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In this appeal, the assessee challenges an order dated 11/01/2024 issued by the Additional/Joint Commissioner of Income Tax (Appeals)-4, Chennai, concerning the assessment year 2021-22. The core contention revolves around the addition of Rs. 60,19,934/- under section 41(1) of the Income Tax Act, 1961, made by the Central Processing Centre (CPC) while processing the assessee's income tax return under section 143(1) of the Act.
The assessee, engaged in the manufacture and sale of tyres, filed its return of income on 10/03/2022. During the processing under section 143(1), the CPC added Rs. 60,19,934/- under section 41(1) of the Act, relating to the write-off of sundry creditors. Both parties agree that this amount constitutes assessable business income under section 41(1).
Crucially, the tax auditor reported this amount in "Column 25" of the Tax Audit Report, noting it had already been credited to the Profit and Loss Account (P&L Account). Therefore, the net profit disclosed by the assessee already included this amount, implying it had been offered for taxation once.
Despite this, the CPC added the same amount again during processing, leading to what the assessee claims is double taxation. The Commissioner of Income Tax (Appeals) (CIT(A)) upheld the CPC's addition, emphasizing the abstract reporting in the return of income over the actual inclusion in the P&L Account.
In appeal, the assessee argued that the net profit calculation inherently included the disputed amount, thus precluding the need for additional taxation under section 41(1). The Appellate Tribunal concurred, finding that the addition by the CPC indeed resulted in double taxation. It highlighted the erroneous emphasis on abstract reporting by the CIT(A), affirming that the total income computation already accounted for the contested amount.
Consequently, the Appellate Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the addition of Rs. 60,19,934/- made under section 41(1) by the CPC. This decision was grounded in the principle that the Income Tax Act prohibits double taxation of the same income item and affirmed that the P&L Account inclusion sufficed for tax assessment purposes.
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