2018 (9) TMI 276 - AT - Income Tax

Revision u/s 263 - error in the order of the A.O. passed u/s 143(3) in allowing the claim of the assessee for provision for wage revision - Held that - The order of the Ld. CIT passed u/s 263 on the issue of provision for wage revision having already been set aside by the Tribunal restoring the order of the A.O. passed originally u/s 143(3) on this issue, the fresh assessment order passed by the A.O. u/s 143(3)/263 on this issue has become infructuous and there is no infirmity in the impugned order of the Ld. CIT(A) allowing the appeal of the assessee against the order passed by the A.O. u/s 143(3)/263 on this issue. Ground No. 1 of the revenue s appeal is accordingly dismissed. Provision for leave encashment u/s 43B - Held that - As per the proviso to section 43B(f) of the Act, any sum actually paid by the assessee on account of leave encashment on or before the due date of filing the return of income should be allowed as deduction. Keeping in view this decision of the Tribunal 2017 (5) TMI 1611 - ITAT KOLKATA , the Ld. CIT(A) vide his impugned order directed the A.O. to verify the claim of the assessee of having paid the amount of leave encashment to the extent of ₹ 57,87,806/- before the due date of filing of return of income for the year under consideration and allow deduction to the extent of such payment. No infirmity in the impugned order of the Ld. CIT(A) in giving the said direction to the A.O. on this issue and upholding the same, we dismiss ground no 2 of revenue s appeal.

Summary

Issues:
1. Proper and adequate enquiry not made by AO in original assessment u/s 143(3).
2. Dispute over additions made to total income by AO u/s 143(3)/263.
3. Tribunal's decision on provision for wage revision.
4. Tribunal's decision on liability of leave encashment.
5. Deduction claim for provision for leave encashment.

Analysis:
1. The appeal was filed by the revenue against the order of Ld. CIT(A) due to the original assessment u/s 143(3) being deemed erroneous and prejudicial to revenue's interest. The Ld. CIT(A) set aside the original order and directed a fresh assessment, resulting in two additions to the total income of the assessee.

2. The assessee disputed both additions made by the AO in the fresh assessment u/s 143(3)/263. The Tribunal, in a separate order, upheld the AO's decision on the provision for wage revision, setting aside the Ld. CIT's order u/s 263. Consequently, the Ld. CIT(A) allowed the assessee's appeal on this issue. However, regarding the liability of leave encashment, the Tribunal directed the AO to verify the claim of the assessee for deduction based on payment made before the due date of filing the return.

3. The Tribunal held that any sum paid on account of leave encashment before the due date of filing the return should be allowed as a deduction as per the proviso to section 43B(f) of the Act. The Ld. CIT(A) directed the AO to verify the payment made by the assessee and allow the deduction accordingly. The Tribunal's decision was crucial in upholding the Ld. CIT(A)'s order on this issue, dismissing the revenue's appeal.

4. The Tribunal's detailed analysis and consideration of the legal provisions regarding the deduction claim for provision for leave encashment showcased a thorough understanding of the applicable laws and regulations. The decision was based on the specific provisions of the Act, ensuring a fair and just outcome for the assessee.

5. The judgment highlighted the importance of adhering to legal requirements and deadlines concerning deductions and additions to the total income. The meticulous examination of the facts and legal provisions by the Tribunal and the Ld. CIT(A) ensured a just and equitable resolution of the dispute between the revenue and the assessee.