ANKIT SHARMA,FARIDABAD vs. ITO WARD 1(1), FARIDABAD

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ITA 8703/DEL/2025Status: DisposedITAT Delhi27 July 2026AY 2016-174 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s disallowance of INR 10,41,840/- under Section 40(a)(ia). The payments, though claimed as commission, were found to be salary and tax at source under Section 192 was not deducted, making the disallowance valid.

What were the facts?

The assessee, an individual engaged in online share trading, claimed expenses including commission. The Assessing Officer (AO) disallowed a portion of expenses, advertisement expenses, and commission. The CIT(A) confirmed some disallowances but reduced others, and invoked Section 40(a)(ia) for commission expenses treated as salary.

What were the issues?

Whether the disallowance under Section 40(a)(ia) was correctly invoked for payments treated as salary where TDS was not deducted, and if the threshold for audit under Section 44AB was relevant for an individual in the first year of business.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 192,Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI “G” BENCHES, NEW DELHI

Before: SHRI YOGESH KUMAR US & SHRI MANISH AGARWAL

For Respondent: Shri Manoj Kumar Tiwari, Sr. DR

आयकर अपीलीय अिधकरण, िद�ी पीठ�, नई िद�ी INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCHES, NEW DELHI BEFORE SHRI YOGESH KUMAR US, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA 8703/DEL/2025 िनधा�रण वष�/Assessment Year: 2016-17) ANKIT SHARMA ITO WARD 1(1) C/O ALOK KUMAR GUPTA & FARIDABAD-121001, CO CHARTERED ACCOUNTANTS HARYANA Vs. 877 SECTOR-17 FARIDABAD, FARIDABAD-121002, HARYANA अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: CCMPS5168P

अपीलाथ� �ारा/Appellant represented by: Sh. Alok Kumar Gupta, CA ��थ� �ारा/Respondent represented by: Shri Manoj Kumar Tiwari, Sr. DR

सुनवाई की तारीख / Date of conclusion of hearing: 07-May-2026 घोषणा की तारीख / Date of pronouncement: 27-Jul-2026 आदेश / ORDER PER MANISH AGARWAL, A.M.: The present appeal is filed by assessee against the order dated 09.10.2025 passed by Ld. Commissioner of Income Tax (Appeals)/ADDL/JCIT(A)-3, Bengaluru [“Ld. CIT(A)”] in Appeal No. CIT(A), Faridabad /10447/2018-19 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 23.12.2018 passed u/s 143(3) of the Act pertaining to Assessment Year 2016-17.

2.

Brief facts of the case are that the assessee is an individual and during the year under appeal, had started a business of online trading of shares etc. The assessment was completed u/s 143(3) of the Act wherein disallowance of INR 4,16,243/- @ 20% was made out of the expenses claimed in the Profit & Loss

ITA 8703/DEL/2025 ANKIT SHARMA Account and further the AO has disallowed INR 6.00 Lakhs paid as advertisement expenses and commission expenses of INR 34,72,800/-. Accordingly, total income was assessed at INR 50,12,363/- against the returned income of INR 5,23,320/-. Before Ld. CIT(A), assessee filed all the relevant details to prove the genuineness of the expenses claimed as additional evidence under Rule 46A of the Income Tax Rules, 1962 (“The Rules”). Ld. CIT(A) obtained the Remand Report from the AO on 02 (two) occasions and thereafter, confirmed the disallowance of INR 4,16,243/- made out of various expenses however, has reduce the disallowance of advertisement expenses of INR 6.00 Lakhs to INR 84,900/-. With respect to the disallowance of commission expenses of INR 34,72,800/-, ld. CIT(A) held the said payment as salary to various employees and since the assessee has filed to deduct the tax at source on such payment, he reduced the disallowance at INR 10,41,840/- being 30% of the payment after invoking the provisions of section 40(a)(ia) of the Act.

3.

Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal where the solitary ground of appeal is with respect to the confirmation of disallowance of INR 10,41,840/- u/s 40(a)(ia) of the Act.

4.

Before us, Ld. AR for the assessee submits that it is the first year of the business and therefore, the provisions of section 40(a)(ia) of the Act are not applicable since the assessee is an individual and has not exceeds the threshold limits to get the accounts audited u/s 44AB of the Act. For this, he placed on record a copy of the return of income filed in immediately preceding year. He therefore, prayed that Ld.CIT(A) has wrongly invoked the provisions of section 40(a)(ia) of the Act and requested for the deletion of disallowance so confirmed.

5.

On the other hand, Ld. Sr. DR for the Revenue vehemently supported the order of Ld.CIT(A) and stated that though the assessee has claimed the said

ITA 8703/DEL/2025 ANKIT SHARMA expenditure as commission however, after verification of the details filed by the assessee, ld. CIT(A) observed that said payments were in the nature of salary and since the gross payment of salary exceeds the maximum amount not chargeable to tax, TDS u/s 192 is required to be made. Ld. Sr. DR submits that as per section 192, it is not necessary that the books of accounts of the assessee should be audited in immediately preceding year in case of an individual or HUF. He therefore, prayed that Ld. CIT(A) has rightly made the disallowance which order deserves to be upheld.

6.

Heard the contentions of both the parties at length and perused the material on record. Every employer responsible for paying salary must deduct tax at source under section 192 of the Act if the salary income exceeds the basic exemption limit. TDS is deducted at the time of salary payment and should be the average of total estimated tax liability of the employee. It is observed that the claim of the assessee was that it is the first year of business and therefore, provision of section 40(a)(ia) of the Act could not be applied. However, while upholding the disallowance at page 22 of the appellate order, ld. CIT(A) has reproduced the copy of bank book furnished by the assessee, according to which payments made to 05(five) persons were on account of salary though it was the claim of the assessee that the same were paid as commission. When the assessee himself admitted that he has paid salary to these Five persons and the salary exceeds the maximum amount of basic exemption of INR 2.50 Lakhs therefore, the assessee was liable to deduct tax at source u/s 192 of the Act. Therefore, we find no error in confirming the disallowance of 10,41,840/- made by ld. CIT(A) by invoking the provision of section 40(a)(ia) of the Act. Accordingly, solitary Grounds of appeal raised by the assessee is dismissed.

ITA 8703/DEL/2025 ANKIT SHARMA In the result, appeal filed by the assessee is dismissed. 7. Order pronounced in the open court on 27.07.2026.

Sd/- Sd/- YOGESH KUMAR U.S MANISH AGARWAL JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 27.07.2026 *Amit Kumar, Sr. P.S*

Copy to: ANKIT SHARMA, C/O ALOK KUMAR GUPTA & CO CHARTERED ACCOUNTANTS 877 1 SECTOR-17 FARIDABAD, FARIDABAD-121002, HARYANA

ITO WARD 1(1), 2 -, FARIDABAD-121001, HARYANA

3 THE PCIT / CIT, 4 THE D.R., ITAT, DELHI BENCH 5 GUARD FILE TRUE COPY

ASSISTANT REGISTRAR / SR. PRIVATE SECRETARY I.T.A.T., DELHI

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