ARABIAN TOURS SERVICE INDIA PVT LTD,ERNAKULAM vs. DEPUTY COMMISSIONER OF INCOME TAX, CHENNAI

Briefly, the facts of the case are that the appellant is a Company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of providing Visa Services and Tour Package and Air Ticket Sales. The Return of Income for the Assessment Year 2017-18 was filed on 31.10.2017 disclosing of loss of Rs.63,65,159/-. Against the said Return of Income, the assessment was completed by DCIT, Corporate Circle-1(1), Chennai(hereinafter called ‘AO’) vide order dated 24.12.2019 passed u/s.143(3) of the Act at a total income of Rs.35,72,000/-. While doing so, the Assessing Officer made addition of Rs.63,289/- u/s.40(a)(ia) of the Income Tax Act for non-deduction of tax at source on the payment of commission and brokerage u/s.194H of Rs.2,10,795/- u/s.40(a)(ia) of the Act. The Assessing Officer also made a disallowance of interest on TDS amount of Rs.2,02,973/- by holding that treating it is part of the tax placing reliance on the decision of Orient General Industries Limited Vs. CIT.

The Assessing Officer disallowed a sum of Rs.4,05,900/- by holding that the appellant had paid penalty to the Dubai Government as the overstaying of passenger who was on Visa Visit to Dubai. The Assessing Officer also made addition of cash deposits in Specified Bank Notes during the demonetization period by holding that the appellant had failed to explain the source of Specified Bank Notes.

Being aggrieved by the above assessment order, the appellant preferred an appeal before ld.CIT(A), who vide impugned order dismissed the appeal after passing reasoned order.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal. The Learned Counsel submits that interest paid on belated remittances of TDS amount is only a compensatory in nature, partake the character of business expenditure placing reliance on the decision of Lachmandas Madhuradas Vs. CIT [2002] 254 ITR 799. He further submits that in respect of absconding fees paid by the assessee to the Dubai Government, it is submitted that the passenger who obtained the Visit Visa through the appellant failed to return upon expiry of Visa Period and overstayed the appellant is required to pay penalty and the same is recoverable from the passengers. He submits that penalty was not levied on the appellant company but on the passengers. As regards, the addition on account of cash deposited in Specified Bank Notes during the demonetization period, he submitted that the cash deposits were made out of collections from the customers of the company and the same were shown as a part of the turnover and also out of the opening cash balance as on 08.11.2016 of Rs.28,12,064/- and therefore, Lower Authorities without appreciating the facts, merely confirmed the addition.

On the other hand, the Learned Sr.DR vehemently opposed the above submissions and submits that the Learned CIT(A) after dealing with the submissions made by the appellant had passed the very reasoned order.

We heard rival submissions and perused the material available on record. We find that the Assessing Officer made the impugned addition without discussing the nature of the interest paid on TDS amount and also nature of penalty paid to Dubai Government. As regards to the addition of cash deposits in Specified Bank Notes in demonetization period, the appellant took plea that out of sum of Rs.35,72,000/-, an amount of Rs.28,12,064/- were deposited out of cash balance as on 08.11.2016. The submissions made by the appellant requires verification of books of accounts and verification of evidence. In these circumstances, we are of the considered opinion that matter requires a remand to the file of Assessing Officer(AO) for de novo assessment in accordance with law after affording an opportunity of being heard to the appellant.

In the result, appeal filed by the assessee partly allowed for statistical purposes. Order pronounced in the open Court on 15th October, 2026.