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Facts
The assessee filed its return of income, and the Assessing Officer, under Section 143(3), made an addition of Rs. 11,10,678/- for disallowed GST expenses. The CIT(A) provided partial relief on this disallowance but arbitrarily confirmed an additional sum of Rs. 2,50,000/- as an estimated interest component due to a time lag between accounting entries. The assessee subsequently appealed to the ITAT.
Held
The ITAT condoned the delay in filing the appeal under Section 253(3). It agreed with the CIT(A)'s reasoning that the addition of Rs. 11,10,678/- for GST expenses was unwarranted as the tax effect was nullified by subsequent accounting entries. The Tribunal further directed the deletion of the Rs. 2,50,000/- addition, finding no legal basis or reasonable justification for its estimation by the CIT(A).
Key Issues
1. Condonation of delay in filing the appeal. 2. Whether the disallowance of Rs. 11,10,678/- related to GST expenses was justified given its nullified tax effect. 3. Whether an estimated addition of Rs. 2,50,000/- by CIT(A) as an interest component had legal and factual basis.
Sections Cited
253(3), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH ‘B’, LUCKNOW
Before: SHRI ANADEE NATH MISSHRA & SHRI SUBHASH MALGURIA
2021-22 against impugned appellate order dated 15/05/2024 (DIN & Order No.ITBA/APL/S/250/2024-25/1064897659(1) passed by learned Addl/JCIT(A), Bengaluru [“Addl/JCIT(A)” for short].
This appeal has been filed by the assessee, beyond time limit prescribed under section 253(3) of IT Act. The assessee has submitted application duly supported by affidavit for condonation of delay in filing of the appeal pleading that the delay was unintentional and beyond the control of the assessee and has requested to admit the appeal for hearing. The learned Sr. Departmental Representative for Revenue did not express any objection to assessee’s application for condonation of delay in filing of the appeal. In view of the foregoing, and in specific facts and circumstances of the present appeal before us, the delay in filing of this appeal is condoned; and the appeal is admitted for hearing.
The facts of the case, in brief, are that the assessee firm filed its return of income on 24/01/2022 declaring total income of Rs.6,80,23,110/-. The Assessing Officer processed the assessment and passed assessment order under section 143(3) of the Act on 31/12/2022 determining the total income of the assessee at Rs.6,91,33,790/- and made addition of Rs.11,10,678/- by disallowing claimed of expenses. Being aggrieved with the disallowance of expenses of Rs.11,10,678/-, the assessee went in appeal before the CIT(A), who has allowed part relief to the assessee. Aggrieved further, the assessee has filed the present appeal before the Income Tax Appellate Tribunal.
We have heard the rival parties and have gone through the material placed on record. The learned CIT(A) has accepted the assessee’s contention that the aforesaid amount of Rs.11,10,678/- was wrongly disallowed by the Assessing Officer. The relevant portion of the order of the learned CIT(A) is reproduced below:
However, the learned CIT(A) arbitrarily confirmed the addition of Rs.2,50,000/- on the ground that there was lapse of time between the two entries for financial year 2020-21 and 2022-23. The learned CIT(A) was of the view that the interest component was to be sustained. She estimated the interest component at Rs.2,50,000/- and sustained the addition of Rs.2,50,000/-. However, there is no discussion in the impugned order of learned CIT(A) how the aforesaid amount on account of interest can be disallowed under provisions of law. Further, there is no discussion on the manner in which the aforesaid amount of Rs.2,50,000/- was estimated. The addition cannot be sustained in these facts and circumstances in the absence of legal justification for the same and also in the absence of reasonable basis for estimation. In the specific facts and circumstances of the present case, Revenue has failed to make a good case for the addition of aforesaid amount of Rs.2,50,000/-. The learned D.R. also did not extend any assistance in this regard and merely relied on the order of the learned CIT(A). In view of the foregoing, the addition of Rs.2,50,000/- sustained by learned CIT(A) is directed to be deleted.
In the result, the appeal of the assessee stands allowed.
(Order pronounced in the open court on 28/08/2025)