INCENT TOURS PVT LTD,NEW DELHI vs. ACIT CIRCLE- 12(1), NEW DELHI

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ITA 5600/DEL/2024Status: DisposedITAT Delhi21 August 2025AY 2017-188 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the assessee's appeal was dismissed by the CIT(A) without being heard. The Ld. Sr. DR fairly conceded to this fact. The Tribunal acknowledged that despite opportunities granted by the lower authorities, the assessee did not file submissions, leading the AO to complete the assessment ex-parte and the CIT(A) to dismiss the appeal. Considering the totality of facts and circumstances, and in the interest of justice, the Tribunal decided to restore the issue to the file of the AO. The AO was directed to grant one final opportunity to the assessee to substantiate its claims and decide the issue as per facts and law. The assessee was also directed to appear before the AO and cooperate in the proceedings. The grounds raised by the assessee were accordingly allowed for statistical purposes. The specific disallowances upheld by the CIT(A) were based on the lack of evidence provided by the assessee, non-compliance with TDS provisions (Section 40(a)(ia)), non-compliance with deposit timelines for employee PF/ESI contributions (Section 36(1)(va)), failure to establish genuineness of business promotion expenses, lack of evidence for leave encashment provision (Section 43B), and classification of membership/subscription expenses as personal rather than business-related, citing judicial precedents like Goodles Nerolac Paints Ltd., CIT vs T.S. Hajee Moosa & Co., CIT vs Alom Extrusions Ltd., Assam Pesticides & Agro Chemicals vs CIT, Mysore Kirloskar Ltd. vs CIT, and L. Jairam Parwani vs DCIT. The Tribunal did not decide on the merits of these disallowances but remanded the matter for fresh consideration.

What were the facts?

The assessee, Incent Tours Private Limited, is in appeal against the order of the Commissioner of Income Tax (Appeal) [CIT(A)] dated 15.10.2024, which upheld the order of the Assessing Officer (AO) dated 24.12.2019 passed under Section 143(3) for Assessment Year 2017-18. The AO had made disallowances totaling Rs.34,61,247, resulting in an assessed loss of Rs.55,94,430. The assessee's appeal before the CIT(A) was dismissed. The assessee's business involves inbound tourism and ground-handling services. The assessee filed its return declaring a total loss of Rs.90,55,679. The case was selected for scrutiny under CASS, and notices under Sections 143(2) and 142(1) were issued. The assessee did not furnish any submissions before the AO. The CIT(A) noted that despite repeated opportunities, the assessee failed to file submissions or furnish additional evidence.

What were the issues?

The Tribunal had to decide the following questions: 1. Whether the impugned order of the CIT(A) is bad in law and void ab initio? 2. Whether the AO/CIT(A) erred in passing their orders ex-parte, violating principles of natural justice? 3. Whether the CIT(A) erred in not appreciating that notice dated 19-03-2024 issued u/s 250 was not served upon the appellant? 4. Whether the CIT(A) erred in upholding the disallowance of Interest Expenses amounting to Rs.3,63,374/- u/s 40(a)(ia)? 5. Whether the CIT(A) erred in upholding the disallowance of Rs. 67,701/- alleging delay in payment of employee contribution towards Provident Fund and EPF? 6. Whether the CIT(A) erred in upholding the disallowance of Rs. 21,53,085/- (20% of Rs. 1,07,65,427/-) incurred on Business Promotion? 7. Whether the CIT(A) erred in upholding the disallowance of Rs. 3,88,437/- towards Provision for Leave Encashment? 8. Whether the CIT(A) erred in upholding the disallowance of Rs. 4,88,650/- towards Membership and Subscription? 9. Whether the levy of interest u/s 234A, 234B and 234D is bad in law? Assessee's Contentions: - The impugned orders were passed without hearing the assessee, violating principles of natural justice. - Notice dated 19-03-2024 u/s 250 was not served. - Necessary details for interest expenses were furnished. - Payments for PF/ESI were made before filing the return. - Business promotion expenses were incurred wholly and exclusively for business purposes. - Provision for leave encashment was made in accordance with law. - Membership and subscription expenses were business-related. - Levy of interest u/s 234A, 234B, and 234D is bad in law. Revenue's Contentions: - The revenue did not explicitly record any contentions in the provided text, but the AO and CIT(A) upheld the disallowances based on lack of evidence and non-compliance with statutory provisions.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 250,Section 40(a)(ia),Section 36(1)(va),Section 43B,Section 234A,Section 234B,Section 234D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “C”, DELHI

Before: SH. SUDHIR KUMAR & SH. MANISH AGARWAL

For Appellant: CA Sh. Sandeep yadav, Advocate
Hearing: 21/08/2025Pronounced: 21/08/2025

Date of hearing: 21/08/2025 Date of Pronouncement: 21/08/2025 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeal) Add/JCIT(A)-2 Noida[hereinafter referred to as “CIT(A)”] vide order dated 15.10.2024 arising out of the order of the Assessing Officer vide order dated 24.12.2019 u/s 143(3) of the Income Tax Act 1961 (in short “the Act” pertaining to A.Y. 2017-18. 2. The assessee has raised following grounds of appeal:

1. That on facts and in law the impugned order dated 15th October 2024 passed by the Commissioner of Income Tax, Appeal ADDL/JCIT (A) -2, Noida (hereinafter referred to as the "CIT(A)") is bad in law and void ab initio.

2. That on facts and in law the AO/CIT(A) have erred in passing their orders ex-parte i.e by violating principals of natural justice.

3. That on fact and in law the CIT(A) has erred in not appreciating that notice dated 19-03-2024 issued u/s 250 of the Act was not served upon the appellant.

4. That on facts and in law the CIT(A) has erred in making upholding disallowance of Interest Expenses amounting to Rs.3,63,374/- u/s 40(a)(ia) of the Act.

4.1 That on facts and in law the AO / CIT(A) have erred in not appreciating that necessary details in support of claim of deduction of Interest Expense of Rs. 12,11,245/- was already furnished by the appellant vide letters dated 30th August 2018, 23rd August, 2019, 11th September, 2019 and 28th November, 2019.

5. That on facts and in law the CIT(A) has erred in upholding disallowance of Rs. 67,701/- alleging that there is a delay in payment of employee contribution towards Provident Fund and EPF.

6.

That on facts and in law the CIT(A) has erred in upholding disallowance of a sum Rs. 21,53,085/- (i.е., 20% of Expenditure of Rs.1,07,65,427/-) incurred by appellant on Business Promotion.

7. That on facts and in law the CIT(A) has erred in upholding disallowance of a sum of Rs. 3,88,437/- being amount debited in P&L account towards Provision for Leave Encashment.

8. That on facts and in law the CIT(A) has erred in upholding disallowance of a sum of Rs. 4,88,650/- being expenditure incurred towards Membership and Subscription.

9.

That on facts and in law the levy of interest u/s 234A, 234B and 234D are bad in law.

3.

The assessee is engaged in the business of Inbound tourism, offering ground – handling services to foreign tourists visiting India and the surrounding subcontinent. For the year under consideration, the assessee filed its return of income on 04.11.2017, declaring a total loss of Rs.90,55,679/-. The case was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) system and notices were issued under Sections 143 (2) and 142(1) of the Act. The assessee did not furnish any submission before the AO. The Assessing officer completed the assessment after making the disallowance of at amount of Rs.34,61,247/-and assessed the loss of Rs. 55,94,430/-.

4.

Aggrieved by the order of the AO, the assessee preferred the appeal before Ld. CIT(A), who vide order dated 15-10-2024 dismissed the appeal. Being aggrieved the order of the Ld. CIT(A) the assessee is in appeal before the tribunal. The Ld. CIT(A) in the order dated 15.10.2024 has observed as under :- 4.1 I have carefully examined the assessment order, the grounds of appeal, and the documents available on record. It is noted that despite repeated opportunities the appellant has failed to file any written submissions or furnish additional evidence to substantiate its claims. Therefore, the appeal is being decided on the basis of the materials available on record.

4.2 With respect to the disallowance of interest expenses amounting to Rs. 3,63,374 under Section 40(a)(ia), it is observed that the AO disallowed the interest expenses on the grounds of non-compliance with the TDS provisions. The appeilant has argued that the necessary details were provided in earlier correspondence. However, no supporting evidence was produced during the appellate proceedings to substantiate this claim. The burden of proving that the expenditure was incurred in accordance with the law lies on the appellant. In the absence of any documentary evidence, the disallowance made by the AO is justified and is hereby confirmed. The decisions in Goodles Nerolac Paints Ltd. vs C/T [137 ITR 58 (Bom)) and CIT vs T.S. Hajee Moosa & Co. (153 ITR 422 (Mad)) support the view that mere assertions without evidence cannot form the basis for allowing deductions under the Income-tax Act

4.3 in relation to the disallowance of Rs. 67,701 for delayed payments of employees' contributions towards PF and ESI, it is noted that the AO made the disallowance on the grounds that the payments were not made within the prescribed due dates. The appellant has contended that the payments were made before the filing of the return of income and should have been allowed. However, as per Section 36(1)(va) of the Income-tax Act, employee contributions must be deposited within the time limits prescribed under the respective statutes. Delays in such payments attract disallowance under the Act. The decision of the Supreme Court in CIT vs Alom Extrusions Ltd. [319 ITR 306 (SC)] further clarifies that while employer contributions may be allowed if paid before the due date of filing the return, this provision does not extend to employee contributions. Therefore, the disallowance is upheld.

4.4 As regards the disallowance of Rs. 21,53,085 towards business promotion expenses which represents 20% of the total business promotion expenses claimed by the appellant, it is observed that the appellant has failed to provide any supporting evidence for these expenses during the assessment proceedings as well as during the appellate proceedings. The AO rightly disallowed a portion of the expenses on the grounds that the genuineness of the expenditure was not established. In the absence of documentary evidence to substantiate that the expenses were incurred wholly and exclusively for the purposes of the appellant's business, the disallowance made by the AO is confirmed. The decisions in Assam Pesticides & Agro Chemicals vs CIT [277 ITR 846 (Gauhati)] and Mysore Kirloskar Ltd. vs CIT (166 ITR 836 (Karnataka)] clearly establish that the onus is on the taxpayer to justify business expenses with proper documentation, failing which such expenses may be disallowed.

4.5 With respect to the disallowance of Rs. 3,88,437 for provision for leave encashment, the AO disallowed the provision under Section 43B of the Income-tax Act. The appellant has not provided any evidence to demonstrate that the provision was made in accordance with the law. As per the provisions of Section 43B, certain deductions, including leave encashment, are allowable only on actual payment. Since the appellant has not made any payment towards leave encashment and no evidence has been furnished to justify the provision, the disallowance is upheld. 4.6 Lastly, concerning the disallowance of Rs.4,88,650 towards membership and subscription expenses, the AO disallowed these expenses on the ground that they were personal in nature and not incurred for business purposes. The appellant has argued that these expenses were business- related, but no documentary evidence has been provided to support this claim. The decision of the Hon’ble Madras High Court in L. Jairam Parwani vs DCIT [93 taxmann.com 291 (Madras)] clearly states that payments for acquiring membership in a social club are not considered business expenditures. In light of this, and in the absence of any contrary evidence, the disallowance made by the AO is confirmed.

5.

Conclusion 5.1Based on the analysis above and materials available on record, I find that all the grounds of appeal raised by the appellant lack merit. The disallowances and additions made by the AO are in accordance with the provisions of the Income-tax Act, 1961 and are supported by judicial precedents. 5.2 The is, therefore, dismissed and the order passed by the AO under Section 143 (3) of the Income- tax Act, 1961 is hereby confirmed.” 6. ld. AR of the assessee submitted that both the orders were passed without being heard to the assessee. The Ld. Sr. DR has fairly conceded to this.

7.

We have heard both the parties and perused the material available on record. It is an admitted fact that despite opportunities granted by lower authorities, the assessee did not file his submissions before the lower authorities, for which the AO completed the assessment exparte and Ld. CIT(A) dismissed the appeal .

8.

Since in the instant case the Ld.CIT(A) has dismissed the appeal without being heard to the assessee, therefore, considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to grant one final opportunity to the assessee to substantive its claim and decide the issue as per fact and law. The assessee is also directed to appear before the AO and co- operate in the proceedings. The grounds raised

by the assessee are accordingly allowed for statistical purposes.

10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 21.08.2025.

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