2024 (9) TMI 344 - AT - Income Tax

Addition u/s. 41(1) - amount related to the Sundry creditors balance written off - double taxation of the same amount - HELD THAT - Addition made by CPC has resulted in double taxation of the same amount. We notice that the assessee has credited the above said amount in the P L Account and hence, the net profit disclosed by the assessee would consist of the above said amount. Assessee has computed its total income by adopting the net profit disclosed in the profit and loss account and hence the total income has already included the above said income. Hence, there is no requirement of making addition of aforesaid amount u/s. 41(1) again. Hence the addition made by CPC has resulted in double taxation of same item of income, which is not permitted under the Act. Accordingly, the said addition is liable to be deleted. CIT(A) has given much emphasis on the abstract information given in the return of income and he did not recognize the fact that the net profit disclosed and consequently, the total income computed by the assessee has already included the above said amount. Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO to delete the addition made u/s. 41(1) of the Act by CPC. Assessee appeal allowed.

Summary

Issues:
Challenge to addition made by CPC u/s. 41(1) of the Income Tax Act, 1961.

Analysis:
The appellant, engaged in the business of manufacturing and selling tires, contested the addition of Rs. 60,19,934 made by the CPC u/s. 41(1) of the Act. The amount in question pertained to "Sundry creditors balance written off," which the appellant had already reported in the Tax Audit Report under "Column 25." The Tax Auditor noted that the amount had been credited to the P&L Account, and the net profit declared by the appellant already included this sum. Despite this, the CPC added the amount again during the processing of the income tax return, leading to the appellant's claim of double taxation.

The appellant argued that the reporting of the amount in "Column 14, Part A-01" was abstract and should not justify the CPC's addition. The Tax Auditor's report also confirmed that the amount had been credited to the P&L Account. The Appellate Tribunal noted that the net profit disclosed by the appellant already included the disputed amount and that the total income computation was based on this figure. Consequently, the addition made by the CPC resulted in double taxation of the same income, which is impermissible under the Act.

The Appellate Tribunal disagreed with the CIT(A)'s emphasis on the abstract information provided in the return of income and directed the Assessing Officer to delete the addition of Rs. 60,19,934 made by the CPC u/s. 41(1) of the Act. The appeal filed by the appellant was treated as allowed, and the order was pronounced on 28th June, 2024.