2022 (9) TMI 1360 - AT - Income Tax

Disallowance on account of bonus payable - Amount mistakenly mentioned by the Chartered Accountant while filing the Tax Audit Report in the wrong column, the same had been paid within time as per law - HELD THAT - We find that it was due to an inadvertent error of the C.A. of the assessee, that he (the CA) mentioned the amount of bonus paid to employees, under clause 20(a) of the Tax Audit Report, i.e., amount payable to the employees as bonus or commission where such sum was otherwise payable to him as Profits or Dividend whereas, the payment had actually been made to labourers under the Payment of Bonus Act. This inadvertent mistake was tried to be rectified by the C.A. by filing certificate (ABP page 52) along with details (ABP-53). The same was, however, not accepted. The revised Tax Audit Report (ABP pave 20 - 51), we find, is a vital piece of evidence and it requires to be admitted as additional evidence, since it would be necessary for a just and proper decision of the matter. Accordingly, the application for additional evidence is allowed and the revised Tax Audit Report (ABP pages 20-51) is taken on record. The matter is, accordingly, remitted to the file of the AO, to be decided afresh in accordance with law, on taking into consideration the aforesaid revised Tax Audit Report, and after affording due and adequate opportunity of hearing to the assessee. The assessee, no doubt, shall cooperate in the fresh proceedings before the AO. Appeal of assessee allowed for statistical purposes.

Summary

Issues:
- Disallowance of bonus payable mistakenly mentioned in Tax Audit Report
- Addition under section 36(1)(ii) of the Income Tax Act

Issue 1: Disallowance of bonus payable mistakenly mentioned in Tax Audit Report
The assessee appealed against the order of the Ld. Commissioner of Income Tax (Appeals) for the assessment year 2020-21. The Chartered Accountant mistakenly mentioned a bonus payable amount of Rs. 17,19,015 in the wrong column of the Tax Audit Report. The bonus had been paid within the stipulated time as per the law. The Ld. CIT(A) confirmed the addition made by the CPC, Bangalore, based on the Tax Audit Report. The assessee contended that the bonus was paid to employees under the Bonus Act, 1965, and not as profit or dividend. The Chartered Accountant filed a certificate clarifying the error, along with documents proving the payment of bonus before the due date. However, the Ld. CIT(A) upheld the disallowance, stating that modification in the Audit Report via a certificate is not permissible.

Issue 2: Addition under section 36(1)(ii) of the Income Tax Act
The assessee, engaged in the business of manufacturing and trading of Hosiery goods, Yarn, and Knitted cloth, filed its return of income for the relevant year. The Assessing Officer made additions under various sections, including section 36(1)(ii) of the Income Tax Act. The CIT(A) deleted some additions but confirmed the addition under section 36(1)(ii). The addition pertained to the inadvertent error in the Tax Audit Report where the bonus paid to employees was wrongly mentioned as payable to them as profit or dividend. The assessee argued that it was a clerical error by the Chartered Accountant and should not result in disallowance under the Act. The assessee sought admission of additional evidence in the form of a revised Tax Audit Report, which was considered vital for a just decision. The ITAT allowed the application for additional evidence and remitted the matter back to the AO for fresh consideration based on the revised report.

In conclusion, the ITAT allowed the appeal of the assessee for statistical purposes, emphasizing the inadvertent error made by the Chartered Accountant and the importance of the revised Tax Audit Report as crucial evidence for a fair decision. The matter was remitted to the Assessing Officer for a fresh decision, with the direction to consider the revised report and provide a fair opportunity of hearing to the assessee.