Ansal Housing Ltd, New Delhi V. DCIT CPC, Bengaluru

ITA 1970/DEL/2020

AI Insights

M/s. Ansal Housing Ltd. appealed against the order of the Commissioner of Income Tax (Appeals) - I, New Delhi, which had partially upheld the adjustments made by the Assessing Officer (AO) in the intimation under Section 143(1)(a) of the Income Tax Act. The adjustments included disallowances related to delayed deposit of PF/ESI contributions and club expenses. The Tribunal examined the legality of these adjustments, particularly focusing on whether the disallowances were justified under the provisions of the Income Tax Act and relevant judicial precedents.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115890 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 10-04-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 20-12-2020
• Other Referred Cases: M/s. P.R. Packaging Service vs. ACIT, Anushree Global Solution vs. ITO, Checkmate Services Pvt. Ltd. and others vs. CIT & others, Cemetile Industries vs. ITO, ACIT vs. Teradata India Pvt. Ltd.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Revised return; Set aside
• Section: 37; 2; 43B; 40(a)(ia); 37(1); 143(1); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA No.1970/Del/2020 (Assessment Year : 2018-19) M/s. Ansal Housing Ltd. 606, 6 th Floor, Indra Prakash, 21, Barakhamba Road, New Delhi – 110001 PAN No. AAACA 0377 R Vs. DCIT CPC Bengaluru (APPELLANT) (RESPONDENT) Assessee by Shri Gaurav Jain, Adv, Shri Sudarshan Roy, AR Revenue by Shri Kanv Bali, Sr. D.R. Date of hearing: 11.04.2023 Date of Pronouncement: 23.06.2023 ORDER PER ANIL CHATURVEDI, AM : This appeal filed by the assessee is directed against the order dated 31.08.2020 passed by the Commissioner of Income Tax (Appeals) – I, New Delhi for Assessment Year 2018-19. 2. Brief facts of the case as culled out from the material on record are as under :- 3. Assessee is a company who filed its return of income for A.Y. 2018-19 on 30 th October 2018 declaring loss of Rs.22,09,04,240/-, thereafter, assessee filed revised return of income declaring loss of ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 2 Rs.21,95,19,479/-. In the intimation issued u/s 143(1)(a) of the Act. AO made adjustment of Rs.1,55,47,702/- on account of disallowance of Rs.3,43,817/- being expenditure incurred at clubs, disallowance u/s 40(a)(ia) of the Act on account of non-compliance with the provisions of Chapter XVII-B of Rs.28,46,229/- and Rs.1,23,57,656/- on account of disallowance u/s 36(1)(va) of the Act being delayed deposit of PF/ESI. 4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 31.08.2020 in Appeal No.10599/19-20 granted partial relief to the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal and has raised the following grounds of appeal: “1. That on the law, facts and in the circumstances of the case, the Ld. CIT(A) has erred in upholding the action of Ld. AO, CPC, Bangalore, who had made adjustment of Rs.1,23,57,656/- u/s 36(i)(va) of Income Tax Act 1961 to the returned income of the assessee, on account of non-deposit of EPF and ESI within the prescribed period in law, though the same was paid before the due date of filing of return of income. 2. That on the law, facts and in the circumstances of the case, the Ld CIT(A) has erred in upholding the action of Ld. AO, CPC, Bangalore, who had made addition of Rs.3,43,817/- on account of club expenses u/s 37 of Income-tax Act. The said business expense of revenue nature was incurred by the company on account of subscription/fees paid to Clubs and is an allowable expenditure u/s 37 of the Act. 3. That the above ground(s) of appeal are to be considered separately and without prejudice to one another. 4. That the appellant assessee craves, leave to add, alter, amend, substitute, withdraw or forego any of the ground(s) of appeal before or at the time of hearing. ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 3 5. That the order of Ld. CIT(A) is bad in law and wrong on facts of the case and is in violation of the principles of natural justice, as passed without providing any opportunity to the appellant assessee to meet the merits of its case.” 5. Ground No.1 is with respect to the PF/ESI adjustment of Rs.1,23,57,656/- u/s 36(i)(va) of the Act on account of non-deposit of PF/ESI. 6. Before us, Learned AR reiterated the submissions made before the AO and CIT(A) and further submitted that CIT(A) was not justified in upholding the action of AO whereby the adjustments of Rs.1,23,57,656/- were made on account of delayed deposit of employees share of Provident Fund & ESI dues as the same was deposited before the due date of filing of the return of income u/s 139(1) of the Act. He further submitted that CIT(A) was not justified in making the addition as the aforesaid addition does not fall within the purview of Section 143(1) as it is a debatable issue and in support of his contention he relied on the decision of Bombay Tribunal in the case of M/s. P.R. Packaging Service vs. ACIT (ITA No.2376/Mum/2022 order dated 07.12.2022) and other decisions. He further submitted that the information provided in tax audit report would cease to be relevant if the issue is debatable and for the aforesaid proposition he placed reliance on Anushree Global Solution vs. ITO (2022) 139 Taxmann.com 460 (Del). 7. Learned DR on the other hand supported the order of lower authorities and further submitted that the issue of delayed payment has now been settled by Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. and others vs. CIT & others (2022) ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 4 448 ITR 518 (SC) and the Pune Bench of Tribunal in the case of Cemetile Industries (ITA No 693/Pun/2022 order dtd 23.11.2022 had considered various aspects and by a detailed order held that the delayed deposit of employees contribution cannot be allowed as deduction and that the adjustment could even be made in the intimation issued u/s 143(1) of the Act. She further submitted that various Benches of Delhi ITAT have decided the issue following the decision of Pune Bench of Tribunal. 8. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the disallowance of delayed deposit of employee’s contribution of PF & ESI in the intimation passed u/s 143(1) of the Act. We find that Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. (supra) has held that the contribution by the employees to the relevant funds is the employer’s income u/s 2(24)(x) of the Act and the deduction for the same can be allowed only if such amount is deposited in the employee’s account in the relevant fund before the date stipulated under the respective Acts. Thus the deduction u/s 36(1)(va) of the Act can be allowed only if the employees’ share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts. We find that identical issue of disallowance of delayed deposit of PF/ESI dues in the intimation issued u/s 143(1) of the Act arose before the Pune Bench of Tribunal in the case of Cemetile Industries vs. ITO in ITA No.693/PUN/2022 and others. The Co-ordinate Bench of Tribunal vide order dated 23.11.2022 has observed as under: “3. We have heard .......... It is undisputed that the audit report filed by the assessee indicated the due dates of payment to the relevant funds ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 5 under the respective Acts relating to employee’s share and the said amounts were deposited by the assessee beyond such due dates but before the filing of the return u/s 139(1) of the Act. The case of the assessee before the authorities below has been that such payments before the due date as per section 139(1) of the Act amounts to sufficient compliance of the provisions in terms of section 43B of the Act, not calling for any disallowance. Per contra, the Department has set up a case that the disallowance is called for because of the per se late deposit of the employees’ share beyond the due date under the respective Act and section 43B is of no assistance. 4. Before proceeding further, it would be apposite to take note of the relevant statutory provision in this regard. Section 2(24) provides that `income’ includes: `(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees’. Thus, contribution by employees to the relevant funds becomes income of the employer. Instantly, there is no dispute as to the taxability of such income in the hands of the assessee. Once such an amount becomes income of the employer-assessee, then section 36(1)(va) comes into play for providing the deduction. This provision provides that: `(va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date.’. The term `due date’ for the purposes of this clause has been defined in Explanation 1 to this provision to mean: `the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise.’ Thus, it is axiomatic that deposit of the employees’ share of the relevant funds before the due date under the respective Acts is sine qua non for claiming the deduction. Au Contraire, if the contribution of the employees to the relevant funds is not deposited by the employer before the due date under the respective etc., then the deduction u/s.36(1)(va) is lost notwithstanding the fact that the share of the employees had already crystallized as income of the employer u/s.2(24)(x) of the Act. 5. Adverting to the facts of the case, it is seen that the assessee claimed the deduction for the employees’ share for depositing the same in the relevant funds beyond the due date as given in Explanation 1 to section 36(1)(va) on the strength of section 43B. The latter section opens with a non-obstante clause and provides that a deduction otherwise allowable in respect of: `(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 6 fund or gratuity fund or any other fund for the welfare of employees’ shall be allowed only in that previous year in which such sum is actually paid. The first proviso to section 43B states that: `nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.’ The main provision of section 43B, providing for the deduction only on actual payment basis, has been relaxed by the proviso so as to enable the deduction even if the payment is made before the due date of furnishing the return u/s 139(1) of the Act for that year. The claim of the assessee is that the deduction becomes available in the light of section 36(1)(va) read with section 43B on depositing the employees’ share in the relevant funds before the due date u/s 139(1) of the Act. This position was earlier accepted by some of the Hon’ble High Courts holding that the deduction is allowed even if the assessee deposits the employees’ share in the relevant funds before the date of filing of return u/s.139(1) of the Act. This was on the analogy of treating the employee’s share as having the same character as that of the employer’s share, becoming deductible u/s 36(1)(iv) read in the hue of section 43B(b). Recently, the Hon’ble Supreme Court in Checkmate Services P. Ltd. & Ors. VS. CIT & Ors. (2022) 448 ITR 518 (SC) has threadbare considered this issue and drawn a distinction between the parameters for allowing deduction of employer’s share and employees’ share in the relevant funds. It has been held that the contribution by the employees to the relevant funds is the employer’s income u/s.2(24)(x), but the deduction for the same can be allowed only if such amount is deposited in the employee’s account in the relevant fund before the date stipulated under the respective Acts. The hitherto view taken by some of the Hon’ble High Courts in allowing deduction even where the amount was deposited in the employee’s account before the time allowed u/s.139(1), ergo, got overturned. The net effect of this Apex Court judgment is that the deduction u/s.36(1)(va) can be allowed only if the employees’ share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts and further that the due date u/s.139(1) of the Act is alien for this purpose. 6. There is no quarrel that the enunciation of law by the Hon’ble Supreme Court is always declaratory having the effect and application ab initio, being, the date of insertion of the provision, unless a judgment is categorically made prospectively applicable. The ld. AR candidly admitted that this judgment will equally apply to the disallowance u/s.36(1)(va) anent to all earlier years as well for the ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 7 assessments completed u/s.143(3) of the Act. He, however, accentuated the fact that the instant batch of appeals involves the disallowance made u/s.143(1) of the Act. It was argued that no prima facie adjustment can be made in the Intimation issued u/s 143(1) of the Act unless a case is covered within the specific four corners of the provision. It was stressed that the action of the AO in making the extant disallowance does not fall in any of the clauses of section 143(1). 7. We fully agree with the proposition bolstered by the ld. AR that adjustment to the total income or loss can be made only in the terms indicated specifically u/s.143(1) of the Act. Now, we proceed to examine if the case falls under any of the clauses. The rival parties are consensus ad idem that the case can be considered as falling either under clause (ii) or (iv) of section 143(1). For ready reference, we are extracting the relevant provision as under: ‘143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iv) disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return’ 8. Sub-section (1) of section 143 states that a return shall be processed to compute total income by making six types of `adjustments’ as set out in sub-clauses (i) to (vi). As noted supra, we are concerned only with the examination of two sub-clauses, viz., (ii) and (iv). Sub-clause (ii) talks of ‘an incorrect claim, if such incorrect claim is apparent from any information in the return”. The expression “an incorrect claim apparent from any information in the return” has not been generally used in the provision. Rather, it has been specifically defined in Explanation (a) to section 143(1) as under: `Explanation.—For the purposes of this sub-section,— (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,— (i) of an item, which is inconsistent with another entry of the same or some other item in such return; ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 8 (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;’ 9. Clause (i) of Explanation (a) refers to a situation in which there is a claim of income or expenditure at two places in the return of income and there is inconsistency in them. For example, if deduction is claimed under a specific section for a sum of Rs.100/- in the Profit and loss account accompanying the return, but in the computation of income, the amount has been taken as Rs.110/-, leading to inconsistency, requiring an adjustment. Clause (ii) of Explanation (a) covers a situation in which claim is made, say, for a deduction u/s.80IA for which audit report is required to be furnished, but such report has not been furnished along with the return. Clause (iii) contemplates a situation in which deduction exceeds specified statutory limit. For example, section 24(a) provides for a standard deduction for a sum equal to 30% of the annual value, but the assessee has claimed deduction at 40%. These situations warrant an adjustment. It is obvious that none of the three clauses of Explanation (a), defining an incorrect claim apparent from any information in the return, gets magnetized to the facts of the present case. 10. Now we turn to clause (iv) of section 143(1)(a) which provides for `disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return’. The words “or increase in income” in the above provision were inserted by the Finance Act, 2021 w.e.f. 01-04-2021. As such, this part of the provision cannot be considered for application during the years under consideration, which are anterior to the amendment. We are left with ascertaining if the disallowance made u/s 36(1)(va) in the Intimation under section 143(1)(a) can be construed as a `disallowance of expenditure indicated in the audit report not taken into account in computing the total income in the return’. Point 20(b) of the audit report in Form 3CA has columns – Serial number; Nature of fund; Sum received from employees; Due date for payment; The actual amount paid; and The actual date of payment to the concerned authorities. A copy of audit report in one of the cases under consideration, namely, S.M. Auto Stamping Pvt. Ltd. (ITA No.521/PUN/2022) has been placed on record. Point 20(b) of the audit report gives the `Sum received from employees’ at Rs.21,800/-. `Due date for payment’ has been reported as 15-07-2017 and `The actual date of payment to the concerned authorities’ has been given as 20-07- ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 9 2017. Similar is the position regarding other items disallowed u/s.36(1)(va) having `The actual date of payment’ after the `Due date for payment’. Thus, it is manifest that the audit report clearly points out that as against the due date of payment of the employees’ share in the relevant fund on 15.7.2017 for deduction u/s 36(1)(va), the actual payment is delayed and deposited on 20.7.2017. The legislature, for the disallowance under sub-clause (iv) of section 143(1)(a), has used the expression `indicated in the audit report’. The word `indicated’ is wider in amplitude than the word `reported’, which envelopes both the direct and indirect reporting. Even if there is some indication of disallowance in the audit report, which is short of direct reporting of the disallowance, the case gets covered within the purview of the provision warranting the disallowance. However, the indication must be clear and not vague. If the indication in the audit report gives a clear picture of the violation of a provision, there can be no escape from disallowance. Turning to the facts of the case, it is clear from the mandate of section 36(1)(va) that the employees’ share in the relevant funds must be deposited before the due date under the respective Acts. If the audit report mentions the due date of payment and also the actual date of payment with specific reference in column no. 20(b) having heading: `Details of contributions received from employees for various funds as referred to in section 36(1)(va)’, it is an apparent indication of the disallowance of expenditure u/s 36(1)(va) in the audit report in a case where the actual date of payment is beyond the due date. Though the audit report clearly indicated that there was a delay in the deposit of the employees’ share in the relevant funds, which was in contravention of the prescription of u/s.36(1)(va), the assessee chose not to offer the disallowance in computing the total income in the return, which rightly called for the disallowance in terms of section 143(1)(a) of the Act. 11. The ld. AR vehemently argued that it was a case of “increase in income” which has been enshrined in clause (iv) of section 143(1)(a) w.e.f. 01-04-2021 and hence cannot be take note of for the year under consideration. In our considered opinion, the contention is ill-founded. We have noted above that clause (iv) of section 143(1)(a) talks of two different limbs, namely, `disallowance of expenditure’ and `increase in income’ by means of indication in the audit report. Both the limbs are independent of each other. The indication in the audit report for `Increase of income’ should be qua some item of income and not increase of income because of the `disallowance of expenditure’. Every disallowance of expenditure leads to increase of income. If the contention of the ld. AR is taken to a logical conclusion, then the second expression `or increase in income’ inserted by the Finance Act, 2021 would be rendered a redundant piece of legislation. It is trite ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 10 interpretation has to be given to the statutory provisions in such a manner that no part of the Act is rendered nugatory. Distinction in the scope of the two aspects can be understood with the help of the present context only. We have noted that point no. 20(b) of the audit report, dealing with section 36(1)(va), has columns, inter alia, (i) `Sum received from employees’; (ii) `Due date for payment’; and (iii) `The actual date of payment to the concerned authorities’. The column (i) having details of the amounts received from employees indicates about the `increase in income’ as per sub-clause (iv) of section 143(1)(a) if the assessee does not take this sum in computing total income. The columns (ii) and (iii) having details of due date for payment and the actual date of payment indicate about `disallowance of expenditure’ if the assessee does not make suo-motu disallowance in computing total income. Right now, there is no case of `increase in income’ because the AO did not make adjustment for non-offering of income of the `Sums received from employees’, but made the adjustment for `disallowance of expenditure’ with the remarks that :`Amounts debited to the profit and loss account, to the extent disallowance under section 36 due to non-fulfilment of conditions specified in relevant clauses’. Thus, it is evident that it is a case of `disallowance of expenditure’ and not `increase of income’. Further, the entire challenge by the assessee throughout has been to the disallowance of expenditure made by the AO. It set up a case before the authorities below, including the ld. CIT(A), taking shelter of section 43B of the Act by arguing that the disallowance cannot be made because such payment was made before the due date u/s.139(1) of the Act. As such, the contention of adjustment u/s 143(1)(a)(iv) due to `increase in income’ is jettisoned. 12. Another argument point was put forth on behalf of the assessee that the assessee did not claim any deduction in the Profit and loss account of the amount under consideration and hence no disallowance should have been made. This argument is again bereft of force. The assessee claimed deduction for salary on gross basis, inclusive of the employees’ share to the relevant funds. To put it simply, if gross salary is of Rs.100, out of which a sum of Rs.10 has been deducted as contribution to relevant fund, then the debit of Rs.100 in the Profit and loss account means deduction has been claimed for Rs.10 as well. Ex consequenti, if deduction of Rs.10 is not allowed u/s 36(1)(va) for late deposit of the amount before the due date under the respective Act, it would mean that the claim of Rs.10 included in Rs.100 is not allowed deduction. 13. The ld. AR referred to section 5 of the Payment of Wages Act, 1936, to contend that deduction made from an employee’s salary for the month of October should suffer disallowance only if it is not paid by ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 11 15th December. This argument was premised on the language of section 5, which says that the wages of every person employed upon or in any railway, factory or industrial or other establishment upon or in which less than one thousand persons are employed, shall be paid before expiry of the seventh day, after the last day of the wage-period in respect of which the wages are payable. It was contended that salary for the month of October, 2022 will be paid before the 7th of November, which will result into income of the employer only at the time of payment, making the due date of payment into relevant fund as on or before 15th December and not 15th November. 14. There is no merit in the contention of linking the date of deposit of the employees’ share in the relevant funds with the date of payment of wages. Section 5 of the Payment of Wages Act simply deals with the ‘Time of payment of wages’. It does not stipulate any time limit for deposit of the employees share in the relevant funds. For that purpose, the relevant Acts give a window for depositing the contribution within 15 days of the last month's salary. Thus, contribution to the relevant fund towards the salary for the month of October-ending should be deposited before 15th November. 15. In view of the foregoing discussion, we are satisfied that the ld. CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made in these cases for late deposit of employees’ share to the relevant funds beyond the date prescribed under the respective Acts. 16. Both the sides are agreeable that the facts and circumstances of all the appeals except the two, which will be taken up hereinafter, are similar. We, ergo, countenance the disallowance. 17. The first case which involves some different facts is IT Cube Solutions Pvt. Ltd. (ITA No.702/PUN/2022). The ld. AR submitted that the information in audit report in point 20(b) was wrongly given pertaining to preceding year. He pointed out this fact from the audit report for the financial year 2016-17, which refers to due date of payment as 15-05-2015 and the actual date of payment as 12-05- 2016. This shows that inadvertently the auditor recorded due dates for payment as pertaining to the preceding year and actual date of payment for the current year for the purposes of indicating the disallowance of expenditure u/s.36(1)(va). The AO is directed to verify this fact and make the disallowance u/s.36(1)(va), if warranted, as per the correct figures. ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 12 18. The second case is Exfo Electro Optical Engineering (I) Pvt. Ltd., (ITA No.523/PUN/2022). The ld. AR contended that the auditor inadvertently mentioned the amount of employees’ share as well as the employer’s share in point 20(b) of the audit report. The AO is directed to verify the factual position in this regard and make disallowance only in respect of employees’ share. 19. In the result, the appeals in ITA No.523/PUN/2022 and ITA No.702/PUN/2022 are allowed for statistical purposes and all other appeals are dismissed.” 9. Before us, Learned AR has not pointed to any contrary binding decision on the issue nor has placed on record any material to demonstrate that the order of Pune Bench of Tribunal in the case of Cemetile Industries (supra) has been set aside, stayed or overruled by higher judicial forum. Further on identical issue, speaking through one of us i.e. Accountant Member the Co-ordinate Bench of Tribunal of ITAT, Delhi Bench in the case of ACIT vs. Teradata India Pvt. Ltd. (ITA No.1431/Del/2022 order dated 29.03.2023) following the decision of Pune ITAT cited hereinabove and Hon’ble Apex Court has decided the issue against the assessee. In such a situation, we following the reasoning given by the ITAT of Pune Benches and for similar reasons find no reason to interfere with the order of CIT(A) and thus the grounds of assessee are dismissed. 10. Ground No.2 is with respect to the addition of Rs.3,43,817/- on account of club expenses u/s 37 of the Act. 11. Before us, Learned AR submitted that in the tax audit report, the tax auditor had reported a sum of Rs.3,43,817/- as expenditure being incurred as fee subscription under form 3CD at tax audit report. He submitted that the expenses incurred were towards ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 13 payment and subscription fee to clubs and it fulfils all the conditions prescribed u/s 37 of the Act for being allowed as deduction. He further submitted that the subscription paid by assessee is allowable expenses and has been allowed by the authorities in the past in scrutiny assessment. He further submitted that the tax auditor has nowhere stated in the tax audit report that the expenditure is not allowable u/s 37(1) of the Act. He pointed to the copy of the Annexure of Form 3CD which is placed at page 107 of the paper book to support its contention that the auditor had only given the details that the payment made to club and had not stated that the payments are not allowable. He, therefore, submitted that in such a situation, no adjustment could have been made in the intimation issued u/s 143(1) of the Act. Learned DR on the other hand supported the order of CIT(A). 12. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the adjustment made of Rs.3,43,817/- in the intimation u/s 143(1) of the Act. We find that CIT(A) while upholding the intimation u/s 143(1) of the Act had relied on the provision of Section 143(1)(a)(iv) of the Act. For ready reference the relevant portion is reproduced hereunder: “143. [(1) Where a return has been made under section 139, or in response to a notice under sub section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or less shall be computed after making the following adjustments, namely:- ........... (iv) disallowance of expenditure [or increase in income] indicate in the audit report but not taken into account in computing the total income in the return;” ITA No.1970/Del/2020 M/s. Ansal Housing Ltd. vs. DCIT CPC 14 13. The perusal of the aforesaid provision would reveal that while processing of return of income, adjustment could be made of the disallowance of expenditure indicated in the audit report but which is not taken into account in computing the total income in the return. In the present case, we find force with the argument of Learned AR as the copy of the tax audit report placed at page 107 of the paper book reveals that the auditor has given the details of payment made to various clubs during the year under consideration which are in the nature of subscription and the auditor has nowhere pointed that the expenditure is disallowable. In such a situation, we are of the view that no adjustment with respect to the disallowance payment made to club could have been made by AO. We, therefore, set aside the order of CIT(A) on this ground. Thus the ground of assessee is allowed. 14. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 23.06.2023 Sd/- Sd/- (CHANDRA MOHAN GARG) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 23.06.2023 Priti Yadav* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI