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2024 (6) TMI 1225 - AT - Income TaxDisallowance on the basis of audit report in the intimation generated u/s 143(1) - disallowance of Gratuity u/s 43B as not mentioned in proper classification in Income Tax Return and also not reported in the tax audit report - HELD THAT - Inadvertent non-reporting in tax audit report by auditor is bonafide when when all details are available in ITR on records although such deduction was find mentioned in wrong classification in ITR. Deductions based on the genuine claim of the assessee cannot be denied especially in the circumstances as narrated above. As such the assessee has claimed deduction u/s 43B of the Act and therefore in our considered view the same should have been allowed by the authorities below. The income of the assessee should not be over assessed even if there is a mistake made by the assessee. As such the legitimate deduction for which the assessee is entitled should be allowed while determining the taxable income. Thus the claim of the assessee cannot be denied for the reason that a deduction was mentioned in wrong classification in ITR especially in the circumstances where all other evidence is available on record suggesting the deduction in pursuance to the provisions of section 43B is available. Appeal of the assessee are allowed.
Issues Involved:
1. Delay in filing the appeal and its condonation. 2. Disallowance of gratuity under section 43B of the Income Tax Act. 3. Correct classification of deductions in the Income Tax Return. 4. Revision of Tax Audit Report and ITR. 5. Applicability of Circulars and Judicial Precedents. 6. Legitimacy of the claim for deduction. Issue 1: Delay in filing the appeal and its condonation: The appeal was filed with a delay of one day, which was condoned by the tribunal after considering the reasons provided by the Director of the assessee company, allowing the appeal for adjudication. Issue 2: Disallowance of gratuity under section 43B of the Income Tax Act: The main grievance raised by the assessee was the disallowance of gratuity amounting to Rs. 79,25,442 under section 43B. The disallowance was based on the incorrect classification of the amount in the Income Tax Return and the absence of reporting in the tax audit report. The tribunal held that genuine claims of the assessee should not be denied due to inadvertent errors in reporting, especially when all details were available in the ITR. The tribunal concluded that the deduction claimed under section 43B should have been allowed. Issue 3: Correct classification of deductions in the Income Tax Return: The tribunal noted that the assessee had incorrectly claimed the gratuity amount under section 43B instead of showing it under another allowance in the Income Tax Return. The tribunal emphasized that deductions based on genuine claims should not be denied solely due to a mismatch in the audit report, especially when all details were available in the ITR. Issue 4: Revision of Tax Audit Report and ITR: The appellant filed a revised Tax Audit Report and ITR for the relevant assessment year, along with a rectification request under section 154 of the Income Tax Act. However, the authorities did not accede to the request, leading to the appeal before the tribunal. Issue 5: Applicability of Circulars and Judicial Precedents: The tribunal referred to Circulars issued by the CBDT and judicial precedents such as the Allahabad High Court and the Gujarat High Court decisions to support the principle that legitimate deductions should be allowed to the assessee, even if there are errors or mistakes in the reporting. Issue 6: Legitimacy of the claim for deduction: Considering the facts and evidence on record, the tribunal concluded that the claim of the assessee for deduction under section 43B was legitimate and should not have been denied by the authorities. The tribunal set aside the findings of the CIT(A) and directed the AO to delete the addition made, ultimately allowing the appeal of the assessee. In conclusion, the tribunal allowed the appeal of the assessee, emphasizing the importance of considering genuine claims for deductions and rectifying errors in reporting to ensure fair assessment under the Income Tax Act.
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