SEYYADURAI CONSTRUCTIONS,RAMNAD vs. ACIT, CENTRAL CIRCLE-3(1), CHENNAI

PER BENCH: The captioned appeals filed by the assessees, namely, M/s. Seyyadurai Constructions in ITA Nos. 1946 to 1949/Chny/2026 for the Assessment Years 2019-20 to 2022- 23 and M/s. The SPK Blue Metal in ITA Nos. 1950 to 1953/Chny/2026 for the Assessment Years 2019-20 to 2022- 23, are directed against the separate orders passed by the Ld.

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 2 :: Commissioner of Income Tax (Appeals), Chennai-20, Chennai [hereinafter referred to as “the Ld. CIT(A)”], all dated 10.02.2026, confirming the respective assessment orders passed by the Assessing Officer (AO) u/s. 143(3) read with section 147 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”].

3.1 For the Assessment Year 2019-20, the assessee filed its original return of income u/s. 139(1) of the Act on 30.10.2019 declaring total income of Rs.78,92,010/-. Subsequently, a search and seizure operation u/s. 132 of the Act was initiated

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 3 :: on 06.07.2022 in the case of M/s. SPK & Co. and others, during the course of which the premises of the assessee were also covered.

3.2 Pursuant thereto, notice u/s. 148 of the Act was issued to the assessee on 20.03.2023. In response thereto, the assessee filed its return of income on 18.04.2023 declaring total income of Rs.78,92,010/-, being the same income as returned originally. Thereafter, statutory notices u/s.s 143(2) and 142(1) of the Act were issued and the assessment proceedings were completed u/s. 143(3) read with section 147 of the Act.

3.3 During the course of assessment proceedings, the assessee claimed deduction towards remuneration paid to its partners amounting to Rs.72,60,000/-. The assessee had furnished before the Assessing Officer the original partnership deed dated 03.02.2017. As per clause 6 thereof, the managing partner, Shri N. Seyyadurai, was entitled to monthly remuneration of Rs.25,000/- and the remaining four working partners were entitled to monthly remuneration of Rs.20,000/- each. Accordingly, the Assessing Officer computed the remuneration permissible under the said deed at Rs.12,60,000/- and disallowed the balance amount of Rs.60,00,000/-.

3.4 The assessee explained before the Assessing Officer that the remuneration had actually been paid in accordance with section 40(b) of the Act. However, since the amended partnership deed could not be produced before the Assessing

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 4 :: Officer at the assessment stage, the explanation was not accepted and the excess remuneration of Rs.60,00,000/- was added back.

3.5 The assessment also involved a disallowance of 15% of wages and cooley expenditure amounting to Rs.59,52,860/-. It has been submitted that the assessee has not preferred an appeal against the said addition and has paid the consequential tax. Accordingly, the dispute before us is confined, inter alia, to the disallowance of partner remuneration.

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 5 :: 4.1 It is pertinent to reproduce the substance of the findings recorded by the Assessing Officer in the remand report, as the same has a material bearing on the issue before us. The Assessing Officer noted that during the appellate proceedings the assessee had submitted the amended partnership deed and other documentary evidence in support of the remuneration claimed. The Assessing Officer specifically recorded that, on verification of the amended partnership deed, Shri N. Seyyadurai, Managing Partner, was entitled to monthly remuneration of Rs.75,000/- and the other four working partners were entitled to monthly remuneration of Rs.1,50,000/- each.

4.2 On that basis, the Assessing Officer observed that the total remuneration permissible under the amended deed worked out to Rs.81,00,000/- per annum, whereas the actual remuneration paid by the assessee was only Rs.72,60,000/-. The Assessing Officer further verified the individual amounts of remuneration paid to the respective partners and recorded the following:

Sl. No. Name of Partner Remuneration

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 6 ::

Sl. No. Name of Partner Remuneration

Total Rs.72,60,000/-

4.3 The Assessing Officer further recorded that the calculation of remuneration was verified with reference to section 40(b) of the Act and that the total amount of admissible remuneration under the statutory ceiling worked out to Rs.89,83,302/-, as against Rs.72,60,000/- actually claimed by the assessee.

4.4 Most importantly, the Assessing Officer concluded in the remand report that:

(i) the remuneration paid to the partners was as per the amended partnership deed; (ii) the remuneration was within the limits prescribed u/s. 40(b) of the Act; and (iii) the remuneration paid to the partners had also been offered to tax by the respective partners in their individual returns of income.

4.5 The Assessing Officer, therefore, concluded that the remuneration of Rs.72,60,000/- paid by the assessee for the

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 7 :: year under consideration was as per the amended partnership deed and section 40(b) of the Act and stated that the same “may be considered.”

4.6 The Ld. CIT(A), however, did not accept the claim of the assessee notwithstanding the aforesaid remand report. The Ld. CIT(A) noted that the original partnership deed dated 03.02.2017 prescribed fixed remuneration of Rs.25,000/- per month to the Managing Partner and Rs.20,000/- per month to each of the other four partners, resulting in total remuneration of Rs.12,60,000/- per annum. The Ld. CIT(A) further noted that the assessee had subsequently furnished a Deed of Amendment dated 01.04.2019, with retrospective effect from 01.04.2018, whereby clause 6 of the original partnership deed was substituted. Under the amended clause, the Managing Partner was entitled to remuneration of Rs.75,000/- per month and the remaining four working partners were entitled to remuneration of Rs.1,50,000/- per month each, subject to the provisions of the Income Tax Act.

4.6 The Ld. CIT(A), however, held that the amended deed was produced only during the appellate proceedings and that there was no evidence on record to show that the existence of such amended deed had been brought to the notice of the Assessing Officer during the assessment proceedings.

4.7 The Ld. CIT(A) also considered the assessee's claim that a letter dated 28.02.2024 had been submitted before the

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 8 :: Assessing Officer, stating that the original partnership deed had subsequently been amended and that the amended deed had been misplaced. According to the Ld. CIT(A), the said letter only referred to remuneration being claimed u/s. 40(b) and the fact that the partners had offered such remuneration to tax in their individual returns, but did not specifically mention the amended partnership deed.

4.8 The Ld. CIT(A), therefore, concluded that the amended partnership deed dated 01.04.2019, produced during the appellate proceedings, was an afterthought. The Ld. CIT(A) also observed that the amended deed was neither registered with any registering authority nor attested by a Notary Public. According to the Ld. CIT(A), the remuneration was consequently required to be tested only with reference to the original partnership deed dated 03.02.2017.

4.9 The Ld.CIT(A) accordingly confirmed the disallowance of Rs.60,00,000/- and dismissed the appeal.x

Now assessees are in appeal before the Tribunal.

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 9 :: during the original assessment proceedings only because the document had been misplaced in the course of the search proceedings and shifting of records. It was submitted that there was no intention whatsoever to suppress the document or introduce a new claim at the appellate stage. It was further submitted that the additional evidence was not merely produced before the Ld. CIT(A) and accepted mechanically. Rather, the Ld. CIT(A) himself forwarded the evidence to the Assessing Officer for verification and obtained a detailed remand report. Thus, according to the Ld. AR, the authenticity and contents of the amended partnership deed stood subjected to verification by the very Assessing Officer who had originally made the disallowance.

5.1 The Ld. AR emphasized that the Assessing Officer, after examining the original amended partnership deed, categorically found that the remuneration actually paid was within the amount authorized under the amended deed. Further, the Assessing Officer independently examined the applicability of section 40(b) and found the admissible remuneration to be Rs.89,83,302/-, which was substantially higher than the amount of Rs.72,60,000/- claimed by the assessee. It was therefore contended that the very basis on which the assessment addition had been made stood materially altered by the additional evidence verified during the remand proceedings.

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 10 :: 5.2 The Ld. AR also submitted that the respective partners had disclosed the remuneration received from the firm in their individual returns of income. Therefore, the genuineness of the payment and the factum of taxation in the hands of the recipients could also be independently verified.

5.3 The Ld. AR submitted that the Ld. CIT(A), despite reproducing and considering the remand report, had not recorded any cogent adverse finding against the specific factual findings made by the Assessing Officer therein. According to the Ld. AR, the Ld. CIT(A) proceeded essentially on the ground that the amended deed was produced belatedly and was not notarised or registered, without disproving the contents of the deed or the verification undertaken by the Assessing Officer. The Ld. AR therefore prayed that the additional evidence be admitted and, considering the factual findings in the remand report, the disallowance of Rs.60,00,000/- be deleted. In the alternative, it was prayed that the matter be restored to the file of the Assessing Officer for proper verification and adjudication after considering the amended partnership deed and all supporting evidence.

5.4 Without prejudice to the ld.AR contended that the amendment deed dated 01.04.2019 already stood duly substantiated on the material available on record, and that the findings in the impugned appellate order are contrary to the JAO's own remand report, the assessee further seeks to place before this Hon'ble Tribunal an important piece of

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 11 :: contemporaneous third-party evidence. The Appellant had furnished a copy of the amendment deed dt 01.04.2019 to Tamilnad Mercantile Bank Ltd. ("TMB Ltd."), Aruppukottai Branch for updating the firm's bank-account/profile records. The corresponding bank acknowledgement is now sought to be produced as additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. This evidence assumes direct relevance only because the ld.CIT(A), for the first time in the appellate order, questioned the authenticity/existence of the amendment deed and characterised it as an afterthought. Prior thereto, the dispute was essentially one of non- production of the amended deed before the Assessing Officer, its authenticity had not been put in issue in such terms. There was therefore no occasion or necessity for the Appellant to produce the bank acknowledgement earlier.

Further submitted that its production is sought by way of abundant caution and without prejudice to the Appellant's contention that the existing material on record, including the JAO's remand report, is itself sufficient to decide the issue in the Appellant's favour.

The ld.AR for the assessee accordingly prays that, if this Tribunal considers it necessary to adjudicate the issue with reference to the said additional evidence, the bank acknowledgement may be admitted under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 and taken into consideration for such adjudication, without prejudice to the

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 12 :: Appellant's primary contention that the material already on record is sufficient to decide the issue in its favour. Separate prayer for submission of additional evidence and raising additional grounds are also submitted by the assessee.

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 13 :: that the Ld. CIT(A) was justified in confirming the disallowance and prayed for dismissal of the appeal.

7.1. At the outset, we find that the Assessing Officer, while completing the assessment, had proceeded on the basis of the original partnership deed dated 03.02.2017, which prescribed remuneration aggregating to Rs.12,60,000/- per annum. Consequently, the excess remuneration of Rs.60,00,000/- was disallowed. However, during the appellate proceedings, the assessee furnished the amended partnership deed dated 01.04.2019, stated to have effect from 01.04.2018. The said document was not merely filed before the Ld. CIT(A) and accepted without verification. The Ld. CIT(A) specifically forwarded the same to the Assessing Officer and obtained a remand report dated 05.01.2026.

7.2. We find considerable significance in the findings recorded by the Assessing Officer in the said remand report. On examination of the amended partnership deed, the Assessing Officer recorded that the Managing Partner was entitled to

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 14 :: remuneration of Rs.75,000/- per month and the remaining four working partners were entitled to remuneration of Rs.1,50,000/- per month each. On such basis, the remuneration authorised under the amended deed worked out to Rs.81,00,000/- per annum, as against the actual remuneration of Rs.72,60,000/- claimed by the assessee.

7.3. More importantly, the Assessing Officer independently examined the allowability of the remuneration with reference to section 40(b) of the Act and determined the admissible remuneration under the statutory ceiling at Rs.89,83,302/-. Thus, the actual remuneration claimed by the assessee at Rs.72,60,000/- was below both the amount prescribed under the amended partnership deed, as recorded by the Assessing Officer, as well as the ceiling prescribed under section 40(b) of the Act.

7.4. The Assessing Officer also verified the actual remuneration stated to have been paid to the individual partners and recorded the respective amounts in the remand report. He further recorded a categorical finding that the remuneration paid to the partners was in accordance with the amended partnership deed and within the limits prescribed under section 40(b) of the Act. The Assessing Officer also noted that the respective partners had offered the remuneration received from the firm to tax in their individual returns of income. Ultimately, the Assessing Officer stated that the remuneration of Rs.72,60,000/- paid by the assessee was as per the amended

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 15 :: partnership deed and section 40(b) of the Act and that the same “may be considered.”

7.5. In our considered view, once the amended partnership deed was produced before the first appellate authority and the same was specifically subjected to verification by the Assessing Officer, the factual findings contained in the remand report could not have been brushed aside merely on the ground that the document was produced at a later stage. The Ld. CIT(A) has not brought on record any specific material to dislodge the factual verification carried out by the Assessing Officer in the remand proceedings. In particular, there is no finding that the amended deed was fabricated, that the remuneration was not actually paid, or that the remuneration received by the partners was not disclosed by them in their respective returns of income.

7.6. We also find that the mere fact that the amended partnership deed was not registered or notarised cannot, by itself, conclusively establish that the document was not in existence or was not acted upon. The question before us is essentially one of factual verification of the document and the actual conduct of the parties pursuant thereto. In the present case, the amended deed has already been examined by the Assessing Officer during the remand proceedings and the Assessing Officer has recorded findings favourable to the assessee on these factual aspects.

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 16 :: 7.7. At the same time, the assessee has now placed before us, by way of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, a copy of the amended partnership deed dated 01.04.2019 together with the contemporaneous covering letter dated 12.04.2019 addressed to Tamilnad Mercantile Bank Ltd., Aruppukottai Branch, evidencing submission of the amended deed to the bank for updating the firm's bank-account/profile records. The said material constitutes third-party evidence and, if duly established, may have a bearing on the question whether the amended deed was in existence and was acted upon contemporaneously, particularly in view of the observation of the Ld. CIT(A) that the amended deed was an afterthought.

7.8. We are of the considered opinion that the said third-party evidence deserves to be admitted under Rule 29, as it is directly relevant to the issue in dispute and its consideration would assist in arriving at a just and proper conclusion. We also take note of the submission of the assessee that the necessity for producing the bank acknowledgement arose particularly in view of the adverse inference drawn by the Ld. CIT(A) regarding the alleged afterthought nature of the amended deed. The evidence is, therefore, relevant not for introducing an altogether new claim, but for corroborating the existence and contemporaneous submission of the very same amended deed which has already been examined by the Assessing Officer during the remand proceedings.

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 17 :: 7.9. However, since the bank acknowledgement and the corresponding third-party evidence have been produced for the first time before the Tribunal, we consider it appropriate, in the interest of natural justice and for a proper factual determination, to restore the matter to the file of the Assessing Officer only for the limited purpose of examining and verifying the said third-party evidence. The Assessing Officer shall verify from Tamilnad Mercantile Bank Ltd., Aruppukottai Branch, or through such appropriate independent verification as may be considered necessary, whether the amended partnership deed dated 01.04.2019, along with the covering letter dated 12.04.2019, was in fact submitted by the assessee to the bank and whether the same was received/acted upon for updating the firm's bank-account/profile records.

7.10. We make it clear that the remand is strictly confined to the aforesaid verification of the third-party evidence and shall not be construed as a direction to undertake a fresh assessment of the entire claim. The Assessing Officer shall consider the result of such verification together with the amended partnership deed already examined during the earlier remand proceedings and the findings already recorded in the remand report dated 05.01.2026. The assessee shall be afforded reasonable opportunity of being heard and shall be permitted to furnish such further material as may be necessary for the limited verification.

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 18 :: 7.11. After carrying out the aforesaid limited verification, the Assessing Officer shall pass an appropriate order in accordance with law, keeping in view the factual findings already recorded in the remand report, including the finding that the remuneration of Rs.72,60,000/- was in accordance with the amended partnership deed and within the limits prescribed under section 40(b) of the Act. Needless to state, the Assessing Officer shall not travel beyond the limited scope of the remand as set out herein.

7.12. In view of the above, the issue relating to the disallowance of partner remuneration of Rs.60,00,000/- is restored to the file of the Assessing Officer for the limited purpose stated above, with the additional evidence admitted under Rule 29. The grounds relating to this issue are treated as allowed for statistical purposes.

7.13. Since the facts and issue involved in the remaining appeals are stated to be identical, our findings herein shall apply, mutatis mutandis, to the corresponding appeals of the assessees in ITA Nos. 1947, 1948 and 1949/Chny/2026 in the case of M/s. Seyyadurai Constructions and ITA Nos. 1950, 1951, 1952 and 1953/Chny/2026 in the case of M/s. The SPK Blue Metal for the respective assessment years, subject to verification by the Assessing Officer in accordance with the limited directions contained herein.

ITA No 1946 to 1953/Chny/2026 (AYs 2019-20 & others) Seyyadurai Constructions Vs ACIT CC-3(1) : 19 :: 13. In the result, the appeals filed by the assessees are allowed for statistical purposes in the terms indicated above. Order pronounced in the open court on 09th day of September, 2026 in Chennai.

Sd/- Sd/- (प�ावती एस) (मनु कुमार िग#र) (PADMAVATHY S) (MANU KUMAR GIRI) लेखा सद$या/ACCOUNTANT MEMBER %या�यक सद$य/JUDICIAL MEMBER

चे%नई/Chennai, 'दनांक/Dated: 09th September, 2026. SNDP, Sr. PS आदेश क� ��त(ल)प अ*े)षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

Digitally signed SANDE by SANDEEP KUMAR EP Date: 2026.09.11 KUMAR 14:17:24 +05'30'