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Facts
The assessee filed an appeal against the order of the CIT(A) concerning the addition of Rs. 5,04,705/- as interest on income tax refund and Rs. 18,412/- for delayed payment of employee's contribution to PF & ESIC, and Rs. 1470/- as interest on TDS. Another issue involved a difference in income reflected in Form 26AS versus the assessee's books, amounting to Rs. 11,01,188/-, which was restored to the AO for fresh adjudication.
Held
The Tribunal dismissed the ground regarding the absence of DIN in the CIT(A)'s order as it was inadvertently raised. The ground concerning the delayed payment of PF & ESIC and interest on TDS were dismissed as covered by judicial precedents. The issue of interest on income tax refund was restored to the AO for determining the exact date of refund grant. The issue of difference in Form 26AS was also restored to the AO for fresh adjudication based on a previous ITAT order.
Key Issues
Whether the addition of interest on income tax refund is justified without proper determination of refund date, and whether disallowances for delayed PF/ESIC payments and TDS interest are valid. Also, the correctness of additions based on discrepancies between Form 26AS and disclosed income.
Sections Cited
250, 244A, 36(1)(va), 26AS
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & Ms. SUCHITRA KAMBLE
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), ADDL/JCIT (A), Agra (hereinafter referred to as “CIT(A)”), dated 30.12.2024 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18.
Ground of appeal
no.1 raised by the assessee reads as under: “1. The Order of Comm. Of Income-tax(Appeals), Agra dated 30- 12-24 is bad in Law and Void and in operative since he has relied wholly and fully on order of Asstt. Comm. Of Income-tax, CIT., Circle 1(1)(1), Baroda dated 16-12-2019 which was invalid and inoperative since DIN Number was not quoted. As per the Circular of Central Board of Direct Taxes and various judgements of Tribunal and High Court Orders for not quoting DIN No. Order of CIT(A) is invalid. It is therefore submitted that the Order of Comm. Of Income-tax dated 30-12-2024 be held as bad in Law and anfractuous.”
3. Vide the above ground the assessee has challenged the validity of order passed by the Ld. CIT(A) in the absence of DIN Number quoted therein.
During the course of hearing before us, Ld. Counsel for the assessee fairly admitted that this ground was inadvertently raised, since, the fact of the matter was that DIN Number was quoted in the order passed by the Ld. CIT(A).
In the light of the above admission made by the Ld. Counsel for the assessee before us Ground No.1 raised by the assessee is dismissed.
Ground of appeal No.2 raised by the assessee reads as under:
“2. Without prejudice to above and on merits of the case your Appellant submits that for making addition of Interest of Rs.5,04,705/-u/s.244A of the Act, the AO had not given sufficient time and the Order was passed in haste and hurry and reply of the Appellant of 7-12-2019 was non-consider in his order of 16-12-2019 and order was passed within seven days. It is submitted that Sec. 244A does not apply since the alleged interest on Refund in Income-tax is adjusted against the demand without permission/sanction/knowledge of the Appellant which is against Law and Equity and therefore the Addition of Rs.5,04,705/-be deleted.”
The assessee in the above ground has challenged the order of the Ld. CIT(A) confirming the addition made by the AO of interest received by the assessee on income tax refund amounting in all to Rs.5,04,705/-.
The facts of the case are that the AO had added Rs.5,04,705/- as interest on income tax refund received by the assessee u/s.244A of the Act, stating that this amount was not declared in the assessee’s return of income. The AO, based this addition on record showing that the appellant received refunds for earlier assessment years which included the said interest amount. The assessee, however, argued that it had not received any income tax refund during the year and that despite regular follow ups made with the department it has not been provided any break up of the income tax refund and interest accrued thereon relating to the impugned assessment year. The assessee contended that it had considered an income of Rs.15.34 Lakhs as lumpsum interest income on income tax refund in F.Y. 2018-19 on the basis of details available with it and that therefore there was no escapement of the said income from their side. The AO, however, was not convinced with the reply of the assessee and based on official data available with him he held that since the assessee had received interest on income tax refund during the year amounting to Rs.5,04,705/-, the same needed to be returned to tax and added the same to the income of the assessee. The Ld. CIT(A) confirmed the order of the AO noting that while the records of the department revealed receipt of such interest income by the assessee, the assessee had been unable to substantiate its claim of non-receipt of the said interest with credible evidence. He relied on several judicial pronouncements clarifying that interest income whether received directly or adjusted, constituted taxable income.
Before us, Ld. Counsel for the assessee reiterated the contention made before the lower authorities that during the impugned year the assessee had received no communication from the Department of any income tax refund and, therefore, there was no question of accounting for the same along with any interest component included therein. She contended that in the absence of any order granting refund to the assessee no income in any way accrued to the assessee in the impugned year.
The Ld. DR, however, relied on the order of the Ld. CIT(A) pointing out clearly that departmental records showed receipt of income tax refund by the assessee during the impugned year and, therefore, the interest component included therein amounting to Rs.5,04,705/- had been rightly subjected to tax by the authorities below.
Having heard the contention of both the parties, the solitary argument of both the sides on the issue of taxability of interest on income tax refund rests on the fact whether the assessee did receive any refund or did not receive any income tax refund during the year. The Revenue’s case is that the office records of the assessee revealed the granting of refund to the assessee during the impugned year along with interest. The case of the assessee, however, is to the contrary, that it had received no communication / order from the department granting any income tax refund during the impugned year. That as and when any such refund was received by the assessee it was duly accounted for in its books of accounts offering all interest component thereof to tax as in F.Y. 2018-19 when, the assessee contended, that it had included in its income Rs.15.34 Lakhs of interest on income tax refund. There is no dispute with respect to the principle guiding the taxation of income i.e. on accrual basis, i.e when the assessee is granted the income tax refund by the Department. Since, there is no evidence on record establishing when the refund was granted to the assessee, We consider it fit to restore the matter back to the AO for the limited purpose of determining when the income tax refund alongwith interest thereon was granted to the assessee. Since, it is available in the departmental records, the AO may furnish the same to the assessee alongwith the evidence of issuing it to the assessee during impugned year. If the refund is so established to have been granted to the assessee in the impugned year only then the interest component be subjected to tax in the impugned year. We may reiterate that the crucial factor for subjecting interest of income tax refund of Rs.5,04,705/- to tax in the impugned year is if income tax refund including interest thereon was granted to the assessee in the impugned year and the assessee was duly communicated of the said fact in the impugned year. This ground of appeal is adjudicated in the above manner with the directions given to the AO as aforestated.
Ground of appeal no.2 is allowed for statistical purposes.
Ground of appeal
no.3 raised by the assessee reads as under:
3. The CIT(A) has also erred in confirming Rs.18,412/-being late payment of employees contribution to PF & ESIC, your Appellant submits that as per provisions of Law and before the amendment and the Supreme Court Judgement the payment of employees PF & ESIC made before the end of the month was allowable and that the disallowance be deleted.”
12. The issue raised in the above ground pertains to the disallowance of employees’ contribution to ESI & PF on account of the same being delayed in terms of the relevant provisions of law. The disallowance being made u/s.36(1)(va) of the Act, the quantum of disallowance made in the present case in relation to above issue amounts to Rs.18,412/-. Ld. Counsel for the assessee stated that the Hon’ble Apex Court had settled this issue in his decision Checkmate Services P. Ltd. Vs. CIT, 143 taxmann.com 178 (SC) holding that delayed payment of ESI & PF towards employees’ contribution is not allowable in terms of provisions of Section 36(1)(va) of the Act. She fairly admitted the issue to be covered against the assessee. In the light of the admission of the Ld. Counsel for the assessee as above, Ground of appeal No.3 raised by the assessee is dismissed.
Ground of appeal
no.4 raised by the assessee reads as under: “4. The Comm. Of Income-tax has also erred in disallowing Rs.1470/- being interest on TDS which is not in the nature of Penalty and is incurred during course of Business and is allowable in computing total incurred and that the same be deleted.”
14. The issue raised in the above ground relates to disallowance of interest paid on TDS amounting to Rs.1470/-. Ld. Counsel for the assessee fairly admitted that this issue also was covered against the assessee by various decisions of the judicial authorities.
In view of the admission of the Ld. Counsel for the assessee as above, ground of appeal no.4 is dismissed.
Ground of appeal no.5 raised by the assessee reads as under:
“5. The disallowance/addition of Rs. 11,01,188/-u/s.26AS a) The CIT(A) has erred both in Law and in fact in confirming applicability of Sec. 26AS to the facts of the case and also in confirming addition of Rs. 11,01,188/- made by the Assessing
Officer who passed Asst. Order in haste & hurry and without giving prepare time to your Appellant to provide and vide. b) Your Appellant respectfully submit that u/s.26AS is a form comprising and of various items of income and expenditure, difference rates, difference form company in accounting method (mercantile and cash system) for deducting of TDS technical system etc. and all are combined together u/s.26AS. It is submitted that the all the items are not income but matter of adjusting capital expenditure item separately which the AO has not done and it is a lose of mismatch of accounts and not a case of Income. c) He has not given the Show Cause Notice with the amount that according to him liable The Assessing Officer to Income-tax u/s.26AS. d) On facts and circumstances of the case the huge amount in despite to your Appellant that this is a fit case were a second chance to given to the Appellant and the addition be set aside to lower authorities for re-computing and allowing the correct figure of income liable to tax.”
The issue raised in above ground relates to addition made to the income of the assessee on account of difference in the income reflected in Form No.26AS and that disclosed by the assessee in its books of accounts which amounted to Rs.11,01,188/-. It was common ground that identical issue had arisen in the case of the assessee in A.Y. 2015-16 wherein the matter travelled up to the ITAT who had restored the issue back to the AO for verification afresh. Copy of the order passed by the ITAT in A.Y. 2015-16 in dated 05.05.2025 was placed before us and our attention drawn to para 11 & 12 of the order restoring the issue of mis-match in the income returned by the assessee and that reflected in Form No.26AS to the file of the AO for verification afresh as under: “11. The addition made by the AO is based on the difference between receipts reported in Form 26AS and those disclosed in the books of account. The explanation offered by the assessee refers to timing and accounting mismatches, TDS deducted on gross values including reimbursements, and third-party errors including wrong PAN tagging. We find that the assessee has now furnished a reconciliation statement and has explained the plausible reasons for mismatch. The same was not available before the AO or CIT(A) in the manner and format as presented before us.
Considering the totality of the circumstances and the principle of judicial consistency as noted in A.Y. 2009-10, we are of the considered view that this issue requires factual verification. The Assessing Officer shall examine the reconciliation and supporting documents and decide the matter afresh after affording a reasonable opportunity of being heard to the assessee. Accordingly, we set aside the order of the CIT(A) on this issue and restore the matter to the file of the AO for fresh adjudication.”
In view of the admission by both the parties before us that the issue is covered by the aforesaid decision of the ITAT in the case of assessee itself, we restore this issue back to the file of the AO for consideration afresh after giving due opportunity of hearing to the assessee.
Ground of appeal no.5 is allowed for statistical purposes.
In the result, appeal filed by the assessee is partly allowed for statistical purposes. This Order pronounced on 29/10/2025