ARORA PREM AND ASSOCIATESNo disallowance of exp. relying upon audit report if same was in contrary to view of jurisdictional HC: ITAT Mumbai
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No disallowance of exp. relying upon audit report if same was in contrary to view of jurisdictional HC: ITAT Mumbai
| No disallowance of exp. relying upon audit report if same was in contrary to view of jurisdictional HC: ITAT |
| While processing of return, the CPC, Bangalore had proposed some adjustments under section 143(1)(a)(iv) based on disallowance made by the tax auditor in audit report. The assessee objected to the proposed adjustment by relying upon rulings of the jurisdictional High Court. However, CPC rejected the objections and passed the order. |
| The assessee carried the matter in appeal before the CIT(A) but without any success. It filed an instant appeal before the Mumbai Tribunal. |
| The Mumbai Tribunal held that section 143(1)(a)(iv) specifically provides for an adjustment in respect of "disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return". It does proceed on the basis that when a tax auditor indicates a disallowance in the tax audit report, for this indication alone, the expense must be disallowed while processing under section 143(1) by the CPC. |
| The tax auditor is a third party, and his opinions cannot bind the auditee in any manner. As a matter of fact, no matter how highly placed an auditor is, and even within the Government mechanism and with respect to CAG audits, the audit observations are seldom taken an accepted position by the auditee- even when the auditor is appointed by the auditee himself. |
| When the law enacted by the legislature has been construed in a particular manner by the Hon'ble jurisdictional High Court, it cannot be open to anyone in the jurisdiction of that Hon'ble High Court to read it in any other manner than as read by the Hon'ble jurisdictional High Court. |
| The views expressed by the tax auditor cannot be reason enough to disregard the binding views of the Hon'ble jurisdictional High Court. Thus, to that extent, the provisions of Section 143(1)(a)(iv) must be read down. |
| Thus, the contrary view law laid down by jurisdictional Hon'ble Courts must be taken care of while making adjustments under section 143(1)(a)(iv). |
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