SOWIL LIMITED ,MUMBAI vs. DCIT, CIRCLE 6(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA No. 275/MUM/2026 Assessment Year: 2022-23

SOWIL LIMITED DCIT, CIRCLE 16(2) 2 ESHA EKTA APTS, Aayakar Bhavan, M.K Road, Vs. Campacola Compound, Worli, Mumbai-400020, Maharashtra. Mumbai-400018, Maharashtra. PAN NO. AADCS 0951 Q Appellant Respondent

: Shri. S. Singhi Assessee by Revenue by : Shri SurendraMohan (SR.DR.)

Date of Hearing : 21/04/2026 : 05/05/2026 Date of pronouncement ORDER PER OM PRAKASH KANT, AM

This appeal by the Assessee is directed against order dated 17.11.2025 passed by the Ld. Commissioner of Income Tax(Appeals) -National Faceless Appeal Centre, Delhi [in short “Ld. CIT(A)”] for Assessment Year (AY) 2022-23, raising following grounds:

“1. On the facts and in the circumstances of the case, the Order dated 17-11- 2025, passed by the Ld. Commissioner of Income tax (Appeals) u/s 250 of the

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Income Tax Act, 1961 ("the Act"), for dismissal of appeal filed against the Income Tax Act, 1961 ("the Act"), for dismissal of appeal filed against the Income Tax Act, 1961 ("the Act"), for dismissal of appeal filed against the Order passed by the Assessing Unit u/s 143(3) r.w.s. 1448 of the Income Tax Order passed by the Assessing Unit u/s 143(3) r.w.s. 1448 of the Income Tax Order passed by the Assessing Unit u/s 143(3) r.w.s. 1448 of the Income Tax Act, 1961 ("the Act"), raising tax demand of Rs. 1,14,62,870/ Act, 1961 ("the Act"), raising tax demand of Rs. 1,14,62,870/ Act, 1961 ("the Act"), raising tax demand of Rs. 1,14,62,870/-, is arbitrary, bad in law, against the principles of natural justice against the principles of natural justice against the principles of natural justice and liable to be quashed/set aside. quashed/set aside. 2. On the facts and circumstances of the case and in law the Commissioner of 2. On the facts and circumstances of the case and in law the Commissioner of 2. On the facts and circumstances of the case and in law the Commissioner of Income-Tax (Appeals) failed to appreciate that the Faceless Assessment Tax (Appeals) failed to appreciate that the Faceless Assessment Tax (Appeals) failed to appreciate that the Faceless Assessment Officer ('FAO') failed failed to provide the Appellant sufficient opportunity to provide the Appellant sufficient opportunity and time to provide the necessary details/ documents in support of its contention time to provide the necessary details/ documents in support of its contention time to provide the necessary details/ documents in support of its contention in response to the show in response to the show-cause notice issued. 3. On the facts and circumstances of the case and in law the learned 3. On the facts and circumstances of the case and in law the learned 3. On the facts and circumstances of the case and in law the learned authorities below erred in disallowing an amount of Rs. 18,01,179/ below erred in disallowing an amount of Rs. 18,01,179/- under below erred in disallowing an amount of Rs. 18,01,179/ section 40(a)(ia) of the Income section 40(a)(ia) of the Income-tax Act, 1961 ('the Act') being 30% of Rs. tax Act, 1961 ('the Act') being 30% of Rs. 60,03,930/- on the assumption that tax had not been deducted at source on on the assumption that tax had not been deducted at source on on the assumption that tax had not been deducted at source on rent paid, and the basis for doing the same, rent paid, and the basis for doing the same, are contrary to the facts of the are contrary to the facts of the case, the provisions of law and the rules made thereunder. case, the provisions of law and the rules made thereunder. case, the provisions of law and the rules made thereunder. 3:1 Further, out of the disallowance of amounts under Ground 3, the learned 3:1 Further, out of the disallowance of amounts under Ground 3, the learned 3:1 Further, out of the disallowance of amounts under Ground 3, the learned authorities below erred in not considering that the amount of Rs 52,80,000/ authorities below erred in not considering that the amount of Rs 52,80,000/ authorities below erred in not considering that the amount of Rs 52,80,000/- was paid towards Business service center charges, on which the Appellant owards Business service center charges, on which the Appellant owards Business service center charges, on which the Appellant had duly deducted tax at source @10% amounting to Rs 5,28,000/ had duly deducted tax at source @10% amounting to Rs 5,28,000/ had duly deducted tax at source @10% amounting to Rs 5,28,000/-. Accordingly, the said amount was wrongly disallowed. This is contrary to the Accordingly, the said amount was wrongly disallowed. This is contrary to the Accordingly, the said amount was wrongly disallowed. This is contrary to the facts of the case and the provisions of law and the facts of the case and the provisions of law and the rules made thereunder. rules made thereunder. Even assuming that without admitting that the deduction has been made Even assuming that without admitting that the deduction has been made Even assuming that without admitting that the deduction has been made under a different section, the Learned authorities below, erred in not under a different section, the Learned authorities below, erred in not under a different section, the Learned authorities below, erred in not appreciating that it could have been an inadvertent error and that the rate of appreciating that it could have been an inadvertent error and that the rate of appreciating that it could have been an inadvertent error and that the rate of tax to be deducted at source under section 194J and 1941 are similar and ducted at source under section 194J and 1941 are similar and ducted at source under section 194J and 1941 are similar and hence there was no loss of revenue to the Government. 3:2 Further, out of the hence there was no loss of revenue to the Government. 3:2 Further, out of the hence there was no loss of revenue to the Government. 3:2 Further, out of the disallowance of amounts under Ground 3, the learned authorities below erred disallowance of amounts under Ground 3, the learned authorities below erred disallowance of amounts under Ground 3, the learned authorities below erred in considering the amount of Rs 2,85,000/ in considering the amount of Rs 2,85,000/- paid as reimbursement of paid as reimbursement of expenses, as rental payments and accordingly disallowed an amount of Rs expenses, as rental payments and accordingly disallowed an amount of Rs expenses, as rental payments and accordingly disallowed an amount of Rs 85,500/-being 30% under section 40(a)(ia) of the Act, and the basis for doing being 30% under section 40(a)(ia) of the Act, and the basis for doing being 30% under section 40(a)(ia) of the Act, and the basis for doing the same, are contrary to the facts of the case and the provisions of law and the same, are contrary to the facts of the case and the provisions of law and the same, are contrary to the facts of the case and the provisions of law and the rules made thereunder. he rules made thereunder. 3.3 Further, out of the disallowance of expenditure under Ground 3 on the 3.3 Further, out of the disallowance of expenditure under Ground 3 on the 3.3 Further, out of the disallowance of expenditure under Ground 3 on the facts and circumstances of the case and in law, the learned authorities below facts and circumstances of the case and in law, the learned authorities below facts and circumstances of the case and in law, the learned authorities below erred in not appreciating that the each of the payments for rent amounting in erred in not appreciating that the each of the payments for rent amounting in erred in not appreciating that the each of the payments for rent amounting in aggregate Rs 4,38,929/ aggregate Rs 4,38,929/-which were below the threshold limit, and hence tax which were below the threshold limit, and hence tax was not required to be deducted at source. However, the learned authorities was not required to be deducted at source. However, the learned authorities was not required to be deducted at source. However, the learned authorities below erred in disallowing an amount of Rs. 1,31,679/ below erred in disallowing an amount of Rs. 1,31,679/ below erred in disallowing an amount of Rs. 1,31,679/-being 30% as per section 40(a)(ia) of the Act. section 40(a)(ia) of the Act. 4. On the facts and circumstances of the case and in law the learned n the facts and circumstances of the case and in law the learned n the facts and circumstances of the case and in law the learned authorities below erred in disallowing an amount of Rs. 15,34,759/ authorities below erred in disallowing an amount of Rs. 15,34,759/ authorities below erred in disallowing an amount of Rs. 15,34,759/-under

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section 40(1)(ia) of the Income section 40(1)(ia) of the Income-tax Act, 1961 ('the Act') being 30% of Rs. tax Act, 1961 ('the Act') being 30% of Rs. 50,49,194/- on the assumption that tax had on the assumption that tax had not been deducted at source on not been deducted at source on interest paid, and the basis for doing the same, are contrary to the facts of interest paid, and the basis for doing the same, are contrary to the facts of interest paid, and the basis for doing the same, are contrary to the facts of the case, the provisions of law and the rules made thereunder. the case, the provisions of law and the rules made thereunder. the case, the provisions of law and the rules made thereunder. 4.1 On the facts and circumstances of the case and in law, the learned 4.1 On the facts and circumstances of the case and in law, the learned 4.1 On the facts and circumstances of the case and in law, the learned authorities below erred in calculating the amount of disallowance on TDS on elow erred in calculating the amount of disallowance on TDS on elow erred in calculating the amount of disallowance on TDS on Interest at Rs. 15,34,759/ Interest at Rs. 15,34,759/- being stated as 30% of Rs. 50,49,194/ being stated as 30% of Rs. 50,49,194/-, However, 30% works out to be Rs. 15,14,759/ 30% works out to be Rs. 15,14,759/- 4.2 On the facts and circumstances of the case and in law, the learned 4.2 On the facts and circumstances of the case and in law, the learned 4.2 On the facts and circumstances of the case and in law, the learned authorities below erred in not providing any reasons/ observations in respect es below erred in not providing any reasons/ observations in respect es below erred in not providing any reasons/ observations in respect of the amount of Rs 14,04,508/ of the amount of Rs 14,04,508/-disallowed under section 40(1)(ia) of the disallowed under section 40(1)(ia) of the Income-tax Act, 1961 ('the Act') being 30% of interest amounting to Rs. tax Act, 1961 ('the Act') being 30% of interest amounting to Rs. tax Act, 1961 ('the Act') being 30% of interest amounting to Rs. 46,81,694/- paid to banks and financial in paid to banks and financial institutions, which is contrary to the stitutions, which is contrary to the facts of the case, the provisions of law and the rules made thereunder. facts of the case, the provisions of law and the rules made thereunder. facts of the case, the provisions of law and the rules made thereunder. 4.3 On the facts and circumstances of the case and in law, the learned 4.3 On the facts and circumstances of the case and in law, the learned 4.3 On the facts and circumstances of the case and in law, the learned authorities below erred in respect of the amount of Rs 1,10,250/ authorities below erred in respect of the amount of Rs 1,10,250/ authorities below erred in respect of the amount of Rs 1,10,250/- disallowed under section 40(1)(a) of the Income under section 40(1)(a) of the Income-tax Act, 1961 ('the Act') being 30% of tax Act, 1961 ('the Act') being 30% of interest amounting to Rs. 3,67,500/ interest amounting to Rs. 3,67,500/-paid towards Interest on delayed paid towards Interest on delayed payment to MSME entities. Also the CIT(A) failed to consider that payment to MSME entities. Also the CIT(A) failed to consider that payment to MSME entities. Also the CIT(A) failed to consider that Rs.3,67,500/- was already disallowed in Retu was already disallowed in Return of Income. 5. On the facts rn of Income. 5. On the facts and circumstances of the case and in law the learned authorities belaw erred and circumstances of the case and in law the learned authorities belaw erred and circumstances of the case and in law the learned authorities belaw erred in disallowing an amount of Rs 1,24,924/ in disallowing an amount of Rs 1,24,924/-under section 40(1)(la) of the under section 40(1)(la) of the Income-tax Act, 1961 ('the Act'), being 30% of Rs. 4,16,412/ tax Act, 1961 ('the Act'), being 30% of Rs. 4,16,412/- on the basis that tax Act, 1961 ('the Act'), being 30% of Rs. 4,16,412/ tax had not been deducted at source on the purchase of software from a local tax had not been deducted at source on the purchase of software from a local tax had not been deducted at source on the purchase of software from a local vendor, which is contrary to the facts of the case, the provisions of law, the vendor, which is contrary to the facts of the case, the provisions of law, the vendor, which is contrary to the facts of the case, the provisions of law, the rules made thereunder and the CBDT instruction issued in this respect. rules made thereunder and the CBDT instruction issued in this respect. rules made thereunder and the CBDT instruction issued in this respect. 6. On the facts and circum 6. On the facts and circumstances of the case and in law the learned stances of the case and in law the learned authorities below erred in disallowing an amount of Rs. 10,00,000/ authorities below erred in disallowing an amount of Rs. 10,00,000/ authorities below erred in disallowing an amount of Rs. 10,00,000/-, paid as penalty to the lead consultant of the Joint. venture, under section 37 read penalty to the lead consultant of the Joint. venture, under section 37 read penalty to the lead consultant of the Joint. venture, under section 37 read with Explanations 1 and 3 of the Income with Explanations 1 and 3 of the Income-tax Act, 1961 ('the tax Act, 1961 ('the Act') on the basis that the amount paid is towards contravention of law, which is contrary to the that the amount paid is towards contravention of law, which is contrary to the that the amount paid is towards contravention of law, which is contrary to the facts of the case, the law and the rules made thereunder. facts of the case, the law and the rules made thereunder. facts of the case, the law and the rules made thereunder. 7. On the facts and circumstances of the case and in law the learned 7. On the facts and circumstances of the case and in law the learned 7. On the facts and circumstances of the case and in law the learned authorities below erred in disa authorities below erred in disallowing an amount of Rs. 1,89,140/ llowing an amount of Rs. 1,89,140/-paid as late fee for deposit of GST under section 37 read with Explanation 1 and 3 of late fee for deposit of GST under section 37 read with Explanation 1 and 3 of late fee for deposit of GST under section 37 read with Explanation 1 and 3 of the income tax Act, 1961 ('the Act') on the presumption that the amount paid the income tax Act, 1961 ('the Act') on the presumption that the amount paid the income tax Act, 1961 ('the Act') on the presumption that the amount paid is towards contravention of law, which is contrary to the is towards contravention of law, which is contrary to the facts of the case, the is towards contravention of law, which is contrary to the facts of the case, the law and the rules made thereunder. law and the rules made thereunder. 8. On the facts and circumstances of the case and in law the learned 8. On the facts and circumstances of the case and in law the learned 8. On the facts and circumstances of the case and in law the learned authorities below erred in disallowing an amount of Rs. 14,963/ authorities below erred in disallowing an amount of Rs. 14,963/ authorities below erred in disallowing an amount of Rs. 14,963/- paid as late

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fee for deposit of Professional tax under section 3 fee for deposit of Professional tax under section 37 read with Explanation 1 7 read with Explanation 1 and 3 of the Income tax Act, 1961 ('the Act') on the presumption that the and 3 of the Income tax Act, 1961 ('the Act') on the presumption that the and 3 of the Income tax Act, 1961 ('the Act') on the presumption that the amount paid is towards contravention of law, which is contrary to the facts of amount paid is towards contravention of law, which is contrary to the facts of amount paid is towards contravention of law, which is contrary to the facts of the case, the law and the rules made thereunder. the case, the law and the rules made thereunder. 9. On the facts and circumst 9. On the facts and circumstances of the case and in law the learned ances of the case and in law the learned authorities below erred in adding an amount of Rs. 63,92,744/ authorities below erred in adding an amount of Rs. 63,92,744/ authorities below erred in adding an amount of Rs. 63,92,744/- under section 68 of the Income 68 of the Income-tax Act, 1961 ('the Act') as unexplained cash credits in tax Act, 1961 ('the Act') as unexplained cash credits in respect of provision for employee benefit expenses and the basis respect of provision for employee benefit expenses and the basis respect of provision for employee benefit expenses and the basis for doing the same are contrary to the facts of the case, the provisions of law and the rules same are contrary to the facts of the case, the provisions of law and the rules same are contrary to the facts of the case, the provisions of law and the rules made thereunder. made thereunder. 10. On the facts and circumstances of the case and in law the learned 10. On the facts and circumstances of the case and in law the learned 10. On the facts and circumstances of the case and in law the learned authorities below erred in adding an amount of Rs 32,16,839/ authorities below erred in adding an amount of Rs 32,16,839/ authorities below erred in adding an amount of Rs 32,16,839/-as under reporting of sales, on account of mismatch in the reconciliation of supplies rting of sales, on account of mismatch in the reconciliation of supplies rting of sales, on account of mismatch in the reconciliation of supplies declared in GSTR declared in GSTR-1 with the turnover reflected in trooks of account, and the 1 with the turnover reflected in trooks of account, and the basis for doing so are wholly contrary to the facts of the case, the law and the basis for doing so are wholly contrary to the facts of the case, the law and the basis for doing so are wholly contrary to the facts of the case, the law and the rules made thereunder. rules made thereunder. 11. On the facts and circumstances of the case and in law the learned . On the facts and circumstances of the case and in law the learned . On the facts and circumstances of the case and in law the learned authorities below erred in adding an amount Rs. 7,98,613/ authorities below erred in adding an amount Rs. 7,98,613/ authorities below erred in adding an amount Rs. 7,98,613/- under section 68 of the Income-tax Act, 1961 ('the Act') on account of unreconciled outstanding tax Act, 1961 ('the Act') on account of unreconciled outstanding tax Act, 1961 ('the Act') on account of unreconciled outstanding credit balance in the name of Tva credit balance in the name of Tvastr Engineering Consultants Private Limited str Engineering Consultants Private Limited (a subsidiary) and the basis for doing so are contrary to the facts of the case, (a subsidiary) and the basis for doing so are contrary to the facts of the case, (a subsidiary) and the basis for doing so are contrary to the facts of the case, the provisions of law and the rules made thereunder. the provisions of law and the rules made thereunder. 12. On the facts and circumstances of the case and in law the learned 12. On the facts and circumstances of the case and in law the learned 12. On the facts and circumstances of the case and in law the learned authorities below erred in adding an amount Rs. 30,82,932/ ies below erred in adding an amount Rs. 30,82,932/ ies below erred in adding an amount Rs. 30,82,932/- under section 68 of the Income 68 of the Income-tax Act, 1961 ('the Act') on account of unreconciled previous tax Act, 1961 ('the Act') on account of unreconciled previous years outstanding credit balance with Genesys International Corporation, years outstanding credit balance with Genesys International Corporation, years outstanding credit balance with Genesys International Corporation, and the basis for doing so are contrar and the basis for doing so are contrary to the facts of the case, the provisions y to the facts of the case, the provisions of law and the rules made thereunder. of law and the rules made thereunder. 13. On the facts and circumstances of the case and in law the learned 13. On the facts and circumstances of the case and in law the learned 13. On the facts and circumstances of the case and in law the learned authorities below erred in adding an amount Rs. 3,62,797/ authorities below erred in adding an amount Rs. 3,62,797/ authorities below erred in adding an amount Rs. 3,62,797/- under section 68 of the Income-tax Act ('the A tax Act ('the Act') on account of unreconciled previous years ct') on account of unreconciled previous years outstanding credit balance with Magma Infrastructure Pvt Ltd and the basis outstanding credit balance with Magma Infrastructure Pvt Ltd and the basis outstanding credit balance with Magma Infrastructure Pvt Ltd and the basis for doing so are contrary to the facts of the case. for doing so are contrary to the facts of the case. 14. For that the Ld. Commissioner of Income 14. For that the Ld. Commissioner of Income-tax (Appeals) failed to consider tax (Appeals) failed to consider that the penalty proceeding initiated u/s 270(A) and 271AAC(1) of the Income the penalty proceeding initiated u/s 270(A) and 271AAC(1) of the Income the penalty proceeding initiated u/s 270(A) and 271AAC(1) of the Income Tax Act, 1961 are without any valid reason. Tax Act, 1961 are without any valid reason. 15. For that the Appellant craves leave to amend, add, delete, rectify or 15. For that the Appellant craves leave to amend, add, delete, rectify or 15. For that the Appellant craves leave to amend, add, delete, rectify or withdraw any of the grounds of appeal herein and to submit such withdraw any of the grounds of appeal herein and to submit such withdraw any of the grounds of appeal herein and to submit such

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statements, documents and papers as may be considered necessary either at atements, documents and papers as may be considered necessary either at atements, documents and papers as may be considered necessary either at or before the final hearing of the Appeal.” or before the final hearing of the Appeal.” 2. Briefly stated, the facts of the case reveal that the assessee Briefly stated, the facts of the case reveal that the assessee Briefly stated, the facts of the case reveal that the assessee company is engaged in providing end company is engaged in providing end-to-end consultancy services in end consultancy services in relation to Railways, Highways, Bridges, Structural and Tunnelling n to Railways, Highways, Bridges, Structural and Tunnelling n to Railways, Highways, Bridges, Structural and Tunnelling projects, encompassing activities from planning and feasibility projects, encompassing activities from planning and feasibility projects, encompassing activities from planning and feasibility studies to preparation of design reports and supervision of studies to preparation of design reports and supervision of studies to preparation of design reports and supervision of construction till completion. For the assessment year under construction till completion. For the assessment year under construction till completion. For the assessment year under consideration, the assessee filed its return of income on 20 October n, the assessee filed its return of income on 20 October n, the assessee filed its return of income on 20 October 2022 declaring ‘Nil’ income after setting off brought forward 2022 declaring ‘Nil’ income after setting off brought forward 2022 declaring ‘Nil’ income after setting off brought forward business losses amounting to ₹50,13,050/- and unabsorbed business losses amounting to and unabsorbed depreciation of ₹5,46,701/ 5,46,701/-.

2.1 The return was selected for scrutiny and statut The return was selected for scrutiny and statut The return was selected for scrutiny and statutory notices issued under the Income issued under the Income-tax Act, 1961 (hereinafter referred to as tax Act, 1961 (hereinafter referred to as “the Act”) were only partly complied with. Upon examination of the “the Act”) were only partly complied with. Upon examination of the “the Act”) were only partly complied with. Upon examination of the material available on record, the learned Assessing Officer (“the material available on record, the learned Assessing Officer (“the material available on record, the learned Assessing Officer (“the AO”) proceeded to make various additions and AO”) proceeded to make various additions and disallowances on disallowances on account of non-compliance with TDS provisions, inadmissible compliance with TDS provisions, inadmissible compliance with TDS provisions, inadmissible expenditure, unexplained liabilities and discrepancies in turnover. expenditure, unexplained liabilities and discrepancies in turnover. expenditure, unexplained liabilities and discrepancies in turnover.

2.2 Insofar as disallowance under Section 40(a)(ia) of the Act is Insofar as disallowance under Section 40(a)(ia) of the Act is Insofar as disallowance under Section 40(a)(ia) of the Act is concerned, the AO observed that the assessee concerned, the AO observed that the assessee had failed to deduct had failed to deduct tax at source on substantial payments under the heads of rent, tax at source on substantial payments under the heads of rent, tax at source on substantial payments under the heads of rent, interest and professional fees. Despite issuance of show cause interest and professional fees. Despite issuance of show cause interest and professional fees. Despite issuance of show cause notices, no explanation or supporting evidence was furnished. notices, no explanation or supporting evidence was furnished. notices, no explanation or supporting evidence was furnished.

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Consequently, invoking Section 40(a)(ia), the A Consequently, invoking Section 40(a)(ia), the AO disallowed 30% of O disallowed 30% of such expenditures, specifically: (i) ₹18,01,179/- being 30% of rent such expenditures, specifically: (i) being 30% of rent expenditure of ₹60,03,929/ 60,03,929/-; (ii) ₹15,34,759/- being 30% of interest being 30% of interest expenditure of ₹50,49,194/ 50,49,194/-; and (iii) ₹1,24,924/- - being 30% of professional fees of ₹4,16,412/ 4,16,412/-.

Further, the AO disallowed a sum of ₹36,97,483/ 2.3 Further, the AO disallowed a sum of 36,97,483/- debited under the head “interest and penalty” holding the same to be penal under the head “interest and penalty” holding the same to be penal under the head “interest and penalty” holding the same to be penal in nature and not allowable under Section 37 of the Act, in nature and not allowable under Section 37 of the Act, in nature and not allowable under Section 37 of the Act, particularly in the absence of any supporting evidence or particularly in the absence of any supporting evidence or particularly in the absence of any supporting evidence or segregation of allowable and non allowable and non-allowable components. allowable components.

2.4 On the issue of liabilities, the AO noted that amount of Rs. On the issue of liabilities, the AO noted that amount of Rs. On the issue of liabilities, the AO noted that amount of Rs. 63,92,744/- reflected in the books, particularly in respect of reflected in the books, particularly in respect of reflected in the books, particularly in respect of employee settlement liabilities and outstanding balances, remained employee settlement liabilities and outstanding balances, remained employee settlement liabilities and outstanding balances, remained unexplained due to unexplained due to non-furnishing of requisite details by the furnishing of requisite details by the assessee. Accordingly, such sums were treated as unexplained assessee. Accordingly, such sums were treated as unexplained assessee. Accordingly, such sums were treated as unexplained credits under Section 68 of the Act and brought to tax under credits under Section 68 of the Act and brought to tax under credits under Section 68 of the Act and brought to tax under Section 115BBE.

2.5 Additionally, on verification of GSTR Additionally, on verification of GSTR-1 filed by the parties and 1 filed by the parties and Sales turnover shown in the Return of Income filed by the assessee, turnover shown in the Return of Income filed by the assessee, turnover shown in the Return of Income filed by the assessee, the ld AO noticed difference in sales turnover in respect of six the ld AO noticed difference in sales turnover in respect of six the ld AO noticed difference in sales turnover in respect of six parties aggregating to Rs. 32,16,839/-. In the absence of parties aggregating to Rs In the absence of reconciliation by the assessee, the AO treated the differential reconciliation by the assessee, the AO treated the differential reconciliation by the assessee, the AO treated the differential of Rs. 32,16,839/- as suppressed sales and added the amount of Rs. 32,16,839/ as suppressed sales and added the

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same to the total income by applying the gross profit ratio disclosed same to the total income by applying the gross profit ratio disclosed same to the total income by applying the gross profit ratio disclosed by the assessee

2.6 The AO also examined confirmations obtained under Section The AO also examined confirmations obtained under Section The AO also examined confirmations obtained under Section 133(6) of the Act from various creditors. While most discrepancies 133(6) of the Act from various creditors. While most di 133(6) of the Act from various creditors. While most di stood reconciled, but he noticed (i) ledger balance difference of Rs. stood reconciled, but he noticed (i) ledger balance difference of Rs. stood reconciled, but he noticed (i) ledger balance difference of Rs. 7,98,613/- in the books of assessee and M/s Tvastr Engineering in the books of assessee and M/s Tvastr Engineering in the books of assessee and M/s Tvastr Engineering Consultants Pvt Ltd, which was treated as income of the assessee Consultants Pvt Ltd, which was treated as income of the assessee Consultants Pvt Ltd, which was treated as income of the assessee and taxed under section 68 of Act (ii) differ and taxed under section 68 of Act (ii) difference in ledger balance of ence in ledger balance of Rs. 3,62,797/- in books of assessee and books of Magma in books of assessee and books of Magma in books of assessee and books of Magma Infrastructure Pvt Ltd, was treated as income of the assessee and Infrastructure Pvt Ltd, was treated as income of the assessee and Infrastructure Pvt Ltd, was treated as income of the assessee and taxed under section 68 of Act taxed under section 68 of Act (iii) As the party Genesys (iii) As the party Genesys International Corp. Ltd. considered the amount of Rs. 30,87,932/- International Corp. Ltd. considered the amount of Rs International Corp. Ltd. considered the amount of Rs to be received from the assessee as bed debt written off of in its to be received from the assessee as bed debt written off of in its to be received from the assessee as bed debt written off of in its books of account, the ld AO treated the corresponding amount as books of account, the ld AO treated the corresponding amount as books of account, the ld AO treated the corresponding amount as waiver of liability and added to income of assessee. waiver of liability and added to income of assessee.

2.7 In this manner, the Assessing Officer assessed In this manner, the Assessing Officer assessed In this manner, the Assessing Officer assessed the total income at Rs.2,10,17,217/ income at Rs.2,10,17,217/- in his order u/sec. 143(3) of the Act. in his order u/sec. 143(3) of the Act.

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and had not discharged the burden cast under Section 68 of the Act and had not discharged the burden cast under Secti and had not discharged the burden cast under Secti in respect of liabilities and credits. The appellate authority further in respect of liabilities and credits. The appellate authority further in respect of liabilities and credits. The appellate authority further held that partial or selective production of documents cannot held that partial or selective production of documents cannot held that partial or selective production of documents cannot substitute for a comprehensive and verifiable evidentiary record as substitute for a comprehensive and verifiable evidentiary record as substitute for a comprehensive and verifiable evidentiary record as required under law. The relevant findi required under law. The relevant findings of the Ld. CIT(A) is ngs of the Ld. CIT(A) is reproduced as below: reproduced as below:

“Issue 1: Disallowance u/s 40(a) (ia) “Issue 1: Disallowance u/s 40(a) (ia) - Rent / Business Centre Service Rent / Business Centre Service Charges (Rs. 34,60,862) Charges (Rs. 34,60,862) The brief facts of the issue are that the appellant had debited substantial The brief facts of the issue are that the appellant had debited substantial The brief facts of the issue are that the appellant had debited substantial expenditure under the heads "Rent" and expenditure under the heads "Rent" and "Business Centre Service Charges" "Business Centre Service Charges" during the year. The Assessing Officer, on examination of the books of during the year. The Assessing Officer, on examination of the books of during the year. The Assessing Officer, on examination of the books of account, noted that although the appellant had claimed to have deducted tax account, noted that although the appellant had claimed to have deducted tax account, noted that although the appellant had claimed to have deducted tax at source on these payments, a significant portion of the payments had eit at source on these payments, a significant portion of the payments had eit at source on these payments, a significant portion of the payments had either not been subjected to TDS at all or were subjected to TDS under an incorrect not been subjected to TDS at all or were subjected to TDS under an incorrect not been subjected to TDS at all or were subjected to TDS under an incorrect section. The total disallowance computed under section 40(a)(ia) amounted to section. The total disallowance computed under section 40(a)(ia) amounted to section. The total disallowance computed under section 40(a)(ia) amounted to Rs. 34,60,862/-. . During assessment proceedings, it was noticed that the appellant's TDS During assessment proceedings, it was noticed that the appellant's TDS During assessment proceedings, it was noticed that the appellant's TDS compliance was inconsistent. For identical landlords and service providers, was inconsistent. For identical landlords and service providers, was inconsistent. For identical landlords and service providers, TDS was deducted under different sections in different months. The AO TDS was deducted under different sections in different months. The AO TDS was deducted under different sections in different months. The AO further noticed that the appellant had not produced complete rent agreements further noticed that the appellant had not produced complete rent agreements further noticed that the appellant had not produced complete rent agreements or service-provider agreements to substanti provider agreements to substantiate the nature of the payments. ate the nature of the payments. The AO also found that certain payments described as "Business Centre The AO also found that certain payments described as "Business Centre The AO also found that certain payments described as "Business Centre Service Charges were, in substance, rent for premises and therefore liable for Service Charges were, in substance, rent for premises and therefore liable for Service Charges were, in substance, rent for premises and therefore liable for TDS under section 1941. The appellant's claim that certain payments were TDS under section 1941. The appellant's claim that certain payments were TDS under section 1941. The appellant's claim that certain payments were reimbursements under a joint venture arrangement was found to be imbursements under a joint venture arrangement was found to be imbursements under a joint venture arrangement was found to be supported only in part; the majority of such payments lacked documentary supported only in part; the majority of such payments lacked documentary supported only in part; the majority of such payments lacked documentary corroboration. In view of these deficiencies, the AO disallowed the portion of corroboration. In view of these deficiencies, the AO disallowed the portion of corroboration. In view of these deficiencies, the AO disallowed the portion of the expenditure on which TDS was not corr the expenditure on which TDS was not correctly deducted. ectly deducted. During appellate proceedings, the appellant contended that complete TDS had During appellate proceedings, the appellant contended that complete TDS had During appellate proceedings, the appellant contended that complete TDS had been deducted on all major payments and that certain classification mistakes been deducted on all major payments and that certain classification mistakes been deducted on all major payments and that certain classification mistakes had occurred inadvertently. It was submitted that various ledgers, TDS had occurred inadvertently. It was submitted that various ledgers, TDS had occurred inadvertently. It was submitted that various ledgers, TDS certificates, TDS returns, and challans were filed as evidence. The appellant S returns, and challans were filed as evidence. The appellant S returns, and challans were filed as evidence. The appellant further argued that some payments were below the threshold for TDS further argued that some payments were below the threshold for TDS further argued that some payments were below the threshold for TDS deduction and that certain expenses represented reimbursements within the deduction and that certain expenses represented reimbursements within the deduction and that certain expenses represented reimbursements within the joint venture arrangement, which, according to the ap joint venture arrangement, which, according to the appellant, were not liable pellant, were not liable for TDS. The appellant also contended that deduction of TDS under an for TDS. The appellant also contended that deduction of TDS under an for TDS. The appellant also contended that deduction of TDS under an

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incorrect section should not result in disallowance when tax has ultimately incorrect section should not result in disallowance when tax has ultimately incorrect section should not result in disallowance when tax has ultimately reached the government. reached the government. However, these submissions cannot be accepted for several However, these submissions cannot be accepted for several However, these submissions cannot be accepted for several reasons. First, under the provisions of the Income Tax Act, the statutory obligation to deduct under the provisions of the Income Tax Act, the statutory obligation to deduct under the provisions of the Income Tax Act, the statutory obligation to deduct TDS correctly and under the appropriate provision rests entirely upon the TDS correctly and under the appropriate provision rests entirely upon the TDS correctly and under the appropriate provision rests entirely upon the payer. Deduction of TDS under an incorrect section does not cure non payer. Deduction of TDS under an incorrect section does not cure non payer. Deduction of TDS under an incorrect section does not cure non- compliance with se compliance with section 1941. The law requires "correct deduction", not "some ction 1941. The law requires "correct deduction", not "some deduction". Second, the appellant's own TDS ledgers show contradictory deduction". Second, the appellant's own TDS ledgers show contradictory deduction". Second, the appellant's own TDS ledgers show contradictory treatment of the same parties, reflecting lack of clarity and consistency in TDS treatment of the same parties, reflecting lack of clarity and consistency in TDS treatment of the same parties, reflecting lack of clarity and consistency in TDS compliance. Third, the appellant has not pro compliance. Third, the appellant has not produced complete rent or service duced complete rent or service agreements to substantiate the argument that certain payments were for agreements to substantiate the argument that certain payments were for agreements to substantiate the argument that certain payments were for services rather than rent. Mere nomenclature in the books services rather than rent. Mere nomenclature in the books services rather than rent. Mere nomenclature in the books-such as "business centre charge-cannot determine the true nature of the payment. Fourth, cannot determine the true nature of the payment. Fourth, cannot determine the true nature of the payment. Fourth, although a few JV h a few JV-related invoices have been produced, these cover only a related invoices have been produced, these cover only a imited part of the disputed amount and do not explain the bulk of imited part of the disputed amount and do not explain the bulk of imited part of the disputed amount and do not explain the bulk of expenditures where no TDS was deducted. Fifth, the appellant has failed to expenditures where no TDS was deducted. Fifth, the appellant has failed to expenditures where no TDS was deducted. Fifth, the appellant has failed to furnish a comprehensive, party furnish a comprehensive, party-wise and month-wise TDS reconciliation se TDS reconciliation demonstrating full compliance. Partial and selective documents cannot demonstrating full compliance. Partial and selective documents cannot demonstrating full compliance. Partial and selective documents cannot discharge the legal obligation under section 40(a)(ia). discharge the legal obligation under section 40(a)(ia). In light of the above analysis, and considering the statutory mandate of TDS In light of the above analysis, and considering the statutory mandate of TDS In light of the above analysis, and considering the statutory mandate of TDS under Chapter XVII under Chapter XVII-B, coupled with the appellant's failure to furnish ith the appellant's failure to furnish complete. coherent and contemporaneous evidence, the explanation offered is complete. coherent and contemporaneous evidence, the explanation offered is complete. coherent and contemporaneous evidence, the explanation offered is not acceptable. The appellant has not rebutted the specific findings of the not acceptable. The appellant has not rebutted the specific findings of the not acceptable. The appellant has not rebutted the specific findings of the Assessing Officer, nor has it demonstrated that the expenditure w Assessing Officer, nor has it demonstrated that the expenditure w Assessing Officer, nor has it demonstrated that the expenditure was fully compliant with TDS provisions. Accordingly, the disallowance made under compliant with TDS provisions. Accordingly, the disallowance made under compliant with TDS provisions. Accordingly, the disallowance made under section 40(a)(ia) is justified. section 40(a)(ia) is justified. Accordingly, based on the facts of the case and the provisions of section Accordingly, based on the facts of the case and the provisions of section Accordingly, based on the facts of the case and the provisions of section 40(a)(ia), the disallowance made by the Assessing Officer is found to 40(a)(ia), the disallowance made by the Assessing Officer is found to 40(a)(ia), the disallowance made by the Assessing Officer is found to be proper and is upheld. proper and is upheld. Issue 2: Disallowance of Expenses under the head "Interest and Issue 2: Disallowance of Expenses under the head "Interest and Issue 2: Disallowance of Expenses under the head "Interest and Penalty" - Rs.36,97,483/ Rs.36,97,483/- The brief facts of the issue are that the appellant debited a consolidated sum The brief facts of the issue are that the appellant debited a consolidated sum The brief facts of the issue are that the appellant debited a consolidated sum of Rs.36,97,483/ of Rs.36,97,483/- under the composite head "Interest and Penal under the composite head "Interest and Penalty". The Assessing Officer observed that the appellant had neither segregated the Assessing Officer observed that the appellant had neither segregated the Assessing Officer observed that the appellant had neither segregated the amounts into compensatory and penal components nor furnished any amounts into compensatory and penal components nor furnished any amounts into compensatory and penal components nor furnished any documentary evidence to establish that the expenses were incurred wholly documentary evidence to establish that the expenses were incurred wholly documentary evidence to establish that the expenses were incurred wholly and exclusively for business purpose and exclusively for business purposes. The AO held that penal charges, fines s. The AO held that penal charges, fines and penalties for violation of statutory provisions are not allowable under and penalties for violation of statutory provisions are not allowable under and penalties for violation of statutory provisions are not allowable under section 37(1) of the Act, and since the appellant failed to provide item section 37(1) of the Act, and since the appellant failed to provide item section 37(1) of the Act, and since the appellant failed to provide item-wise justification, the entire amount was disallowed. justification, the entire amount was disallowed.

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During assessment proceedings, it was noticed that the appellant's ledger sment proceedings, it was noticed that the appellant's ledger sment proceedings, it was noticed that the appellant's ledger grouped interest, late fees, penalties, compensatory charges and JV grouped interest, late fees, penalties, compensatory charges and JV grouped interest, late fees, penalties, compensatory charges and JV-related retentions into one single head without disclosing the nature or basis of each retentions into one single head without disclosing the nature or basis of each retentions into one single head without disclosing the nature or basis of each entry. No contract copies, penalty noti entry. No contract copies, penalty notices, sanction letters, computation ces, sanction letters, computation sheets, or bank proofs were produced to substantiate the claim that the sheets, or bank proofs were produced to substantiate the claim that the sheets, or bank proofs were produced to substantiate the claim that the penalties were compensatory rather than punitive. The AO found that the penalties were compensatory rather than punitive. The AO found that the penalties were compensatory rather than punitive. The AO found that the appellant claimed certain levies as "contractual penalties", but failed to appellant claimed certain levies as "contractual penalties", but failed to appellant claimed certain levies as "contractual penalties", but failed to produce the contract clauses imposing such charges. Similarly, the AO oduce the contract clauses imposing such charges. Similarly, the AO oduce the contract clauses imposing such charges. Similarly, the AO observed that TDS interest, GST late fees and statutory dues were observed that TDS interest, GST late fees and statutory dues were observed that TDS interest, GST late fees and statutory dues were intermingled with commercial penalties, and in the absence of a clear intermingled with commercial penalties, and in the absence of a clear intermingled with commercial penalties, and in the absence of a clear segregation and supporting documents, the entire exp segregation and supporting documents, the entire exp segregation and supporting documents, the entire expenditure remained unverified. During appellate proceedings, the appellant contended that only a minor part During appellate proceedings, the appellant contended that only a minor part During appellate proceedings, the appellant contended that only a minor part of the expenditure was penal and that the majority represented allowable of the expenditure was penal and that the majority represented allowable of the expenditure was penal and that the majority represented allowable compensatory charges or statutory late fees incidental to business operation compensatory charges or statutory late fees incidental to business operation compensatory charges or statutory late fees incidental to business operations. It was submitted that liquidity crunch forced delayed compliance and that It was submitted that liquidity crunch forced delayed compliance and that It was submitted that liquidity crunch forced delayed compliance and that certain penalties were imposed by the joint venture lead as per business certain penalties were imposed by the joint venture lead as per business certain penalties were imposed by the joint venture lead as per business agreements. The appellant relied on selective challans, a JV communication agreements. The appellant relied on selective challans, a JV communication agreements. The appellant relied on selective challans, a JV communication letter, and a few settlement pa letter, and a few settlement papers to contend that the disallowance should pers to contend that the disallowance should be deleted. However, upon examination of the material on record, it becomes evident that However, upon examination of the material on record, it becomes evident that However, upon examination of the material on record, it becomes evident that the appellant's rebuttal lacks item the appellant's rebuttal lacks item-wise documentary substantiation. While a wise documentary substantiation. While a few entries such as statutory late fees appea few entries such as statutory late fees appear compensatory, the appellant r compensatory, the appellant has has not not provided provided any any contract contract clauses, clauses, third third-party party confirmations, confirmations, contemporaneous notices, debit notes, or bank proof for the majority of items. contemporaneous notices, debit notes, or bank proof for the majority of items. contemporaneous notices, debit notes, or bank proof for the majority of items. A general assertion that penalties were compensatory cannot replace A general assertion that penalties were compensatory cannot replace A general assertion that penalties were compensatory cannot replace evidence. Section 37(1) clearly disallows any expenditure which is penal in tion 37(1) clearly disallows any expenditure which is penal in tion 37(1) clearly disallows any expenditure which is penal in nature or incurred for infraction of law. Without specific evidence establishing nature or incurred for infraction of law. Without specific evidence establishing nature or incurred for infraction of law. Without specific evidence establishing commercial necessity or compensatory nature, no deduction can be allowed. commercial necessity or compensatory nature, no deduction can be allowed. commercial necessity or compensatory nature, no deduction can be allowed. The JV communication produced relates The JV communication produced relates only to a limited amount and cannot only to a limited amount and cannot justify the entire head. The appellant has therefore failed to demonstrate the justify the entire head. The appellant has therefore failed to demonstrate the justify the entire head. The appellant has therefore failed to demonstrate the allowability of the bulk of the claimed amount allowability of the bulk of the claimed amount Accordingly, on the basis of facts and the provisions of section 37(1), this Accordingly, on the basis of facts and the provisions of section 37(1), this Accordingly, on the basis of facts and the provisions of section 37(1), this ground of appeal ground of appeal is dismissed. Issue 3: Addition under Section 68 Employee Benefit Liabilities Issue 3: Addition under Section 68 Employee Benefit Liabilities Issue 3: Addition under Section 68 Employee Benefit Liabilities Rs.63,92,744/- The brief facts of the issue are that the appellant claimed unpaid liabilities The brief facts of the issue are that the appellant claimed unpaid liabilities The brief facts of the issue are that the appellant claimed unpaid liabilities towards employees amounting to Rs. 63,92,744/ towards employees amounting to Rs. 63,92,744/-. The Assessing Officer . The Assessing Officer required required the the a appellant ppellant to to furnish furnish complete complete employee-wise employee details, confirmation letters, settlement documents, and bank proof of payments to confirmation letters, settlement documents, and bank proof of payments to confirmation letters, settlement documents, and bank proof of payments to establish the genuineness of the liability. establish the genuineness of the liability.

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During assessment proceedings, it was noticed that the appellant produced During assessment proceedings, it was noticed that the appellant produced During assessment proceedings, it was noticed that the appellant produced only sample full- -and-final settlement letters and selected ledgers. No complete final settlement letters and selected ledgers. No complete employee-wise confirmations, signed acknowledgements, resignation records, wise confirmations, signed acknowledgements, resignation records, wise confirmations, signed acknowledgements, resignation records, computation sheets, or comprehensive evidence of payments were provided. computation sheets, or comprehensive evidence of payments were provided. computation sheets, or comprehensive evidence of payments were provided. Several liabilities had remained stagnan Several liabilities had remained stagnant for long durations without t for long durations without movement, and when 133(6) notices were issued, responses were either movement, and when 133(6) notices were issued, responses were either movement, and when 133(6) notices were issued, responses were either incomplete or inconsistent. In absence of corroborative evidence proving incomplete or inconsistent. In absence of corroborative evidence proving incomplete or inconsistent. In absence of corroborative evidence proving identity, nature and genuineness of the liabilities, the AO treated the amount identity, nature and genuineness of the liabilities, the AO treated the amount identity, nature and genuineness of the liabilities, the AO treated the amount as unexplained cash credit under section 68. During appellate proceedings, xplained cash credit under section 68. During appellate proceedings, xplained cash credit under section 68. During appellate proceedings, the appellant contended that the liabilities were genuine dues arising on the appellant contended that the liabilities were genuine dues arising on the appellant contended that the liabilities were genuine dues arising on employee resignations and that delayed payments were due to cash flow employee resignations and that delayed payments were due to cash flow employee resignations and that delayed payments were due to cash flow challenges. It submitted that sample settle challenges. It submitted that sample settlement letters should suffice to ment letters should suffice to demonstrate genuineness of the entire liability demonstrate genuineness of the entire liability However, after a detailed examination, the appellant's rebuttal fails to meet However, after a detailed examination, the appellant's rebuttal fails to meet However, after a detailed examination, the appellant's rebuttal fails to meet the statutory standard. Section 68 mandates that for every credit in the the statutory standard. Section 68 mandates that for every credit in the the statutory standard. Section 68 mandates that for every credit in the books, the assessee must p books, the assessee must prove identity of the claimant, the nature of the rove identity of the claimant, the nature of the liability, and its genuineness. Producing samples for a few employees does liability, and its genuineness. Producing samples for a few employees does liability, and its genuineness. Producing samples for a few employees does not establish the genuineness of the entire liability. The appellant has not not establish the genuineness of the entire liability. The appellant has not not establish the genuineness of the entire liability. The appellant has not produced any employee produced any employee-wise confirmation letters, has no wise confirmation letters, has not produced full settlement records, and has not provided bank trail evidence for the entire settlement records, and has not provided bank trail evidence for the entire settlement records, and has not provided bank trail evidence for the entire balance. Long-standing liabilities with no movement naturally invite higher standing liabilities with no movement naturally invite higher standing liabilities with no movement naturally invite higher scrutiny, yet the appellant has not supplied even basic confirmations. scrutiny, yet the appellant has not supplied even basic confirmations. scrutiny, yet the appellant has not supplied even basic confirmations. Business hardship Business hardship cannot substitute for documentary proof. The AO's cannot substitute for documentary proof. The AO's approach, based on absence of confirmations and unexplained balances, is approach, based on absence of confirmations and unexplained balances, is approach, based on absence of confirmations and unexplained balances, is correct. Accordingly, in view of the facts and statutory requirements, this ground of Accordingly, in view of the facts and statutory requirements, this ground of Accordingly, in view of the facts and statutory requirements, this ground of appeal is dismissed. appeal is dismissed. Issue 4: Undisclosed Sale Issue 4: Undisclosed Sales based on GST Mismatch - - Rs. 32,16,839/- The brief facts of the issue are that the Assessing Officer compared the The brief facts of the issue are that the Assessing Officer compared the The brief facts of the issue are that the Assessing Officer compared the outward supplies declared in GSTR outward supplies declared in GSTR-1 with the turnover reflected in the books 1 with the turnover reflected in the books of account and found a mismatch of Rs. 32,16,839/ of account and found a mismatch of Rs. 32,16,839/-. The differen . The difference was treated as unrecorded and undisclosed sales. treated as unrecorded and undisclosed sales. During assessment proceedings, it was noticed that despite several notices, During assessment proceedings, it was noticed that despite several notices, During assessment proceedings, it was noticed that despite several notices, the appellant failed to furnish a complete invoice the appellant failed to furnish a complete invoice-wise reconciliation. Certain wise reconciliation. Certain invoices appeared in GSTR invoices appeared in GSTR-1 but not in the books, certain book invoices did , certain book invoices did not match the figures in GST returns; and third not match the figures in GST returns; and third-party verification conducted party verification conducted by AO through 133(6) showed discrepancies. The appellant neither produced by AO through 133(6) showed discrepancies. The appellant neither produced by AO through 133(6) showed discrepancies. The appellant neither produced confirmations from customers nor reconciled the mismatches. confirmations from customers nor reconciled the mismatches. confirmations from customers nor reconciled the mismatches. During appellate During appellate proceedings, the appellant contended that differences arose proceedings, the appellant contended that differences arose due to timing issues, JV billing, prior due to timing issues, JV billing, prior-period invoices and clerical mistakes. period invoices and clerical mistakes.

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However, after verifying the contentions, it is noticed that the reconciliation However, after verifying the contentions, it is noticed that the reconciliation However, after verifying the contentions, it is noticed that the reconciliation remains partial and incomplete. GST r remains partial and incomplete. GST returns are statutory documents and eturns are statutory documents and must be rebutted with precise, invoice must be rebutted with precise, invoice-level evidence. The appellant has only level evidence. The appellant has only reconciled a handful of items and has not linked all mismatched entries with reconciled a handful of items and has not linked all mismatched entries with reconciled a handful of items and has not linked all mismatched entries with dates, invoice numbers or customer confirmations. Explanations suc dates, invoice numbers or customer confirmations. Explanations suc dates, invoice numbers or customer confirmations. Explanations such as "timing difference" must be supported by contemporaneous ledger entries, "timing difference" must be supported by contemporaneous ledger entries, "timing difference" must be supported by contemporaneous ledger entries, which were not provided. The JV argument also lacks full supporting which were not provided. The JV argument also lacks full supporting which were not provided. The JV argument also lacks full supporting documentation. A mismatch in statutory GST disclosures and books of documentation. A mismatch in statutory GST disclosures and books of documentation. A mismatch in statutory GST disclosures and books of account creates a serious presumption of u account creates a serious presumption of unrecorded turnover unless fully nrecorded turnover unless fully reconciled by the taxpayer. The appellant has failed to do so reconciled by the taxpayer. The appellant has failed to do so reconciled by the taxpayer. The appellant has failed to do so Accordingly, based on the facts and the statutory weight of GST records, this Accordingly, based on the facts and the statutory weight of GST records, this Accordingly, based on the facts and the statutory weight of GST records, this ground of appeal is dismissed. ground of appeal is dismissed. Issue 5: Additions under Section 68 Issue 5: Additions under Section 68-Rs. 7,98,613/- an and Rs. 34,50,729/- The brief facts of the issue are that the appellant recorded credits of Rs. The brief facts of the issue are that the appellant recorded credits of Rs. The brief facts of the issue are that the appellant recorded credits of Rs. 7,98,613/- and Rs. 34,50,729/ and Rs. 34,50,729/- in its books. The Assessing Officer issued in its books. The Assessing Officer issued notices to creditors but either received no replies or received replies notices to creditors but either received no replies or received replies notices to creditors but either received no replies or received replies inconsistent with the appellant's books. h the appellant's books. During assessment proceedings, it was noticed that the appellant did not During assessment proceedings, it was noticed that the appellant did not During assessment proceedings, it was noticed that the appellant did not produce confirmations, PANs, bank statements, ITR evidence or any produce confirmations, PANs, bank statements, ITR evidence or any produce confirmations, PANs, bank statements, ITR evidence or any documentary support establishing identity, creditworthiness or genuineness. documentary support establishing identity, creditworthiness or genuineness. documentary support establishing identity, creditworthiness or genuineness. Only self-prepared ledger entries were filed, which the AO rightly held to be prepared ledger entries were filed, which the AO rightly held to be ed ledger entries were filed, which the AO rightly held to be insufficient. During appellate proceedings, the appellant contended that these were During appellate proceedings, the appellant contended that these were During appellate proceedings, the appellant contended that these were normal business credits and ledger entries should be relied upon. normal business credits and ledger entries should be relied upon. normal business credits and ledger entries should be relied upon. However, after evaluating the material, the However, after evaluating the material, the appellant has not produced a appellant has not produced a single independent document to discharge the burden placed by section 68. single independent document to discharge the burden placed by section 68. single independent document to discharge the burden placed by section 68. There is no bank trail, no creditor confirmation, no explanation of nature or There is no bank trail, no creditor confirmation, no explanation of nature or There is no bank trail, no creditor confirmation, no explanation of nature or purpose of credit, and no financial capacity of the creditor has been purpose of credit, and no financial capacity of the creditor has been purpose of credit, and no financial capacity of the creditor has been established. In absence of even basic documentary proof, the AO's action is lished. In absence of even basic documentary proof, the AO's action is lished. In absence of even basic documentary proof, the AO's action is fully justified and cannot be faulted. fully justified and cannot be faulted. Accordingly, based on facts and the provisions of section 68, this ground of Accordingly, based on facts and the provisions of section 68, this ground of Accordingly, based on facts and the provisions of section 68, this ground of appeal is dismissed.” appeal is dismissed.” 4. Before us, the learned counsel for the asses Before us, the learned counsel for the assessee filed a paper see filed a paper book and submitted that the requisite documentary evidences, book and submitted that the requisite documentary evidences, book and submitted that the requisite documentary evidences, including TDS certificates, agreements, financial statements, GST including TDS certificates, agreements, financial statements, GST including TDS certificates, agreements, financial statements, GST

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reconciliations, and confirmations, were available and have now reconciliations, and confirmations, were available and have now reconciliations, and confirmations, were available and have now been placed in the paper book, but the same wer been placed in the paper book, but the same were either not filed or e either not filed or not properly appreciated by the lower authorities. It was contended not properly appreciated by the lower authorities. It was contended not properly appreciated by the lower authorities. It was contended that the additions were sustained without due consideration of that the additions were sustained without due consideration of that the additions were sustained without due consideration of these materials.

5.1 As far as disallowance of rent/business Centre Services As far as disallowance of rent/business Centre Services As far as disallowance of rent/business Centre Services Charges amounting to Rs.34,60,862/ Charges amounting to Rs.34,60,862/- u/s 40(a)(ia) of the Act is u/s 40(a)(ia) of the Act is concerned the Ld. CIT(A) has sustained the additions observing concerned the Ld. CIT(A) has sustained the additions observing concerned the Ld. CIT(A) has sustained the additions observing that: (i) firstly, the assessee had not produced complete rent or that: (i) firstly, the assessee had not produced comp that: (i) firstly, the assessee had not produced comp services agreements; Secondly,(ii) Only few joint ventures related services agreements; Secondly,(ii) Only few joint ventures related services agreements; Secondly,(ii) Only few joint ventures related invoices had been produced; thirdly, (iii) The assessee failed to invoices had been produced; thirdly, (iii) The assessee failed to invoices had been produced; thirdly, (iii) The assessee failed to furnish a comprehensive party wise and month wise TDS furnish a comprehensive party wise and month wise TDS furnish a comprehensive party wise and month wise TDS reconciliation demonstrating full compliance. Before us the reconciliation demonstrating full compliance. Before us reconciliation demonstrating full compliance. Before us assessee has placed reliance upon TDS certificates and related assessee has placed reliance upon TDS certificates and related assessee has placed reliance upon TDS certificates and related

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documents, inter alia, at paper book pages 586 (Pinewood documents, inter alia, at paper book pages 586 (Pinewood documents, inter alia, at paper book pages 586 (Pinewood Commercial Ltd. – ₹39,60,000/ 39,60,000/-), 598 (Innovation Handicrafts India ), 598 (Innovation Handicrafts India Pvt. Ltd. – ₹13,20,000/ 13,20,000/-), 631 (TDS certificate issued by Ayolee ), 631 (TDS certificate issued by Ayoleeza to Irshad Ahmed – ₹2,25,000/ 2,25,000/-), and the rent agreement placed at ), and the rent agreement placed at page 640. These documents are material to determine whether page 640. These documents are material to determine whether page 640. These documents are material to determine whether there has been due compliance with the statutory obligation of there has been due compliance with the statutory obligation of there has been due compliance with the statutory obligation of deduction of tax at source, and whether the disallowance sustained deduction of tax at source, and whether the disallowance sustaine deduction of tax at source, and whether the disallowance sustaine is legally tenable.

5.2 Regarding the disallowance of expenses under the head Regarding the disallowance of expenses under the head Regarding the disallowance of expenses under the head interest and penalty, amounting to Rs.36,97,483/ interest and penalty, amounting to Rs.36,97,483/- -, the Ld. CIT(A) has noted that the assessee had not provided any contract clauses, has noted that the assessee had not provided any contract clauses, has noted that the assessee had not provided any contract clauses, third-party confirmations, contemporaneous party confirmations, contemporaneous notices, debit notes, or notices, debit notes, or bank proof for the majority of items and general assertion that bank proof for the majority of items and general assertion that bank proof for the majority of items and general assertion that penalties were compensatory cannot replace evidence. Before us the penalties were compensatory cannot replace evidence. penalties were compensatory cannot replace evidence. assessee drawn our attention to supporting materials including assessee drawn our attention to supporting materials including assessee drawn our attention to supporting materials including financial statements (paper book page 73), Joint Venture agreement financial statements (paper book page 73), Joint Venture agreement financial statements (paper book page 73), Joint Venture agreement (page 610), communication from Ayoleeza (page 675), invoice from (page 610), communication from Ayoleeza (page 675), invoice from (page 610), communication from Ayoleeza (page 675), invoice from NHIDCL (page 678), overdraft statement (page 326), bank NHIDCL (page 678), overdraft statement (page 32 NHIDCL (page 678), overdraft statement (page 32 statements relating to vehicle loan interest, and MSME-related statements relating to vehicle loan interest, and MSME statements relating to vehicle loan interest, and MSME documents including return of income of the concerned party (page documents including return of income of the concerned party (page documents including return of income of the concerned party (page 122) and tax audit report (page 200). These documents are relevant 122) and tax audit report (page 200). These documents are relevant 122) and tax audit report (page 200). These documents are relevant to ascertain whether the expenditure is compensatory in nature and to ascertain whether the expenditure is compensator to ascertain whether the expenditure is compensator incurred wholly and exclusively for the purposes of business, or incurred wholly and exclusively for the purposes of business, or incurred wholly and exclusively for the purposes of business, or

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whether it partakes the character of penal expenditure hit by whether it partakes the character of penal expenditure hit by whether it partakes the character of penal expenditure hit by Section 37(1) of the Act. Section 37(1) of the Act.

5.3 Regarding the addition for employee benefit liabilities of Regarding the addition for employee benefit liabilities of Regarding the addition for employee benefit liabilities of Rs.63,92,744/- made u/se made u/sec. 68 of the Act is concerned, the Ld. c. 68 of the Act is concerned, the Ld. CIT(A) noted that the assessee did not produce any employee wise CIT(A) noted that the assessee did not produce any employee wise CIT(A) noted that the assessee did not produce any employee wise confirmation letter, full settlement records bank trail evidence, etc. confirmation letter, full settlement records bank trail evidence, etc. confirmation letter, full settlement records bank trail evidence, etc. Before us, the assessee has referred to financial statements (paper Before us, the assessee has referred to financial statements (paper Before us, the assessee has referred to financial statements (paper book page 73) and employee and employee-wise details placed at page 21. These wise details placed at page 21. These evidences, evidences, evidences, which which which were were were not not not fully fully fully examined examined earlier, examined earlier, earlier, require require require verification to ascertain the genuineness of the liabilities. verification to ascertain the genuineness of the liabilities. verification to ascertain the genuineness of the liabilities.

5.4 Regarding the undisclosed sales based on the GST mismatch Regarding the undisclosed sales based on the GST mismatch Regarding the undisclosed sales based on the GST mismatch of Rs.32,16,839/-, the , the Ld. CIT(A) noted that the reconciliation Ld. CIT(A) noted that the reconciliation submitted by the assessee was partial and incomplete and were not submitted by the assessee was partial and incomplete and were not submitted by the assessee was partial and incomplete and were not supported by the GST return and invoice level evidence. Before us supported by the GST return and invoice level evidence. Before us supported by the GST return and invoice level evidence. Before us the assessee sought to explain through GSTR the assessee sought to explain through GSTR-1 returns (paper book 1 returns (paper book page 845) and reconciliation statements with Form 26AS (page 26). conciliation statements with Form 26AS (page 26). conciliation statements with Form 26AS (page 26). These materials, if duly verified, may have a significant bearing on These materials, if duly verified, may have a significant bearing on These materials, if duly verified, may have a significant bearing on the correctness of the addition. the correctness of the addition.

5.5 Regarding the addition made u/sec. 68 of Rs.7,98,613/ Regarding the addition made u/sec. 68 of Rs.7,98,613/ Regarding the addition made u/sec. 68 of Rs.7,98,613/- and Rs.34,50,729/-, the Ld. CIT(A) noted that , the Ld. CIT(A) noted that the assessee did not the assessee did not produce a single independent documents to discharge the burden produce a single independent documents to discharge the burden produce a single independent documents to discharge the burden placed u/sec. 68. It is submitted that no bank trail, no correctly placed u/sec. 68. It is submitted that no bank trail, no correctly placed u/sec. 68. It is submitted that no bank trail, no correctly confirmation, no explanation of nature of purpose of credit and no confirmation, no explanation of nature of purpose of credit and no confirmation, no explanation of nature of purpose of credit and no

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financial capacity of the creditor wa financial capacity of the creditor was established. With reference to s established. With reference to the above finding of the Ld. CIT(A) the assessee referred. Before us the above finding of the Ld. CIT(A) the assessee referred. Before us the above finding of the Ld. CIT(A) the assessee referred. Before us the assessee has referred to related party disclosures (paper book the assessee has referred to related party disclosures (paper book the assessee has referred to related party disclosures (paper book page 79), financial statements of counterparties (page 1148), ledger page 79), financial statements of counterparties (page 1148), ledger page 79), financial statements of counterparties (page 1148), ledger accounts (page 490), and supporting invoices. These documents are ), and supporting invoices. These documents are ), and supporting invoices. These documents are crucial for discharging the statutory burden cast upon the assessee crucial for discharging the statutory burden cast upon the assessee crucial for discharging the statutory burden cast upon the assessee under Section 68 of the Act. under Section 68 of the Act.

5.6 From the foregoing, it becomes manifest that the evidences From the foregoing, it becomes manifest that the evidences From the foregoing, it becomes manifest that the evidences now relied upon by the assessee are neither peripheral nor now relied upon by the assessee are neither peri now relied upon by the assessee are neither peri ancillary, but go to the very root of the matter and are determinative ancillary, but go to the very root of the matter and are determinative ancillary, but go to the very root of the matter and are determinative of the issues involved. At the same time, it is also evident that such of the issues involved. At the same time, it is also evident that such of the issues involved. At the same time, it is also evident that such evidences were either not produced or not subjected to proper evidences were either not produced or not subjected to proper evidences were either not produced or not subjected to proper verification at the stage of assessment o verification at the stage of assessment or before the learned CIT(A). r before the learned CIT(A). The appellate order, therefore, proceeds on an incomplete The appellate order, therefore, proceeds on an incomplete The appellate order, therefore, proceeds on an incomplete evidentiary foundation. evidentiary foundation.

5.7 In such circumstances, the question that arises is whether we In such circumstances, the question that arises is whether we In such circumstances, the question that arises is whether we should adjudicate the issues finally on the basis of the material now should adjudicate the issues finally on the basis of the material now should adjudicate the issues finally on the basis of the material now placed on record, or whether the matter deserves to be restored for record, or whether the matter deserves to be restored for record, or whether the matter deserves to be restored for proper verification. In our considered view, where the adjudication proper verification. In our considered view, where the adjudication proper verification. In our considered view, where the adjudication of issues hinges upon appreciation of primary facts and of issues hinges upon appreciation of primary facts and of issues hinges upon appreciation of primary facts and examination of documentary evidence, which has not been verified examination of documentary evidence, which has not been verified examination of documentary evidence, which has not been verified by the lower authorities, it would be neither appropriate nor ower authorities, it would be neither appropriate nor ower authorities, it would be neither appropriate nor judicious for us to render conclusive findings in the absence of such judicious for us to render conclusive findings in the absence of such judicious for us to render conclusive findings in the absence of such verification.

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5.8 It is a settled principle of law that no party should be It is a settled principle of law that no party should be It is a settled principle of law that no party should be condemned unheard, and equally, no material evidence which has a condemned unheard, and equally, no material evidence whic condemned unheard, and equally, no material evidence whic bearing on the determination of tax liability ought to be ignored. bearing on the determination of tax liability ought to be ignored. bearing on the determination of tax liability ought to be ignored. The principles of natural justice demand that both the assessee and The principles of natural justice demand that both the assessee and The principles of natural justice demand that both the assessee and the Revenue be afforded a fair opportunity to present and examine the Revenue be afforded a fair opportunity to present and examine the Revenue be afforded a fair opportunity to present and examine the relevant material. The power of remand, in the relevant material. The power of remand, in such circumstances, such circumstances, is not merely procedural but is exercised to advance the cause of is not merely procedural but is exercised to advance the cause of is not merely procedural but is exercised to advance the cause of substantial justice.

5.9 Accordingly, having regard to the entirety of the facts and Accordingly, having regard to the entirety of the facts and Accordingly, having regard to the entirety of the facts and circumstances of the case, and in the interest of justice, we deem it circumstances of the case, and in the interest of justice, we deem it circumstances of the case, and in the interest of justice, we deem it appropriate to set aside the impugned order passed by the learned set aside the impugned order passed by the learned set aside the impugned order passed by the learned CIT(A) and restore the matter to the file of the Assessing Officer. The CIT(A) and restore the matter to the file of the Assessing Officer. The CIT(A) and restore the matter to the file of the Assessing Officer. The Assessing Officer shall examine, in detail, the evidences referred to Assessing Officer shall examine, in detail, the evidences referred to Assessing Officer shall examine, in detail, the evidences referred to hereinabove, including those placed at paper book and any other hereinabove, including those placed at paper book and any other hereinabove, including those placed at paper book and any other material that may be furnished by the assessee, and shall material that may be furnished by the assessee, and shall material that may be furnished by the assessee, and shall adjudicate the issues afresh in accordance with law. adjudicate the issues afresh in accordance with law.

5.10 The Assessing Officer shall afford reasonable and effective The Assessing Officer shall afford reasonable and effective The Assessing Officer shall afford reasonable and effective opportunity of being heard to the assessee and shall pass a opportunity of being heard to the assessee and shall pass a opportunity of being heard to the assessee and shall pass a speaking order dealing with each of the issues in accordance with ing with each of the issues in accordance with ing with each of the issues in accordance with law. The assessee, in turn, is directed to extend full cooperation and law. The assessee, in turn, is directed to extend full cooperation and law. The assessee, in turn, is directed to extend full cooperation and to furnish complete, cogent and contemporaneous evidences in to furnish complete, cogent and contemporaneous evidences in to furnish complete, cogent and contemporaneous evidences in support of its claims. support of its claims.

SOWIL LIMITED, 18 ITA No.275/MUM/2026

Order pronounced in the open Court on ounced in the open Court on 05/05/2026. /05/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (ANIKESH BANERJEE (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER

Mumbai; Dated: 05/05/2026 Saumya, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai