2022 (5) TMI 1218 - AT - Income Tax

Rectification of mistake u/s 154 - Ex-parte appeal Decided by CIT-A - disallowances u/s 43B of the Act as well as under section 40A(7) - whether adjustment so made by the CPC cannot be taken up in appeal against the order passed by the CPC under section 154 as against 143(1) - As submitted assessee has deposited the employees contribution towards PF/ESI before the due date of filing of the return of income and provision of Gratuity disallowed under section 40A(7) of the Act while processing the return of income, the CPC has failed to take into consideration the fact that the assessee has suo moto disallowed the said sum under section 43B - HELD THAT - Given the fact that the case of the assessee has been decided ex-parte qua the assessee and we do not have the benefit of findings of the ld. CIT (A) in this case, we deem it fit to set aside the matter to his file to decide the same afresh as per law after providing opportunity to the assessee. Before parting, we would like to state that against the adjustments which have been made by the CPC while processing the return of income under section 143(1), the assessee has claimed to have moved rectification application under section 154 of the Act. Given the fact that the adjustment relates to disallowances under section 43B of the Act as well as under section 40A(7) of the Act which are clearly apparent from the tax audit report filed by the assessee along with its return of income, these matters are clearly apparent from the record and clearly fall within the domain of rectification under section 154 of the Act. Therefore, we direct the ld. CIT(A) to examine this matter afresh after providing reasonable opportunity to the assessee.

Summary

Issues:
1. Appeal against order of Learned Commissioner of Income Tax (Appeals)
2. Ex-parte decision by the appellate authority
3. Adjustment on debatable issues under section 143(1)
4. Adjustment on delay in deposit of employees' contribution of PF/ESI
5. Assessment under section 143(3) for A.Y. 2017-18
6. Disallowance on account of delay in deposit of employees' contribution to PF/ESI
7. Disallowance on account of provision of gratuity under section 40A(7)

Analysis:
1. The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) under section 250 of the Income Tax Act, 1961. The appellant raised various grounds challenging the observations and decisions made by the appellate authority.

2. The appellant contended that the appeal was decided ex-parte despite requesting an adjournment and submitting subsequent filings. The appellant argued that the adjustments made by the CPC should be open to appeal. Additionally, the appellant highlighted that the employees' contributions towards PF/ESI were deposited before the due date, citing precedents supporting their case.

3. The appellate authority dismissed the grounds of appeal, stating that the adjustments under section 143(1) were not rectifiable under section 154. The appellant argued for the consideration of grounds on merits, emphasizing the timely deposit of contributions. The appellant also challenged the disallowance under section 40A(7), asserting that the amount was already disallowed under section 43B.

4. The assessing officer's adjustment on the debatable issue of delay in depositing employees' contributions was questioned by the appellant, seeking deletion of the addition. The appellant also raised concerns regarding the assessment under section 143(3) for A.Y. 2017-18, urging for the deletion of any additional adjustments made.

5. After hearing both parties, the Tribunal decided to set aside the matter to the file of the Learned Commissioner of Income Tax (Appeals) for a fresh decision, providing an opportunity for the appellant to present their case. The Tribunal directed a re-examination of the adjustments made by the CPC under section 143(1), emphasizing the need for a reasonable opportunity for the appellant.

6. Ultimately, the Tribunal allowed the appeal for statistical purposes, indicating that the matter required further review and consideration by the appellate authority. The decision was pronounced on 28.04.2022, providing clarity on the issues raised by the appellant and the subsequent directions for a fresh assessment.