Genuine ₹85.25 Lakh Gratuity Claim Cannot Be Denied Due to ITR-TAR Mismatch | Biz Flow Kit

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that a genuine claim of gratuity deduction cannot be refused only because of an inadvertent mismatch between the Income Tax Return (ITR) and the Tax Audit Report (TAR), and remanded the matter for verification of ₹85.25 lakh.

The taxpayer AT & T Global Network Services India Pvt. Ltd. submitted its return for Assessment Year 2021 and 2022. Because of discrepancies between the disclosures made in the income tax return (ITR) and the TAR, the Central Processing Centre (CPC) disallowed the gratuity claim of ₹85.25 lakh u/s 143(1). The Commissioner of Income Tax [Appeals] CIT(A) upheld the disallowance.

As per the taxpayer, the gratuity amount was actually filed in the year and was permissible u/s 40A(7) read with Section 37 of the Income Tax Act, 1961.

The same mismatch arises due to the unintentional mistake in submitting the ITR form, wherein the amount was incorrectly declared, whereas in the tax audit report (TAR), it was not reported since it does not come u/s 43B.

To support its claim, it provided an actuarial valuation report of the gratuity amount and referenced a similar benefit given to another comparable company. The Revenue, however, put reliance on the decisions of the lower authorities.

The Tribunal, comprising Mahavir Singh [Vice President] and Amitabh Shukla [Accountant Member], stated that the revenue did not dispute the actual payment of gratuity and that the disallowance came out only because of a reporting inconsistency. The Bench, considering the chance of a bona fide clerical error, felt that no significant claim must be dismissed on a technical basis.

The orders of the lower authorities have been set aside by the Tribunal, and the issue has been restored to the Assessing Officer (AO) for limited verification.

It asked that if the gratuity payment of Rs 85,25,109 is discovered to have been actually made in the related assessment year and supported via an actuarial valuation report, then it will be permitted as a deduction. The appeal was authorised for statistical objectives.