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Facts
The assessee filed a return of income, which was selected for scrutiny. Despite notices, the assessee did not respond, leading the Assessing Officer (AO) to complete the assessment with additions. The CIT(A) confirmed these additions. The assessee's appeal before the Tribunal faced a delay, attributed to a previous consultant's failure to update the assessee.
Held
The Tribunal condoned the delay in filing the appeal. Considering the circumstances, the Tribunal decided to give the assessee another opportunity and remitted the appeal back to the AO for fresh consideration of additions/disallowances. A cost of Rs. 10,000 was also levied on the assessee.
Key Issues
Whether the disallowances/additions made by the AO and confirmed by CIT(A) are justified, especially when the assessee claims lack of proper communication from their previous consultant and seeks a fresh opportunity for adjudication.
Sections Cited
250, 142(1), 36(1(va)), 80TTA
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & MS. PADMAVATHY.S
आदेश / O R D E R
PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 25.03.2025 for Assessment Year (AY) 2018-19. The assessee raised the following grounds of appeal:
1. The order of the department is contrary to the Law and to the facts and circumstances of the case and is not in line with the principles of natural justice.
Haridoss Gnanaprakasam :- 2 -: 2. The disallowance on account of Audit fees amounting to Rs.75,000/- is not justifiable since the relevant bills are available on record with your appellant (Annexure 1).
PARTICULARS AMOUNT Invoice raised by K Ramanathan Bcom ACA 8,000 dated 09.07.2017 Invoice Number 39 Invoice raised by K Ramanathan Bcom ACA 25,000 dated 30.09.2017 Invoice Number 62 Invoice raised by KA Consultants dated 42,000 07.02.2018 Invoice Number 43 Total 75,000 Therefore your appellant request the honorable ITAT to consider the above disallowance made by AO.
The disallowance on account of Bill Preparation charges amounting to Rs. 2,30,194/- is not justifiable in law. Your appellant has to get these bills prepared which were to be raised against the services rendered by your appellant through the outside professional who has raised various bills, the copies of which are readily available, as a proof for payments made by your appellant (Annexure 2).
4. The disallowance on account of Filing fees amounting to Rs. 6,29,256/-. Your honor this expenditure is not on account of filing fees but they are in the nature of pile foundation work done by a labor contractor but due to typographical error it was mentioned as Filing fees. The relevant bills from the labor contractor are available on record dated 01.11.2017 and 31.03.2018 (Annexure 3).
The disallowance on account of internal audit fees amounting to Rs. 24,000/-. Your honor this expenditure is on account of fees paid to RG Consultancy for filing the monthly EPF and ESI Returns amounting to Rs. 2,000/- per month. The screenshots for the payments made through bank are readily available (Annexure 4).
6. The disallowance on account of LWF Retention Charges amounting to Rs. 3,74,251/-. Your honor as mentioned in the statement of facts your appellant is a service provider who is major Haridoss Gnanaprakasam :- 3 -: business is only with the state and central governments. This amount represents one percent of the bill amount (Taxable Value) when settled by the government departments they will deduct this one percent and settle the balance amount to your appellant. This LWF is in the nature of Labour Welfare Fund which is retained by the government department and never settled in future as well. This amount represents LWF retained by the government department which has to be written off to the P & L account. Bifurcation of which is mentioned in the annexure 5 for your kind consideration.
7. The disallowance on account of housing loan interest amounting to Rs. 2,00,000/-. This is the amount on account of housing loan availed by your appellant against the property which was used for his self occupation. The total interest paid to the lending institution namely GIC Housing Finance Ltd is Rs. 2,55,927/- and the principal payment amounting to Rs. 68,743/- both aggregating to Rs. 3,24,670/-. As per the provisions of the Income Tax Act, 1961 only Rs. 2,00,000/- is allowable against the housing loan interest, therefore Income From self occupied property has resulted in a loss of Rs. 2,00,000/-. Housing Loan interest certificate (Annexure 6) is available on record issued by the GIC Housing Finance Ltd.
The disallowance on account of donation expenses amounting to Rs. 89,926/-, Sir, this is the expenditure in the nature of Ayudha Pooja Expenses but the AO has treated this as donation expenses. Your honor you are aware of the fact that ours is labor intensive unit and we have to incur such expenses on the occasions of festivals to keep motivated the employees and on such occasions throughout the state of Tamilnadu this festival is celebrated in a very grand manner. Therefore we humbly request you to consider this disallowance as an allowable expenditure.
The disallowance on account of late payment towards PF and ESI against the employee contribution amounting to Rs. 1,30,355/- as per section 36(1(va)). The disallowance made is as per the law; therefore your appellant humbly accepts this disallowance.
The disallowance of PF amounting to Rs. 6,72,215/-. On carefully going through the Return of income for AY 18-19 your appellant has done a clerical mistake of entering wrong figure in Contribution to recognized provident fund instead of entering Rs. 7,80,977/- your appellant has entered amount of Rs. 14,53,192/-.
Haridoss Gnanaprakasam :- 4 -: Therefore the difference between Rs. 14,53,192/- and Rs. 7,80,977/- is the resultant disallowance amounting to Rs. 6,72,215/-. Therefore your appellant humbly prays to honorable ITAT to pardon this mistake and allow the appellant the relief requested for. Your appellant is enclosing the relevant challans (Annexure 7) towards the payment of PF for all the 12 months for the FY 17-18.
Disallowance u/s 80TTA amounting to Rs. 272/-. As per the AO's order his contention is that your appellant has not shown this amount as income, therefore this is subjected to disallowance. Sir, we draw your kind attention to the ITR filed on 31.10.2018 where in total interest receipts in P & L account shown as Rs. 24,443/-. The disallowance amount of Rs. 272/- is already included in this amount of Rs. 24,443/-. Therefore the claim of your appellant is legitimate.
The Appellant prays for leave to add, modify, delete or introduce additional Grounds of Appeal
at any time before the Appeal is disposed off.
13. Based on these and such other grounds that may be adduced from time to time, the Appellant pray the Honorable ITAT to consider the petition in the light of principles of justice and delete the additions made by the Learned Assessing Officer.”
2. The assessee is an individual and filed the return of income for A.Y 2018-19 on 31.10.2018 declaring total income of Rs. 24,36,780/-. The case was selected for scrutiny and statutory notices were duly served on the assessee. The A.O issued notices to the assessee u/s. 142(1) of the Act on various dates calling on the assessee to furnish details pertaining to the business activities, loans and advances, ledger of expenses etc. Since, the assessee did not respond to the notices, the A.O completed the assessment after making several additions/disallowances assessing the income at Rs.48,62,229/-. Aggrieved, the assessee filed further appeal before the CIT(A). The CIT(A) confirmed the additions/disallowances for the same reason that the assessee did not file any response or details. The assessee is in appeal before the Tribunal against the order of the CIT(A).
3. There is a delay of 74 days in filing the appeal before the Tribunal and the assessee filed an affidavit for condonation of delay. It is stated in the affidavit that the delay is due to the fact that the consultant engaged by the assessee to take care of the tax matters failed to inform the status of the appellate proceedings. It is further stated that the assessee came to know of completion of appellate proceedings only when the order of CIT(A) was received by him through e-mail. It is also stated that the assessee has engaged a new Consultant and with his support the present appeal is filed before the Tribunal. Accordingly, the assessee prayed for condonation of delay as the reasons for delay is unintentional and bonafide.
Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST.Katiji & Ors., (167 ITR 471) (SC), we condone the delay of 74 days in filing the appeal and admit the appeal for adjudication.
5. We have heard the parties and perused the materials available on record. From the perusal of the order of the lower authorities, we notice that the main revision for the A.O/CIT(A) to make the various additions/disallowances is that the assessee has not submitted details called for and has not also furnished any documentary evidences in support of the claims made. The ld. AR during the course of hearing submitted that the earlier consultant was not guiding the assessee properly and that the assessee was not informed of the status of the assessment as well as appellate Haridoss Gnanaprakasam :- 6 -: proceedings. On the other hand, the Ld. DR argued that the assessee was not cooperating during the proceedings before the lower authorities and that the assessee has not discharged the onus of substantiating the claims made in the return of income. Considering the facts and circumstances unique to the assessee's case and in the interests of natural justice and fair play, we are inclined to given one more opportunity to the assessee. Accordingly, we are remitting the appeal back to the A.O to consider the additions/disallowances afresh by calling for necessary details as may be required to decide the issues on merits in accordance with law.
Further, we also levy a cost of Rs.10,000/- (Ten thousand only) in the appeals since considerable time and efforts have been spent by the Exchequer and for the reason that the assessee being delinquent before the lower authorities. The same shall be paid by the assessee to Tamil Nadu State Legal Services Authority at Hon’ble High Court of Madras within a period of one month from the date of receipt of this order and produce the receipt before the A.O.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 17th day of December, 2025 at Chennai.