HOTEL RELAXINN,DELHI vs. INCOME TAX OFFICER, WARD 51(1), DELHI, DELHI

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ITA 2150/DEL/2026Status: DisposedITAT Delhi24 April 2026AY 2018-194 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal condoned the delay in filing the appeal and restored the issue back to the CIT(A) for de novo adjudication. The assessee was to be given a reasonable opportunity to make submissions.

What were the facts?

The assessee, a hotel business, faced disallowances under Section 40(a)(i) and 40(a)(ia) of the Income Tax Act due to non-deduction of TDS on rent paid to old landlords. The assessee claimed the non-deduction was due to a dispute and threat of eviction. The CIT(A) dismissed the appeal ex-parte.

What were the issues?

Whether disallowance under Section 40(a)(i) and 40(a)(ia) was justified for rent paid without TDS deduction due to landlord disputes. Whether the CIT(A) erred in dismissing the appeal ex-parte without affording a proper opportunity.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

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

Hearing: 13/04/2026Pronounced: 13/04/2026

आयकर अपीलीय अधिकरण धिल्ली पीठ “एस एम सी”, धिल्ली श्री धिकास अिस्थी, न्याधयक सिस्य IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER आअसं.2150/धिल्ली/2026 (धि.ि. 2018-19) ITA No.2150/DEL/2026 (A.Y.2018-19)

Hotel Relaxinn, 35, Ground Floor, South Patel Nagar, New Delhi 110008 ...... अपीलार्थी/Appellant PAN: AAIFH-6295-C बिाम Vs. Income Tax Officer, Ward-51(1), ..... प्रधििािी/Respondent Civic Centre, New Delhi 110002 अपीलार्थी द्वारा/Appellant by : S/Shri Saksham Garg & Kunal Gupta, Chartered Accountants प्रधििािीद्वारा/Respondent by : Shri Manoj Kumar, Sr. DR सुििाई की धिधर्थ/Date of hearing : 13/04/2026 घोषणा की धिधर्थ/Date of pronouncement : 13/04/2026 आिेश/ORDER PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 28.03.2025, for Assessment Year 2018-19.

2.

The appeal is time barred by 272 days. The assessee has filed an application supported by an affidavit citing reasons causing delay in filing of appeal. After perusal of the same, I am satisfied that delay in filing of appeal is not intentional, the delay has been caused for the reasons stated in petition which appears to be bonafide. Thus, delay of 272 days in filing of appeal is condoned and appeal is admitted for decision on merits.

3.

Shri Saksham Garg appearing on behalf of the assessee submits that the assessee is a partnership firm engaged in the business of running a hotel on leased

2 ITA No. 2150/DEL/2026 (A.Y.2018-19) premises. The leased premises was originally owned by Smt. Manju Setia and Shri O. P. Wadhwa. Upon demise of Shri O. P. Wadhwa during A.Y. 2017-18, a dispute arose between the co-owners and family members. During the period relevant to assessment year under appeal, the leased premises was sold by the co-owners to Shri Suresh Kumar Kashyap and Shri Surender Kumar Kashyap. The assessee continued its business from the same leased premises after entering into a fresh lease agreement with new owners. Owing to the dispute with the old landlords and threat of eviction, the assessee did not deduct tax at source on rent paid to the old landlords. The total rent paid to the old landlords during the period relevant to assessment year under appeal was Rs.37.50 lakhs. The assessee paid lease rent of Rs.28,00,000/- to the new landlords after deduction of tax at source, which was duly deposited to the Government exchequer within time. In addition to lease rent, the assessee also paid Rs.3,00,000/- towards stamp duty for execution of the new lease agreement, on which provisions of TDS are not applicable. Thus, the total expenditure claimed by the assessee in the Profit and Loss account towards lease rental was Rs.68.50 lakhs (Rs.37.50 lakhs paid to old landlords + Rs.28.00 lakhs paid to new landlords + Rs.3.00 lakhs stamp duty). In the Tax Audit Report under Clause 21(b), the auditors wrongly reported disallowance of Rs.40.50 lakhs u/s 40(a)(i) and 40(a)(ia) of the Act stating that TDS was deducted on lease rentals but not deposited to the Govt. exchequer. The said observation is factually incorrect and is in contradiction to Clause 34(a) of the Tax Audit Report. The Assessing Officer (AO), in scrutiny assessment proceedings, made disallowance of Rs.40.50 lakhs u/s 40(a)(i) of the Act. Further, 30% disallowance of Rs.40.05 lakhs u/s 40(a)(ia) of the Act was also made, resulting in excessive and erroneous addition. Aggrieved by the assessment order dated 06.01.2021, the assessee filed an appeal before the CIT(A). The CIT(A), in ex-parte proceedings, dismissed appeal of the assessee and

3 ITA No. 2150/DEL/2026 (A.Y.2018-19) confirmed the addition. The ld. AR submits that the assessee has a good case on merits and, therefore, prayed for restoring the issue back to the AO for de novo examination.

4.

Per contra, Shri Manoj Kumar, representing the department supported the impugned order and prayed for dismissing appeal of the assessee.

5.

Both sides heard, orders of the authorities below examined. The CIT(A) had issued multiple notices to the assessee but the assessee has failed to respond to the same. Considering entire facts of the case and in interest of justice, I deem it appropriate to restore the appeal back to the CIT(A) for fresh adjudication on merits after affording reasonable opportunity of making submissions to the assessee, in accordance with law.

6.

In the result, impugned order is set aside and appeal of the assessee is allowed.

Order pronounced in the open court on Monday the 13th day of April, 2026.

Sd/- Sd/- (VIKAS AWASTHY) न्याधयक सिस्य/JUDICIAL MEMBER धिल्ली/Delhi, धििांक/Dated 24/04/2026 NV/-

4 ITA No. 2150/DEL/2026 (A.Y.2018-19)

प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलार्थी/The Appellant , 1. प्रधििािी/ The Respondent. 2. 3. The PCIT/CIT(A) धिभागीय प्रधिधिधि, आय.अपी.अधि., दिल्ली /DR, ITAT, धिल्ली 4. गार्ड फाइल/Guard file. 5.

BY ORDER, //True Copy//

(Asstt. Registrar) ITAT, DELHI

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