SURYA INTERNATIONAL PVT. LTD.,LUCKNOW vs. CENTRAL PROCESSING CENTRE, BANGALORE

(2) the said observations were made by the Id. CIT(A) on account of addition made under section 40A(3), as on account of disallowance of electricity expenses aggregating Rs.3,18,342/-, without considering the fact that as enumerated below :

(a) electricity Expenses had been paid by appellant, in cash at village Asroga, where no banking facilities were available, about which there was no dispute whatsoever;

(b) such payments had been made to Uttar Pradesh Power Corporation Limited, a State Government Undertaking and thus payments had been made to the Government, which were covered under Rule 6DD of Income Tax Rules 1962.

(3) observations made by Id. CIT(A) in Ground No. 1 on account of addition made as Disallowance of Bank Guarantee amounting to Rs.1,75,00,000, without considering the facts that as enumerated below :-

(a) such Bank Guarantee has not been claimed as deduction in profit and loss account and due to inadvertent mistake of auditor, same could not be added back to income of appellant (b) such Bank Guarantee has been provided by Punjab National Bank as per the proposal sanctioned by its Head office and the same was in nature of contingent liability;

(4) the order appealed against is contrary to facts, law and principles of natural justice.”

(B) In this case, assessee’s return of income was processed u/s 143(1) of the I. T. Act wherein the assessee’s returned income was disclosed at Rs.52,32,430/-. An intimation was issued to the assessee u/s 143(1) of the Act, wherein adjustments were made and total income was determined at Rs.2,30,50,770/- after the adjustment. The aforesaid adjustments included an amount of Rs.1,75,00,000/- on account of bank guarantee. Further, an adjustment of Rs.3,08,342/- was also made on account of disallowance amounting to Rs.3,08,342/- made u/s 40A(3) of the Act, out of electricity expenses. The assessee’s appeal against the aforesaid adjustments was dismissed by the learned CIT(A) vide impugned appellate order dated 18/03/2025. The present appeal has been filed by the assessee against the aforesaid impugned appellate order of learned CIT(A). In the course of Assessment Year:2020-21 4 appellate proceedings in Income Tax Appellate Tribunal, a paper book containing the following particulars was filed from the assessee’s side:

Assessment Year:2020-21 5 (C) First we take up the issue regarding adjustment made on account of bank guarantee. The relevant portion of the order of the learned CIT(A) is reproduced as under:

“Ground C & D: Disallowance of Bank Guarantee of Rs.1,75,00,000/-

The said amount is mentioned in column 21(g) of Form 3CD uploaded by the appellant in ITBA as Particulars of any liability of a contingent nature.

The column 21 of form 3CD is regarding the expenses debited to the Profit and Loss account. The appellant in the audit report certified by an auditor itself has admitted that this bank guarantee of Rs.1,75,00,000/- has been debited to the Profit and Loss account, thus the same has been rightly disallowed by the CPC. In view of these facts as the disallowance has been made on the basis of information uploaded by the appellant in the Form 3CD which has Assessment Year:2020-21 6 been prepared by the Auditor on examination of books of account/ documents/evidences, this ground of appeal is dismissed.”

(C.1) At the time of hearing, learned A.R. for the assessee submitted that the amount of Rs.1,75,00,000/- was mentioned by the tax auditor by mistake, in Column 21(g) of Form 3CD of the audit report. He further submitted that revised tax audit report was prepared by the auditor rectifying the aforesaid mistake. He placed reliance on the order dated 08/05/2025 of the Ahmedabad Bench of the ITAT in the case of ACIT vs. Mahesh Mohanbhai Patel (HUF) in order dated 06/12/2013 of Delhi Bench of the ITAT in the case of DCIT vs. Dwarikadish Spinners Ltd. in and order dated 12/12/2011 of Kolkata Bench of the ITAT in the case of CIT vs. Kay Bee Industrial Alloys Pvt. Ltd. in I.T.A. No.1032/Kol/2011. He also drew our attention to the copy of independent auditor’s aforesaid report as per Companies Act. He also placed reliance on the aforesaid paper book, referred to in foregoing paragraph (B) of this order.

(C.2) Learned D.R. submitted that the adjustment was made by Income-tax Department on the basis of documents filed by the assessee along with return of income; and If there was any mistake in reporting, in these documents, it was brought to the notice of the learned CIT(A) for the first time. Further, he submitted, although in the paper book the assessee has certified that documents mentioned at Sl. No. 1 to 10 of the index were placed before the authorities below; the fact is that documents at Sl.No. 5 to 10 of the paper book were filed for the first time before the learned CIT(A). He submitted that the documents submitted by the assessee for the first time before the learned CIT(A) should be subjected to verification at the end of the Assessing Officer. For this purpose, he submitted, the issue (E) We have heard both sides. The aforesaid amount of Rs.1,75,00,000/- has been reported by the tax auditor at Sl.No.21(g) of the audit report in Form 3CD. Under Sl.No. 21, the tax auditor is to give the details of amounts debited to profit & loss account, which are either not allowable, or are of doubtful allowability. These include the following:

21 a) Please furnish the details of amounts debited to the profit & loss account, being in the nature of capital, personal, advertisement expenditure etc. 1 Expenditure of capital nature NIL Particulars Amount in (Rs.) Remarks if any 2 Expenditure of personal nature Particulars Amount in Rs. DONATION 2,25,000 3 Expenditure of advertisement in any NIL souvenir, brochure, tract, pamphlet or the like, published by a political party Particulars Amount in Rs. Remarks if any 4 Expenditure incurred at clubs being NIL entrance fees and subscriptions Particulars Amount in Rs. Remarks if any 5 Expenditure incurred at clubs being NIL cost for club services and facilities used Particulars Amount in Rs. Remarks if any 6 Expenditure by way of penalty or NIL fine for violation of any law for the time being force Particulars Amount in Rs. Remarks if any 7 Expenditure by way of any other NIL penalty or fine not covered above Particulars Amount in Rs. Remarks if any 8 Expenditure incurred for any NIL purpose which is an offence or which is prohibited by law Particulars Amount in Rs. Remarks if any Assessment Year:2020-21 8 b) Amounts inadmissible under section 40(a) i As payment to non-resident referred to in sub-clause (i) A Details of payment on which tax is not deducted NIL Date of Amount Nature Name PAN Address Address City or PIDcode Remarks payment of of of the of the Line 1 Line 2 town if any payment payment payee payee or district

B Details of payment on which tax has been deducted but has not been paid during NIL the previous year or in the subsequent year before the expiry of time prescribed under section 200(1) Date of Amount Nature Name PAN of Addres Addres City or PIN Remarks payment of of of the the Line 1 s Line 2 town or Code if any payment payment payee payee district As payment to resident referred to in sub-clause (ia) ii A Details of payment on which tax is not deducted NIL Date of Amount Nature Name PAN of Address Address City or PIN Remarks payment of of of the the Line 1 Line 2 Town or Code if any payment payment payee payee District

B Details of payment on which tax has been deducted NIL but has not been paid on or before the due date specified in sub-section (1) of section 139 Date of Amount Nature of Name of PAN of Address Address City or PIN Code Remarks payment of payment the payer the payer Line 1 Line 2 town or if any payment district

As payment referred to in sub-clause (iv) iii Details of payment on which levy is not deducted NIL A Date of Amount Nature of Name of PAN of Address Address City or PIN Code Remarks payment of payment the the Line 1 Line 2 town or if any payment payee payee district

Details of payment on which levy has been deducted but has NIL B not been paid on or before the due date specified in sub- section (1) of section 139 Date of Amount Nature of Name of PAN of Address Address City or PIN Code Remarks payment of payment the the Line 1 Line 2 Town or if any payment payee payee District iv Fringe benefit tax under sub-clause (ic) Wealth Tax under sub-clause (iia) v Royalty, license fee, service fee etc. under sub-clause (iib) vi Salary payable outside India/to a non resident without TDS NIL vii etc. under sub-clause (iii) Date of Amount Name of PAN of Address Address City or PIN code Remarks if any payment of the the Line 1 Line 2 Town or payment payee payee District

Viii Payment to PARTNERSHIP FIRM/other fund etc. under sub0clause (iv) Ix Tax paid by employer for perquisites under sub-clause (v) Amounts debited to profit & loss account being interest, NIL c) salary, bonus, commission or remuneration inadmissible under section 40(b)/40(ba) and computation thereof Particulars Section Amount Description Amount Amount Remarks debited to admissible inadmissible profit & loss account

Disallowance/deemed income under section 40A(3) d) A On the basis of the examination of books of account and other relevant No documents/evidence, whether the expenditure covered under section 40A(3) read with rule 6DD were made by account payee cheque drawn on a bank or account payee bank draft. If not, please furnish the details Date of payment Nature of payment Amount Name of the payee PAN of the payee

(Optional) 24 DEC 2019 Electricity Charges 85,998 State Power Corporation 07 Feb 2019 Electricity Charges 1,27,085 State Power Corporation 25 Feb 2020 Electricity Charges 1,05,259 State Power Corporation B On the basis of the examination of books of account and other relevant Yes documents/evidence, whether the payment referred to in section 40A(3A) read with rule 6DD were made by account payee cheque drawn on a bank or account payee bank draft if not, please furnish the details of amount deemed to be the profits and gains of business or profession under section 40A(3A) Date of payment Nature of Amount Name of payee PAN of payee Remarks if any payment

Provision for payment of gratuity not allowable under section NIL e) 40A(7) f) Any sum paid by the assessee as an employer not allowable NIL under section 40A(9) g) Particulars of any liability of a contingent nature Nature of liability Amount Bank Guarantee 17500000.00 h) Amount of deduction inadmissible in terms of section 14A in NIL respect of the expenditure incurred in relation to income which does not form part of the total income Particulars Amount Remarks if any i) Amount inadmissible under the proviso to section 36(1)(iii) Nil When the tax auditor reports a figure in Sl.No. 21(g) and the tax audit report is filed by the assessee himself in the Income Tax Department, and no case is made with supporting materials for allowability of the reported figure, prima facie adjustment of the amount u/s 143(1) of the Act is quite understandable. What the assessee desires is a decision on merits that the aforesaid amount of Rs.1,75,00,000/- reported at Sl.No. 21(g) of the tax audit report was not disallowable, and was not to be included as assessee’s total income. For this, decision on merits, it is quite a reasonable request from Revenue that the entire issue should first be examined at the level of the Assessing Officer. The reliance placed by the assessee on the aforesaid orders of Ahmedabad Bench of the ITAT in the case of ACIT vs. Mahesh Mohanbhai Patel (HUF) in Delhi Bench of the ITAT in the case of DCIT vs. Dwarikadish Spinners Ltd. in and Kolkata Bench of the ITAT in the case of CIT vs. Kay Bee Industrial Alloys Pvt. Ltd. in does not have any force because this case before us stands on a totally different factual matrix. In the aforesaid cases relied upon by learned A.R. for the assessee, Assessment Year:2020-21 10 additions were made by Income Tax Department in an assessment order and not by way of adjustment and intimation u/s 143(1) of the Act. Consequently, cases on which the learned A.R. for the assessee has placed reliance, orders have been passed by the Income Tax Appellate Tribunal on merits. However, in the present case before us, the merits of the case cannot be decided without proper factual verification of the case at the level of the Assessing Officer. There could be many aspects requiring verification. What was the exact nature of the figure reported as contingent liability? Was it reported on gross basis or net basis? What were the accounting entries in the books of account? Does it have any connection with earlier and/or subsequent year(s)? etc. etc. Material on records are insufficient for a categorical decision by us, either way, on merits. In this set of facts and circumstances, we are in agreement with the submissions made by learned D.R. that the matter requires verification at the end of the Assessing Officer. We also note that learned CIT(A) did not provide any opportunity to the Assessing Officer to examine the documents filed for the first time during appellate proceedings before the learned CIT(A). Therefore, we remand this matter to the file of the Assessing Officer with the direction to pass order in accordance with law after providing reasonable opportunity to the assessee and after considering all relevant materials.

(E.1) We now come to the second issue regarding addition amounting to Rs.3,18,342/- made under section 40A(3) of the Act. At the time of hearing, the learned A.R. for the assessee submitted that the aforesaid amount represented payment of electricity expenses in cash. Learned A.R. for the assessee submitted that these payments had to be made in cash because banking facilities were not available in close vicinity in the area. In response to a specific query from the Bench whether all the payments were made in cash or some of the payments of electricity expenses were made through Assessment Year:2020-21 11 banking channels also; the A.R. for the assessee submitted that payments of electricity expenses were made both in cash and through banking channels. The learned Departmental Representative relied on the impugned appellate order of learned CIT(A). There is lack of clarity on perusal of materials on record why, partly the electricity expenses could not be made through banking channels in expenses due to fact of banking facility in close vicinity, whereas the remaining expenses were paid through banking channels. It is not clear whether the payments of electricity expenses pertained to different installations located at different places and whether some of the places were indeed such where banking facilities were not available in close vicinity. Therefore, this issue is also remitted back to the file of the Assessing Officer with the direction to pass order in accordance with law after providing reasonable opportunity to the assessee and after considering all relevant materials. All the grounds of appeal are treated as disposed of in accordance with the aforesaid directions.

(F) In the result, the appeal is partly allowed for statistical purposes.

(Order pronounced in the open court on 08/01/2026)