MAGNAQUEST TECHNOLOGIES LIMITED,HYDERABAD vs. DCIT., CIRCLE-5(1), HYDERABAD

3. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in not allowing the deduction claimed by the appellant u/s 438 of the Act to the extent of Rs.1,40,23,520/- being the old outstanding Service tax payments 3 ITA.Nos.736 & 743/Hyd./2025 made by the appellant during the AY 2018-19 using the internet banking facility by opining that as the Service tax payment challans submitted by the appellant did not contain the stamp and signature of Bank the same cannot accepted as genuine.

4. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in passing the impugned appellate order u/s 250 of the Act dt. 21-02-2025 without giving the adequate opportunity to the appellant to submit the signed and stamped challans and confirmation letter from the bank if in the opinion the CIT(A), NFAC the same is mandatorily to be submitted by the appellant to consider the said challans as genuine.

5. The appellant craves leave to add/alter/modify the grounds of appeal as may be required for proper adjudication of the case.”

4. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee claimed that, during the financial year 2016-2017 relevant to assessment year 2017-2018, the appellant has not paid various liabilities in terms of sec.43B of the Act on or before the due date for 5 ITA.Nos.736 & 743/Hyd./2025 filing the return of income u/sec.139(1) of the Act and consequently, disallowed an amount of Rs.4,87,72,674/- in the statement of total income and reported in ITR Form filed for the assessment year 2017-2018. Further, out of amount disallowed for the assessment year 2017-2018, the appellant has paid an amount of Rs.4,10,61,665/- during the financial year 2017-2018 relevant to the assessment year 2018-2019 and claimed deduction in terms of sec.43B of the Act, in the ITR, in which, the said deduction has been made and accordingly claimed deduction under any other amount allowable as deduction in Schedule-BP. Out of the total amount, the appellant has filed relevant details including details of payment of service tax for Rs.1,40,23,520/- and towards TDS of Rs.1,66,44,340/- and the remaining amount of unpaid liabilities towards professional tax, PF and sales tax, the appellant could not file relevant evidences. However, the Assessing Officer without considering the relevant evidences filed by the assessee, has simply disallowed the amount and added back to the total income of the assessee.

6 ITA.Nos.736 & 743/Hyd./2025 4.1. The learned CIT(A) after considering the relevant submissions of the assessee and also taking note of relevant reasons given by the Assessing Officer for disallowance of any other amount allowable as deduction in Schedule-BP of ITR-6 observed that, although, the appellant has furnished certain challans for payment of service tax, and TDS through Bank of Baroda, but, failed to file relevant confirmation from the Bank of Baroda. Further, the assessee would have taken stamp and signature of the Bank /Banking Officials along with confirmation letter from Bank of Baroda before submission of the assessee, which the assessee has failed to do so and which would confirm that, the details submitted by the assessee are not genuine. Therefore, observed that, since the assessee has failed to file complete details about total disallowance including towards payment of PF, sales tax and professional tax, the details submitted by the assessee towards payment of service tax and TDS cannot be accepted. Thus, rejected the arguments of the assessee and sustained the additions made by the Assessing Officer towards disallowance of any other amount

7 ITA.Nos.736 & 743/Hyd./2025 allowable as deduction in Schedule-BP of ITR-6 for Rs.4,10,61,665/-. The relevant findings of the learned CIT(A) are as under :

“5.1. On going through the submission of the assessee it can be seen that the assessee during the assessment proceedings was provided a number of opportunities for submitting the details regarding the deduction claimed of Rs.4,10,61,665/- as deduction in schedule BP of ITR. However, the assessee failed to comply to the said notice. In view of this fact, the addition of Rs.4,10,61,665/- was made to the total income of the assessee during the assessment proceedings. Further, penalty proceedings u/s.270A of the Act were being initiated and show-cause notice u/s.274 r.w.s. 270A of the Act was issued upon the assessee on 24.04.2021 there by informing the assessee as to why the penalty should not be imposed, for which the assessee failed to respond. In this respect as per the submission of the assessee, it is stated that due to ill health of the Accountant and the accountant of the company was absent for a long period as he was suffering from Covid along with his family members. However, the onus of submitting the information as called for vide the notices is upon the assessee and not on the accountant. Therefore it can be very well presumed that the assessee is just making a story to cover the default caused for non-compliance to the statutory notices issued. 5.2. On further verification of the submission of the assessee it has been stated that the assessee had paid taxes on the amount of Rs.4,10,61,665/- which pertained to financial year 2016-17, and the claim of the assessee of Rs.3,06,67,860/- should be considered and allowed due to details furnished by the 8 ITA.Nos.736 & 743/Hyd./2025 assessee, However, the details submitted by the assessee are presumed to be not genuine in nature as the documents submitted by the assessee are not fully complied and the genuineness of the documents cannot be accepted. Further the assessee has stated that the remaining payment of Rs.1,03,93,805/- (i.e. Rs.4,10,61,665/-minus Rs.3,06,67,860/-) the supporting evidences cannot be given as the same have been misplaced by the old accountant who had not handed over the accounts and has left the organization is not acceptable. As it was the onus of the assessee to submit the requisite documentary evidences in support of its claim for claiming deduction, which the assessee failed to do so during the assessment as well as during the appellate proceedings. Therefore, it can be seen that the assessee-company is only making a story to cover up the inability to comply to the notices issued and failure to submit the requisite documentary evidences along with genuineness of the same.

5.3. Further, the assessee during the appellate proceedings vide its submission has stated that the amount of Rs.4,10,61,665/- pertained to A.Y. 2017-18 which was disallowed u/s.43B(1)(B)(b) of the act on non-payment of said amounts before the filing of return of income for the A.Y 2017-18 and the said amount were paid during the year under consideration and are eligible for deduction. However, on going through the submission of the assessee, it can be seen that the assessee has stated that the deductions are genuine and are allowable as the same were being paid during the F.Y.2017-18 corresponding to the year under consideration. However, it can be seen that the assessee during the appellate proceedings has stated that due to unavoidable conditions the assessee was not able to provide all the details with regard to deduction u/s.43B of 9 ITA.Nos.736 & 743/Hyd./2025 the Act. However, the assesse stated that the details with regard to payment of Rs.45,39,635/- on account of provident fund against the disallowance of Rs.48,05.151/-. It can be seen from the submission of the assessee that the assessee has provided the chart of provident fund paid amounting to Rs.48,05,151/-, however, it can be seen that the assessee was required to submit the statement from the provident fund office which could prove the genuineness of the seen that the assessee has submitted the details of service tax payment made, TDS challans paid by the company are pertaining to Bank of Baroda. However, on going through the details it can be seen that the details submitted are without any confirmation from the Bank of Baroda. The assessee would have taken the stamp and signature of the Bank/ bank officials along with confirmation letter from Bank of Baroda before submission of the same, which the assessee failed to do so and which would confirm that the details submitted by the assessee are genuine. In view of this fact, I do not find any excuse to take a divergent view from the findings of the AO and thereby reject the contention of the assessee and upheld the findings of the AO. In view of this fact the Ground of appeal raised by the assessee vide Nos.1 to 4 are hereby dismissed.”

5. Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.

6. CA, G Srinivasa Rao, Learned Counsel for the Assessee submitted that, the learned CIT(A) was erred in not allowing deduction claimed by the appellant u/sec.43B of the Act to the extent of Rs.1,66,44,340/- towards TDS 10 ITA.Nos.736 & 743/Hyd./2025 payments pertaining to assessment year 2017-2018, even though, the assessee has filed relevant challans for payment of TDS, as per which, the challans clearly shows payment for the assessment year 2017-2018. Learned Counsel for the Assessee further submitted that, the learned CIT(A) was erred in not allowing deduction towards service tax payment in terms of sec.43B of the Act to the extent of Rs.1,40,23,520/-, even though, the assessee has furnished relevant evidences including challans only on the ground that, the challans furnished by the assessee are not confirmed by the Bank with their signature and seal. Learned Counsel for the Assessee further referring to various challans submitted that, once payment has been made through Bank A/c, the challans will be automatically generated, for which, there is no requirement of any signature and seal of the Bank Officials. Further, although, the assessee is not required to obtain seal and signature on the challans, but, the assessee to prove the genuineness of the said challans, has obtained Certificate from the Bank of Baroda, Begumpet Branch, Hyderabad, in respect of 11 ITA.Nos.736 & 743/Hyd./2025 payment of service tax and TDS, as per which, the Bank has certified payment of service tax to the extent of Rs.1,40,23,520/- and TDS payment to the extent of Rs.1,66,44,340/. Since, the appellant has substantiated payments of TDS and service tax, the additions made by the Assessing Officer towards disallowance of TDS and service tax, should be deleted. Learned Counsel for the Assessee further submitted that, in respect of remaining liabilities of TDS and service tax and also professional tax, PF and sales tax, the appellant could not trace-out relevant records and, therefore, conceded that, the additions made by the Assessing Officer towards unsubstantiated payments may be sustained.

7. Dr. Sachin Kumar, learned Sr. AR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, the assessee could not reconcile the deductions claimed towards any other amount allowable as deduction in Schedule-BP of ITR with relevant challans either before the Assessing Officer or before the learned CIT(A). Further, although, the assessee has 12 ITA.Nos.736 & 743/Hyd./2025 furnished certain evidences like challans, but, in absence of Certificate from the Bank, the authenticity and genuineness of the challans cannot be accepted. Further, payment of service tax and TDS pertains to assessment year 2017-2018 can be traced to the challans along with relevant returns filed with the Authorities. Since, the appellant failed to file relevant return filed before the Authorities along with relevant challans to confirm the payment of TDS and service tax, the mere submission of challans with Certificate from the Bank cannot be accepted. The Assessing Officer and the learned CIT(A) after considering the relevant facts, has rightly disallowed the amount claimed as deduction in Schedule-BP of ITR and the same should be confirmed. The Learned Sr. AR further submitted that, in so far as the payments of sales tax, PF and professional tax and remaining part of TDS and service tax, the appellant could not file any details. The Learned Counsel for the Assessee conceded the additions and thus, the same may be sustained.

13 ITA.Nos.736 & 743/Hyd./2025 8. We have heard both the parties, perused the material on record and the orders of the authorities below. The Assessing Officer made addition of Rs.4,10,61,665/- towards claim of any other amount allowable as deduction in Schedule-BP of ITR-6 filed for the assessment year 2018- 2019 which pertains to deduction towards disallowance of unpaid liabilities in terms of sec.43B of the Act in earlier assessment year and paid during the financial year relevant to assessment year under consideration. The Assessing Officer disallowed any other amount allowable as deduction in Schedule-BP of ITR on the ground that, the appellant could not file relevant evidences to prove the claim of unpaid liabilities for the year under consideration. The amount disallowed by the Assessing Officer includes disallowance of PF, sales tax and TDS u/sec.43B of the Act for the assessment year 2017-2018 and claimed as deduction for the assessment year under consideration upon payment of said liabilities in the financial year 2017- 2018 relevant to assessment year 2018-2019. The Counsel for the Assessee furnished relevant ledger account of service 14 ITA.Nos.736 & 743/Hyd./2025 tax payable in the books of accounts of the assessee along with challans of payment of service tax in the financial year 2017-2018. As per the evidences filed by the assessee, the amount outstanding as on 01.04.2017 was at Rs.1,78,69,351/- which was the same amount disallowed in assessment year 2017-2018. Further, out of the opening balance of Rs.1,78,69,351/-, the appellant has made payment of Rs.1,40,23,520/- during the financial year 2017-2018 relevant to assessment year 2018-2019 which is evident from service tax paid challans and confirmation letter issued by the Bank of Baroda along with relevant payments indicating payment to CBEC towards service tax. From the details furnished by the assessee, it is undisputed fact that, out of the amount disallowed for Rs.1,78,69,351/- in assessment year 2017-2018, the appellant has paid a sum of Rs.1,40,23,520/- for the year under consideration and, therefore, in our considered view, the amount paid during the financial year relevant assessment year under consideration is allowable as deduction in terms of sec.43B of the Income Tax Act, 1961 under the Head “Any Other 15 ITA.Nos.736 & 743/Hyd./2025 Amount Allowable as Deduction in Schedule-BP of ITR-6”. This fact is further supported by the ITR-6 filed for the assessment year 2017-2018 along with relevant Audit Report filed in Form-3CA and Form-3CD, where the appellant has made disallowance towards unpaid liabilities for the assessment year 2017-2018. Since, the appellant has disallowed unpaid liabilities towards service tax for the assessment year 2017-2018, in our considered view, when the said unpaid liability has been paid during the financial year 2017-2018 relevant to assessment year 2018-2019, the same should be allowed as deduction. Thus, we are of the considered view that, the Assessing Officer was erred in making disallowance of any other amount allowable as deduction in Schedule-BP towards service tax. Thus, we direct the Assessing Officer to delete service tax payment of Rs.1,40,23,520/- out of total disallowance of Rs.4,10,61,665/-.

19 ITA.Nos.736 & 743/Hyd./2025 12. In the result, appeal of the Assessee partly allowed.

ITA.No.743/Hyd./2025 – A.Y. 2018-2019 :

1. “That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in passing the impugned non-speaking appellate order u/sec.250 of the Act dated 21.02.2025 without applying his mind to the legal grounds raised by the appellant which goes to the root of the matter and hence the impugned appellate order is bad-in-law and is liable to be quashed.

2. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in not quashing the penalty order passed by the Assessing Officer u/s 270A of the Act dt.25.02.2022 as the AO failed to mention either in the assessment order or in the show cause notice issued for initiation of penalty proceedings, the specific limb in the sub-sections of section 270A under which the penalty proceedings are initiated in the appellant case and hence the penalty order passed by AO u/s 270A is liable to be quashed.

3. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in not appreciating the 20 ITA.Nos.736 & 743/Hyd./2025 position of law that as the quantum appeal is non-est due to non- issuance of show-cause notice cum draft assessment order before finalizing the assessment, the penalty order passed based on the non-est quantum order is also bad-in-law and is liable to be quashed.

Without prejudice to the above legal grounds raised, the appellant is hereby taking following grounds based on the merits of the case

5.2. On further verification of the submission of the assessee, it can be seen that the assessee has submitted the details of service tax payment made, however, on going through the same it can be seen that the service tax payment and TDS challans paid by the company are pertaining to Bank of Baroda. However, on going through the details it can be seen that the details submitted are without any confirmation from the Bank of Baroda. The assessee would have taken the stamp. and signature of the Bank/ bank officials alongwith confirmation letter from Bank of Baroda before submission of the same, which the assessee failed to do so and which would confirm that the details submitted by the assessee are genuine. Further, as per the grounds of appeal it is stated by the assessee that no proper opportunity of being heard was given by the AO during the 24. ITA.Nos.736 & 743/Hyd./2025 penalty proceedings. However, it can be very well confirmed from the penalty order that the assessee was being provided with a number of show-cause notices and notices u/s.142(1) for which the assessee merely submitted adjournment letter. It was the duty of the assessee to provide the requisite details as called for by the AO during the assessment proceedings, as the assessment proceedings are time bound and are to be completed in a timely manner. Further, it can be noticed that the assessee was being provided with draft penalty order and was asked as to why the penalty u/s 270A of the Act should not be levied in its case, for which the assessee neither replied nor filed any submission Therefore, the claim of the assessee that no opportunity of being heard was given is rejected. 5.3. On further verification of the submission of the assessee it has been stated that the assessee had paid taxes on the amount of Rs.4,10,61,665/- which pertained to financial year 2016-17, and the claim of the assessee of Rs.3,06,67,860/- should be considered and allowed due to details furnished by the assessee. However, the details submitted by the assessee are presumed to be not genuine in nature as the documents submitted by the assessee are not fully complied and the genuineness of the documents cannot be accepted. Further the assessee has stated that the remaining payment of Rs.1,03,93,805/- (i.e. Rs.4,10,61,665/- minus Rs.3,06,67,860/-) the supporting evidences cannot be given as the same have been misplaced by the old accountant who had not handed over the accounts and has left the organization is not acceptable. As it was the onus of the assessee to submit the requisite documentary evidences in support of its claim for claiming deduction, which the assessee failed to do so during the assessment as well as during the appellate proceedings.

25 ITA.Nos.736 & 743/Hyd./2025 Therefore, it can be seen that the assessee-company is only making a story to cover up the inability to comply to the notices issued and failure to submit the requisite documentary evidences along with genuineness of the same. In view of this fact, I do not find any excuse to take a divergent view from the findings of the AO. Therefore, the penalty levied u/s 270A(8) of the Act for the year under consideration amounting to Rs.2,56,22,480/-is hereby confirmed. 5.4. In view of the facts discussed above, the contentions the appellant are rejected and the action of the AO levying penalty of Rs.2,56,22,480/- u/s 270A of the Act is hereby confirmed. Accordingly, Ground Nos.1 to 5 raised by the appellant are hereby dismissed.”

Order pronounced in the open Court on 24.09.2025.