2025 (5) TMI 1399

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..... ter referred to as "the Act"], for the Assessment Year 2020-21 arising out of the intimation dated 29.11.2021 passed by the Centralised Processing Centre, Bengaluru [hereinafter referred to as "CPC"]. Brief Facts of the Case 2. The assessee is a HUF, proprietor of Deep Pharma, who filed its return of income for A.Y. 2020-21 declaring a total income of Rs. 85,70,990/-. The return was processed under section 143(1) by the CPC, Bengaluru, vide intimation dated 29.11.2021, wherein the total income was enhanced to Rs. 5,09,26,630/- and demand of Rs. 2,13,00,550/- was raised. The increase in income was due to two adjustments made in the intimation under section 143(1)(a): (i) Addition of Rs. 4,20,39,630/- treating the same as contingent liab .....

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..... udit report, concluded that no actual amount was debited towards contingent liability. The disclosure under clause 21(g) was found to be for informational purposes only and not part of income computation. On the disallowance of Rs. 3,16,017/-, the CIT(A) accepted that the assessee had already disallowed the amount in the return, and the CPC disallowance resulted in duplication. The revised tax audit report and auditor's certificate corroborated this. Relying on the decisions cited by the assessee, the CIT(A) deleted both additions and allowed the appeal. 5. Aggrieved by the order of CIT(A) preferred an appeal before us raising following grounds: a) The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 4,20,39,6 .....

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..... d in the original tax audit report and the same is rectified in the revised form 3CD - annexure to the tax audit report in form 3CB. The coordinate benches in Dwarkadish Spinners Ltd. (supra) and Kay Bee Industrial Alloys Pvt. Ltd. (supra) have held that contingent liabilities which are not debited to the profit and loss account cannot be added merely on the basis of disclosure in the audit report. Further, under section 143(1)(a), the scope of adjustment is limited to arithmetical errors, incorrect claims apparent from any information in the return, or disallowance of loss claimed without required return. The adjustment made in the present case does not fall under any of these categories, as it requires verification beyond the return itsel .....

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