2024 (12) TMI 117 - AT - Income Tax

Disallowance of bonus gratuity shown payable/paid in the Balance Sheet/Profit Loss Account - HELD THAT - We are of the considered view that this issue needs to be decided a fresh in view of the decision of Checkmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT . We therefore, set aside this issue and remit the disallowance of Bonus gratuity of back to the file of the AO to be decided accordingly. Lesser receipts shown in the ITR vis- -vis the receipts as per the Form 26AS of the appellant/assessee - We find merit in the submission of the Ld. Sr. DR that this issue requires verification reconciliation of receipts as per 26AS vis- -vis receipts as per the books of account/Profit Loss Account of the appellant/assessee. We therefore, set aside this issue and remit the issue of addition back to the file of the AO to be decided afresh after proper reconciliation and verification. Appellant/assessee should ensure compliances during the set-aside proceeding before the AO.

Summary

Issues:
1. Disallowance of bonus and gratuity shown payable/paid in the Balance Sheet/Profit & Loss Account.
2. Lesser receipts shown in the ITR compared to receipts as per Form 26AS.

Analysis:

Issue 1: Disallowance of Bonus and Gratuity:
The appellant, a partnership firm supplying manpower, contested the additions made by the assessing officer on account of gratuity, bonus, and discrepancy in receipts. The Ld. Authorized Representative argued that the bonus debited to the Profit & Loss account had neutral tax effect as it was paid without receiving the amount from the client. Referring to a Bombay High Court decision, it was contended that the bonus should be allowed as an expense. Regarding the disallowance of bonus and gratuity shown payable but not paid, it was argued that since the entire liability was not claimed as expenses, the sum shown as payable should not be added back. The discrepancy in receipts was explained as debit notes/bills raised, which were accounted for in the books.

Issue 2: Discrepancy in Receipts:
The Ld. Authorized Representative argued that the addition of Rs. 68,03,907 due to the difference in receipts as per Form 26AS and Profit & Loss account was unjustified. It was claimed that all receipts were recorded in the books, and the difference was due to debit notes/bills raised by the client or the appellant. The discrepancy was clarified through a detailed reconciliation statement showing the difference in account balances between the appellant and the client.

Judgment:
The Tribunal upheld the disallowance of gratuity but remitted the issue of bonus and gratuity shown payable back to the assessing officer for fresh consideration. The Tribunal also set aside the addition of Rs. 68,03,907 for verification and reconciliation of receipts. The decision was based on the need for proper examination and reconciliation of the discrepancies in receipts. The appellant was directed to comply during the reassessment, and the assessing officer was instructed to provide reasonable opportunities for the appellant to be heard. The appeal was allowed for statistical purposes.

This detailed analysis highlights the arguments presented by both parties, the reasoning behind the Tribunal's decision, and the instructions given for further proceedings, ensuring a comprehensive understanding of the judgment.