ALTEN CALSOFT LABS (INDIA) PRIVATE LIMITED ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU

ITTPA 1863/BANG/2024Status: DisposedITAT Bangalore14 July 2025AY 2020-2112 pages
AI SummaryRemanded

What were the facts?

The assessee, M/s. Alten Calsoft Labs (India) Pvt. Ltd., is in appeal before the ITAT against the final assessment order for AY 2020-21 passed by the Assessing Officer (AO) on 23/07/2024, based on directions from the Dispute Resolution Panel (DRP). The assessee initially declared a total income of Rs. 27,69,31,340/- and later Rs. 41,02,44,370/- after filing a revised return. The case was selected for scrutiny due to reasons including TDS discrepancies, large refund claims, share capital increase, Chapter VI-A deductions, and large other deductions. The AO proposed disallowance of 75% of rent expenses, treating a portion as notional, and also proposed disallowance of deduction claimed under Section 80JJAA. The assessee provided explanations and evidence for share capital increase and Section 80JJAA deduction, which were accepted by the AO. However, regarding rent expenses, the AO disallowed Rs. 4,80,05,569/- as notional expenses under Section 37, and later disallowed Rs. 6,95,65,479/- by allowing only 25% of the rent. The DRP confirmed the additions made by the AO, not giving credence to additional evidence filed by the assessee.

What did the Tribunal hold?

The Tribunal held that the assessee was not granted sufficient time to file all details in response to the show cause notice. The Tribunal perused the additional evidence filed before the DRP and the ITAT, which included details of several vendors other than IBC Knowledge Park, lease agreements with these vendors, sub-lease agreements with sister concerns, rent reconciliation workings, and invoices/debit/credit notes for rental payments. The Tribunal found that these documents, which were not considered by the AO, established that the assessee had paid rents not only to IBC Knowledge Park but also to other vendors and incurred expenses for office fit-outs and maintenance. The Tribunal was satisfied that the assessee had evidence to show that the rental expenses declared in the financial statements were correct and actual. It was also noted that the additional documents could not be produced before the AO due to insufficient time. In the interest of justice, the Tribunal decided to grant one more opportunity to the assessee to appear before the AO with all available documents. The final assessment order of the AO was set aside, and the issue was remitted to the jurisdictional assessing officer to pass an order afresh after hearing the assessee. The stay petition was dismissed as infructuous.

What were the issues?

1. Whether the disallowance of rental expenses to the extent of Rs. 4,80,05,569/- (initially proposed as notional expenses) and subsequently Rs. 6,95,65,479/- (by allowing only 25% of rent) by the AO, and confirmed by the DRP, is justified, turning on the interpretation and application of Section 37 of the Income Tax Act, 1961, and the nature of expenses incurred by the assessee. Assessee's contentions: The AO did not grant sufficient time to file all details in response to the show cause notice. The assessee had entered into lease agreements with multiple vendors besides IBC Knowledge Park and had sub-lease agreements with sister concerns. The 25% estimation by the AO was baseless. The assessee followed the straight-line rent expenditure method recognized in audited financial statements. Additional evidence filed before the DRP and ITAT, including rent reconciliation, sub-lease agreements, invoices, and lease agreements with other vendors, supports the claim that rental expenses were actual and notional. The assessee also filed debit notes raised on group companies. Revenue's contentions: The DRP, after reviewing some details and noting discrepancies in additional evidence, concluded that the AO was prima facie justified and did not give credence to the additional evidence. The DRP confirmed the addition made by the AO.

Which sections of the Income-tax Act were involved?

Section 37,Section 80JJAA,Section 139(1),Section 92CD,Section 143(3),Section 142(1),Section 92CA,Section 68,Section 144C,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE

Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.

For Appellant: Ms. N V Lakshmi, Advocate
For Respondent: Ms. Neera Malhotra, CIT-DR

PER SOUNDARARAJAN K., JUDICIAL MEMBER

This is an appeal filed by the assessee challenging the final assessment order passed by the AO dated 23/07/2024 in respect of the A.Y. 2020-21 based on the directions given by the Ld.DRP. The assessee also raised the following grounds: S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024

2.

The brief facts of the case are that the assessee is a company doin

The order continues below.

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