Case remitted for verification of wrong figure of ICDS adjustment by Tax Auditor

Case remitted for verification of wrong figure on account of adjustment for ICDS as reported by Tax Auditor.

In a recent judgment, the ITAT Chennai remitted the matter for verification where CPC made adjustment u/s 143(1) of the Income Tax Act, 1961 (the Act) due to wrong figure on account of adjustment for ICDS reported by Tax Auditor.

ABCAUS Case Law Citation:
4405 (2025) (02) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the adjustment made by the CPC in intimation issued u/s 143(1)(a) of the Act on account of ICDS adjustments.

The assessee submitted that the dispute has arisen only due to wrong reporting in Tax Audit Report. It was requested that matter may be sent back to the file of Jurisdictional AO to verify the same.

The Tribunal observed that CPC Bengaluru had made certain adjustment to the income of the assessee for more than Rs. 25 crores on account of adjustment for ICDS as reported by Tax Auditor.

The Tribunal further observed that the impugned adjustment stemmed from reporting in Clause 14(b) of Tax Audit Report wherein Tax Auditor reported that net effect on profit on account of deviation from inventory valuation as prescribed under Section 145A of the Act.

The assessee submitted stated that the adjustment had occurred due to wrong reporting of figures by Tax Auditor whereas the net effect of the GST component on valuation of inventories would ultimately be Nil.

The Tribunal opined that apparently, the assessee had erred in transmitting the correct data of Tax Audit Report. Upon perusal of Annexure of manual Tax Audit Report, it could be seen that the amount of reduction in profit due to increase of opening stock of raw material due to inclusion of GST on which credit is availed has been wrongly reported and hence the adjustment was made. However, as per Annexure to the Tax Audit Report, the net effect of adjustments would ultimately be Nil.

Accordingly, accepting the prayer of the assessee, the Tribunal remitted the issue under dispute back to the file of Jurisdictional AO for limited purpose of said verification.

Download Full Judgment Click Here >>

• ITR was not non est for no e-verification when AO took cognizance of returned income
• Section 43CB & ICDS-III is applicable to contractors not to real estate developers
• Expenses of ESOP are allowable as revenue expenditure u/s 37(1) of Income Tax Act.
• Compliance history of supplier can’t be used to invalidate genuine business transactions of buyer
• Reassessment quashed as AO issued notice u/s 148 instead of 153C as reopening was based on search