Adjustment of figures. - Income Tax - 1358/CBDT

INSTRUCTION NO. 1358/CBDT Dated: September 20, 1980 Recently, in the case of a company which has come to the notice of the Board, as pointed out by the revenue audit the ITO disallowed the provision for gratuity to a fund which had not so far been approved in the assessment year 1973-74 but allowed the payment of gratuity to the fund in the immediately succeeding year. Subsequently the assessee company complied with the provisions of sec.40A(7) of the I.T.Act and gratuity fund was approved by the CIT retrospectively with the result the provision for gratuity became allowable in 1973-74. The assessment for assessment year 1973-74 was therefore rectified u/s.155(13) of the I.T.Act and the claim was allowed in that year. The ITO however failed to withdraw the deductions allowed in 1974-75 on actual payment basis. This resulted in the mistake of the same amount being allowed twice once in Assessment year 1973-74 on provisional basis and again in assessment year 1974-75 on actual payment basis. The mistake was also not detected by the IAP although the orders had been audited by the party. 2. The Board would emphasise the need for a very careful examination of the effect of an adjustment of this nature which involves more than one assessment year. There should be a proper correlation of the assessment of one year with that of another year when there is an adjustment of figures which are connected with each other. IAPs should keep this aspect in view specifically when auditing assessment and/or rectificatory orders. 3. These instructions may please be brought to the notice of all the ITOs working in your charge.