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2022 (11) TMI 716 - AT - Income TaxDisallowance u/s 43B - leave encashment - Disallowance made on the basis of observation of tax audit report u/s 44AB of the Act and the assessee fail to give proper explanation on that count - HELD THAT: It is found that the Ld. A.O has not raised the query on the said issue but suo-moto disallowed the claim of the expenditure. In our opinion, it has to be seen whether the assessee has paid this expenditure before the due date of filing of the return u/s 139(1) of the Act. If the same is paid within the due date filing of return there cannot be any disallowance on this count. AO cannot make addition only based on the figure picked from the Tax Audit Report which is contrary to the existing facts. Since in the present case, the actual disallowance has been added back to the computation by the assessee, we are of the opinion that, the addition/disallowance made u/s 43B is deserves to be deleted. Accordingly, we allow the Ground No. 1 of the assessee. Disallowance u/s 40A(7) - amount of provision for gratuity debited in the profit and loss account and which was credited to the provision of gratuity account - HELD THAT:- We find force in the contention of the Ld. Counsel for the assessee that the Ld. AO as well as Ld. CIT(A) could not understand the tax audit report and made the addition which has been confirmed by the Ld. CIT(A). The Lower Authorities have disallowed total closing balance at the end of the previous year (i.e. 31/03/2015) u/s 40A(7) of the Act without understanding the tax audit report in proper sense. A.O. and the CIT(A) ought to have appreciated the tax audit report in proper sense the computation. The Lower Authorities ought to have appreciated the fact that the amount of provision for gratuity debited in the profit and loss account and which was credited to the provision of the gratuity account is only Rs. 24,27,081/- and should not have made disallowance u/s 40A(7) of the Act. Therefore, the Ground of the Assessee is deserves to be allowed.
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