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Facts
The assessee, Amrutanjan Healthcare Ltd., filed its return for AY 2021-22. During the assessment, the AO made ad-hoc disallowances on unverified payments (20% of Rs. 1,30,77,586) and advance payments (20% of Rs. 3,68,23,277). The FAA confirmed these disallowances for not producing sufficient evidence. The assessee is in appeal before the Tribunal.
Held
The Tribunal noted that for the disallowance on unverified payments, the assessee claimed to have submitted evidence that was not considered by the FAA. Therefore, the Tribunal restored the issue to the AO for one more opportunity. For the disallowance on advance payments, the assessee argued it was not claimed as expenditure. The Tribunal restored this issue to the AO to examine if the expenditure was claimed as deduction.
Key Issues
Whether the ad-hoc disallowances made on unverified payments and advance payments are justified without proper consideration of evidence. Whether an advance payment not debited to P&L account can be disallowed as expenditure.
Sections Cited
194J, 133(6), 37, 143(3), 144B, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI INTURI RAMA RAO
आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 26.11.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2021-22.
ITA No.3851/Chny/2025 & :- 2 -: SA No.136/Chny/2025 2. Brief facts of the case are as follows: The assessee is a company. For the assessment year 2021-22, return of income was filed on 14.03.2022 declaring total income of Rs.79,89,44,462/-. Assessment was selected for scrutiny for verification of genuineness of expenses claimed. The notice u/s.143(2) of the Act was issued on 28.06.022. The assessment was completed u/s.143(3) r.w.s 144B of the Act vide order dated 24.12.2022. In the said assessment order, AO made an adhoc disallowance of Rs.26,15,517/- and Rs.73,64,655/-. The details of the disallowance made are as follows:- i) Unverified payments made U/s 194J Amounting to Rs.1,30,77,586 for which adhoc disallowance of 20% amounting Rs.26,15,517 For Non receipt of reply from the parties to whom notice u/s 133(6) was issued and no response was received by the AO.
ii) Advance payments made amounting to Rs.3,68,23,277 for which the assessee has not supported its contention/ Submission with documentary evidence such as invoices, Bank Statement or details of TDS deducted for which adhoc advance disallowance of 20% amounting to Rs.73,64,655
Aggrieved by the order of the AO completed u/s.143(3) r.w.s.144 of the Act, assessee filed appeal before the First Appellate Authority (FAA). The FAA stated that the assessee has
ITA No.3851/Chny/2025 & :- 3 -: SA No.136/Chny/2025 not produced any evidence / material in support of its contentions and confirmed the disallowance of expenditure made.
Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The grounds raised read as follows:- 1. The order passed by the CIT (Appeal) is not proper under the Income tax Act,1961
As regards addition of Rs.26,15,517 (20% on Rs. 1,30,77,586) for which TDS is deducted U/s 194J is not proper for non-receipt of reply from the parties to whom notice was issued U/s 133(6)
Of the Rs 1,30,77,586, copy of response u/s 133(6) as evidence for Rs.1,19,42,820 was submitted during the proceedings vide Acknowledgement_941907561220425 but not considered by CIT(A). Copy of our submission dated 22/04/2025 is attached.
The Following case laws are in favour of the Assessee for addition made for nonreceipt of reply for notice issued U/s 133(6) a) ITO Vs Gold finger establishment (ITAT-Mumbai)-ITA No 4212/M/2015-Mumbai G Bench dated 17/05/2018 b) Unique Finance of Securities (ITAT- Kolkata)-ITA No 110/KOL/2025 dated 13/05/2025
As regards addition of 20% on 3,63,23,277 amounting to Rs.73,64,655 on advance payment U/s 37 is not valid Since Section 37 contemplates any expenditure laid out or extended wholly and exclusively for the purposes of Business or profession. But in appellant case it was not claimed as expenditure but shown as advance payment in balance sheet. We have submitted complete list of Advances on which TDS was deducted with name, address. PAN no and also submitted sample TDS certificates during the proceedings vide Acknowledgement_941907561220425 but was not considered by CIT(A). Copy of our submission dated 22/04/2025 is attached.
ITA No.3851/Chny/2025 & :- 4 -: SA No.136/Chny/2025 5. The Book of accounts are not rejected and 20% adhoc disallowance made is not proper as per the given below Judgements. a. Kailash Chand Agarwal Vs DCIT (2022) 139 Taxmann.com 462 (Raipur Tribunal). b. Mokshstar International Vs ACIT Gandidham ITA 397/RJT/2017.
c. M.V.A. Seetharama Raju v. DCIT [2022] 137 taxmann.com 147 (Chennai –Trib.).
d. Honorable Supreme Court of India in case of Principal Commissioner of Income Tax vs.R.G.Buildwell Engineers Ltd. (2018) 99 com 284 (SC) wherein it was held as under: “Where High Court upheld order of Tribunal setting aside adhoc disallowance of expenses claimed on ground that assessee’s books of account were not rejected, SLP filed against said order was to be dismissed. The Apex Court has held that “Section 37(1) of the Income-tax Act, 1961 Business expenditure – Allowability of (Onus to prove) – In course of assessment, assessee claimed deduction of expenses towards bricks, machinery repair, cartage, labour expenses etc. Assessing Officer disallowed to per cent of said expenses on ground that insufficient evidence was adduced Tribunal set aside said adhoc disallowance on two grounds, firstly, assessee’s books of account were not rejected and secondly, such expenses were allowed consistently in past inscrutiny assessments – High Court upheld order passed by Tribunal – Whether SLP filed against view taken by High Court was to be dismissed – Held, yes [Para 2] [In favour of assessee]”
Crave leave to file additional grounds at the time of personal hearing
The Ld.AR relied on the grounds raised. The Ld.DR on the other hand relied on the findings of the AO and the FAA.
We have heard rival submissions and perused the material on record. The AO had issued notices u/s.133(6) of the Act to
ITA No.3851/Chny/2025 & :- 5 -: SA No.136/Chny/2025 thirteen parties seeking confirmations, copies of contract, bank details of transaction, the GST/ITR information and the related documents. Out of 13 parties only seven responded. Whereas six parties representing transaction aggregate to Rs.1,30,77,585/- did not file any confirmation or supporting information. The assessee also did not submit the relevant details called for by the AO except the ledger extracts and excel sheets which the AO treated as internal documents and insufficient to establish genuineness. Therefore, on adhoc basis, AO disallowed 20% of Rs.1,30,77,585/-, being the aggregate transaction of these six parties who did not respond to the notice issued u/s.133(6) of the Act. The FAA in the impugned order had stated that assessee has not furnished any additional evidences. However, the Ld.AR during the course of hearing by referring to Ground No.2 submitted that assessee had given detailed submissions and had also furnished relevant evidences with regard to payment of Rs.1,30,77,585/-. It was stated by Ld.AR that these documents submitted during the course of appellate proceedings was not noted by the FAA and the impugned order was passed rejecting the claim of the assessee. In the interest of justice and equity, we are of the view that one more opportunity should be provided to the assessee to explain the nature of
ITA No.3851/Chny/2025 & :- 6 -: SA No.136/Chny/2025 expenditure to the tune of Rs.1,30,77,585/-, whether the expenditure has been incurred for the purpose of assessee’s business or not. For the aforesaid purpose, the issue raised in Ground No.2 and 3 are restored to the files of the AO.
As regards the disallowance of Rs.73,64,655/- being 20% of disallowance of Rs.3,68,23,277/-, the Ld.AR submitted that this was an advance payment not claimed as deduction u/s.37 of the Act. It was submitted that since the advance payment is not debited to the P & L account and is only forming part of balance sheet, the disallowance on adhoc basis 20% of the same is not warranted. We find this contention of assessee was not raised before the AO nor the FAA. Therefore, in the interest of justice and equity, we restore the matter to the files of the AO. The assessee is directed to furnish the relevant details explaining that impugned expenditure has not been claimed as deduction for the relevant assessment year. If the expenditure has not been claimed as deduction, disallowance of 20% of the said expenses is not warranted. Therefore, the AO shall examine the examine the claim of assessee and shall take a decision in accordance with law. It is ordered accordingly. In the result, the Ground Nos.4 & 5 are allowed for statistical purposes.
ITA No.3851/Chny/2025 & :- 7 -: SA No.136/Chny/2025 SA No.136/CHNY/2025 8. Since we have disposed off the appeal on merits, the Stay application is rendered infructuous and is dismissed.
In the result, the appeal filed by the assessee is allowed for statistical purposes and the stay application filed by the assessee is dismissed.
Order pronounced in the open court on 3rd February, 2026 at Chennai.
Sd/- Sd/- (इंटूर� रामा राव) (जॉज� जॉज� के) (INTURI RAMA RAO) (GEORGE GEORGE K) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�ई/Chennai, �दनांक/Dated, the 3rd February, 2026 RSR आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त /CIT, Chennai 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF.