2023 (1) TMI 831 - AT - Income Tax

Disallowance u/s. 43B - whether the expenses made by the assessee were made on actual basis? - HELD THAT - AO without full reference to figures reported at clause 26(i)(A) 26(I)(B) of TAR carried out the rectification on the basis of figures reported in clause 26(i)(B)(b) alone and whereas the Ld. FAA holistically considered the figure of TAR and allowed the appeal for statistical purpose but without reference to expenditure charged to Profit Loss Account, hence for the reasons the matter requested for remand back to the file of AO for a limited purpose of verification of qualifying expense u/s 43 of the Act. Assessee adverting to adjudication laid by the Ld. NFAC, concurred with the request of department in remanding the matter back to the file of jurisdictional AO with a limited purpose to examine the issue of deductibility of expense reported in clause 26(i)(A) (B) of TAR in the light of section 43B of the Act, and we order accordingly. Appeal of the appellant revenue is Allowed for statistical purposes.

Summary

Issues:
Challenge to order of National Faceless Appeal Centre under Income Tax Act, 1961 for AY 2015-16 regarding rectification of expenses under section 43B.

Analysis:
The Appellate Tribunal ITAT Pune heard an appeal by the revenue challenging the order of the National Faceless Appeal Centre (NFAC) and a rectification order passed by the Deputy Commissioner of Income Tax, Pune. The respondent, a registered society engaged in sugar manufacturing and trading, filed its return of income for AY 2015-16, which was initially accepted without variation under section 143(1) of the Income Tax Act, 1961. Subsequently, the case was selected for scrutiny under CASS mechanism, and assessment under section 143(3) was completed without deviation.

The Assessing Officer (AO) identified short payment of expenses subject to section 43B provisions in the Tax Audit Report (TAR) and invoked rectification jurisdiction under section 154. After the respondent failed to respond to a notice, the AO disallowed an amount under section 43B without further notice. The assessee appealed to the Ld. FAA, who allowed the appeal on merits. The revenue then appealed to the Tribunal, arguing that the relief granted was erroneous without verifying if expenses were made on an actual basis or previously disallowed.

During the hearing, the Departmental Representative (DR) admitted the AO's error in rectification and requested a remand for verification. The assessee's representative (AR) agreed with the remand request for examining the deductibility of expenses under section 43B. Consequently, the Tribunal allowed the appeal for statistical purposes, remanding the matter back to the AO for verification of qualifying expenses under section 43B in the TAR. The appeal of the revenue was allowed for statistical purposes.