore, Karnataka-560 500 (Appellant) (Respondent) PAN No. AAAAT0320R Assessee by : Shri Vipul Joshi/Ms. Dinkal Hariya Revenue by : Shri S.K.Jain (SR AR) Date of hearing: 20.10.2022. Date of pronouncement : 17.01.2023. O R D E R PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by the assessee against appellate order passed by the National Faceless Appeal Centre, Delhi [the ld. CIT (A)] for A.Y. 2020-21 dated 10.06.2022 by which the appeal filed by the assessee against the order dated 18.10.2021 passed u/s. 143 (1) of the Income Tax Act, 1961 [ The Act ] by the Centralized Processing Centre, Bangalore [ The ld AO] was partly allowed. 02. Assessee is aggrieved and has raised following grounds of appeal: “1. Natural Justice Page | 2 ITA No.1796/MUM/2022 The Malad Sahakari Bank Ltd; A.Y. 2020-21 1.1. It is submitted that, in the facts and the circumstances of the case, and in law, the appellate order passed by Learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre [“Ld. CIT(A)”] to be held as bad and illegal, as : (i) The same is framed in breach of the participles of natural justice; and (ii) The same is perverse, passed without application of mind to the facts on record. 1.2 Without prejudice to the generality to the above, in the facts and the circumstances of the case, and in law, the order is bad in law as: (i) The same is passed without granting proper, sufficient and adequate opportunity of being heard to the Appellant; and (ii) The order is passed without application of mind to facts and the submissions brought on record. 1.2. ADDITION OF ₹ 4,49,14,968/- ON ACCOUNT OF CONTIGENT LIABILITIES. 2.1. The learned CIT(A) erred in confirming the action of the Centralized Processing Centre, Income Tax Department, Bangalore, [„AO‟] in making the adjustment u/s 143(1) of ₹ 4,49,14,968/- on account of „Amount of liability of contingent nature‟ [₹ 3,90,96,088/- towards Page | 3 ITA No.1796/MUM/2022 The Malad Sahakari Bank Ltd; A.Y. 2020-21 Guarantees and ₹ 58,18,880/- towards Education and Awareness Fund Deposits]. 2.2. While doing so, the CIT (A) erred in – (i) Basing his action on surmises, suspicion and conjecture; (ii)Taking into account irrelevant and extraneous considerations; and (iii) Ignoring relevant material and considerations as submitted by the Appellant. 2.3 It is submitted that, assuming-but not admitting- that some disallowance was required to be made, in the facts and circumstances of the case, and in law, such disallowance is not in accordance with the law, is arbitrary and excessive. 3. Addition of ₹ 3,97,566/- ON ACCOUNT OF CONTRIBUTION RECEIVED FROM EMPLOYEES TOWARDS PROVIDENT FUND 3.1 The Ld.CIT(A) erred in confirming the action of the Assessing Officer in making the disallowance of ₹ 3,97,566/- made by Central Processing Centre, Income Tax Department, being the employees‟ contribution toward the provident fund, on the ground that the same was not paid within the due date prescribed under the respective statues. Page | 4 ITA No.1796/MUM/2022 The Malad Sahakari Bank Ltd; A.Y. 2020-21 3.2 It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance was called for. 3.3 Without prejudice to the above, in the alternative, assuming- but not admitting- that some disallowance was called for, the computation of the same is not in accordance with the law, is arbitrary and excessive.” 03. The brief facts of the case show that, assessee is an association of person [AOP] engaged in banking business. It filed its return of income on 20.01.2021 at total income of ₹5,35,64,760/-. The return was processed u/s. 143(1) of the Act wherein the income from business or profession of the assessee was taken at ₹9,06,92,439/- against the income declared by the assessee at ₹4,42,45,201/-. The adjustment is with respect to  disallowance of liability of contingent nature disallowed as per clause 7(h) of the intimation u/s. 143(1) of the Act. The disallowance of ₹ 4,49,14,968/-. This amount was added under the pretext that the amount is debited to the profit and loss account is disallowable u/s. 37(1) of the Act.  adjustment was of ₹3,39,136/- being amount debited to profit and loss of the previous year but disallowable 43B of the Page | 5 ITA No.1796/MUM/2022 The Malad Sahakari Bank Ltd; A.Y. 2020-21 Act which is in the nature of tax due to cess or fee.  adjustment is ₹7,95,132/- being a sum disallowable u/s. 43B payable by the a way of contribution to provident fund for the welfare of employees. 04. The assessee filed an appeal before the ld.CIT(A) contested that contingent liability of ₹4,49,14,968/- was not at all debited to the profit and loss account, but is a contingent item. It was never claimed by the assessee as deduction. Further duty, taxes and fees ₹41,000 is share forfeiture amount and has not been debited to the profit and loss. Further, the GST payment of ₹ 2,79,736/- is already paid on or before the due date of filing of the return of income. The profession tax of ₹18,400/- is also paid on 23.04.2021. Therefore same is also not disallowable u/s. 43B. The provident fund of ₹3,97,566/- has been paid on 08.04.2020 therefore same is also not disallowable. The assessee submitted that with respect to the bonus, the actual bonus is ₹33,25,285/- whereas in the return of income same was wrongly shown at ₹33,25,000/-. Accordingly, it was stated that adjustment made as per intimation u/s. 143(1) dated 18.10.2021 is not correct. 05. It was further stated that a rectification application u/s. 154 of the Act was also filed on 21.11.2021. The above application u/s. 154 was disposed off on 14.02.2022 wherein certain adjustments are deleted. However, Page | 6 ITA No.1796/MUM/2022 The Malad Sahakari Bank Ltd; A.Y. 2020-21 adjustment with respect to the contingent liability and contribution of PF of employees are retained. The assessee further submitted that revised audit report in Form No. 3CD was filed on 06.04.2022 wherein the wrong facts punched by the auditor in the tax order report have been rectified. The ld. CIT(A) did not consider the argument of the assessee and noted that AO has correctly disallowed the contingent liability of ₹ 4,14,14,968/- on account of the fact that this expenses were reported by the auditor in Column No. 21(g) of the report. The entire column 21 of the audit report is meant for providing details of amounts debited to the profit and loss account being in the nature of capital, personal and advertisement expenditure, etc. Therefore, he confirmed the disallowance. On account of late payment of employees contribution to provident fund amounting to ₹3,97,566/- which was actually deposited by the assessee on 08.04.2022 and due date of payment was 15.04.2020. The Ld.CIT (A) confirmed the disallowance because of the reason that the appellants failure to pay the employees contribution to PF and ESI within the prescribed due dates as per section 36(1) (va) of the Act. Therefore, aggrieved with that appellate order assessee is in appeal before us. 06. The Ld. Authorized Representative submitted a paper book containing 390 pages and submitted that in the computation of total income assessee has not claimed any deduction on account of contingent liability therefore the addition of the same made by the CPC and confirmed by the ld.CIT(A) is not correct. He referred to profit and loss Page | 7 ITA No.1796/MUM/2022 The Malad Sahakari Bank Ltd; A.Y. 2020-21 account and balance sheet of the company and submitted that same have been shown in the balance sheet and not debited to the profit and loss account. He further submitted that employees contribution to provident fund is already deposited on 08.04.2020 whereas the due date for the same is 15.04.2020 therefore the disallowance made by the lower authorities is not correct. He further stated that, ld.CIT(A) has incorrectly mentioned that above amount is not paid before the respective due date of the Provident Fund Act. 07. Ld. DR vehemently supported the order of the ld.CIT(A). He submitted that when the figures are wrongly punched by the assessee or his auditor no fault can be found with the Central Processing Centre or CIT(A). 08. We have carefully considered the rival contentions and perused the order of the lower authorities. We find that admittedly the assessee has punched the wrong figures. In fact, it is not the auditor but the assessee who approves the figures put in Form No. 3CD. The Auditor certifies it to be "true and correct". Therefore, in this case the auditor as well as the assessee both are at some fault. However, when the matter is before us the interest of substantial justice need to be looked at. If because of the error of the assessee an amount of income is not taxable we cannot uphold the addition made by the lower authorities, if it is not supported by provisions of law. 09. In this case, the contingent liability of ₹4,49,14,968/- was not debited to the profit and loss account and therefore Page | 8 ITA No.1796/MUM/2022 The Malad Sahakari Bank Ltd; A.Y. 2020-21 same was not claimed as deductable expenditure by the assessee. The Above amount was disclosed in the balance sheet only. Accordingly, the addition of ₹4,49,14,968/- cannot be made in the hands of the assessee. Accordingly, we direct the ld.AO to delete the same. 010. The second item of amount disallowance of ₹ 3,97,566/- on account of employees contribution towards the provident fund which was deposited on 08.04.2020 where the due date of deposit of the above dues was 15.04.2020. The disallowance of this sum is also not correct. Accordingly, we allow Ground No. 2 & 3 of the appeal of the assessee. 05. In view of our decision Ground No. 1 is merely academic in nature and hence, dismissed. 06. In the Result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 17.01.2023. Sd/- Sd/- (PAVAN KUMAR GADALE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated:17.01.2023 Uday Mugal, Stenographer Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai Page | 9 ITA No.1796/MUM/2022 The Malad Sahakari Bank Ltd; A.Y. 2020-21 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai