AVG LOGISTICS LIMITED,NEW DELHI vs. ASST. DIRECTOR OF INCOME TAX, CPC, BENGALURU, BENGALURU
Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SHRI C. N. PRASAD & SHRI M. BALAGANESHAVG Logistics Ltd, 25, DDA Market, Nirman Vihar, East Delhi, Delhi Vs. Asst. Director of income Tax, CPC, Bengaluru (Appellant)
PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.242/Del/2025 for AY 2020-21, arises out of the order of the Jt. Commissioner of Income Tax (Appeals)-2, Mumbai [hereinafter referred to as „ld. JCIT(A)‟, in short] in Appeal No. ITBA/APL/S/250/2024-25/1070115401(1) dated 05.11.2024 against the order of assessment passed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 30.11.2024 by the Assessing Officer, CPC, Bengaluru (hereinafter referred to as „ld. AO‟). 2. The assessee has raised the following grounds:- 1. That the learned Addl./JCIT (A) erred in law and on facts in passing the impugned order without considering the merits of the case in a proper manner and/or in a fair and reasonable manner. 2. That the learned Addl./JCIT (A) erred in upholding the disallowance made by the Assessing Officer (AO) on the grounds of that wrong disclosure in Tax Audit Report have been added in the taxable income AVG Logistics Ltd without appreciating that they have never been charged in the Profit & Loss Account and Leave Encashment & Labor Welfare fund paid after the Tax Audit but before filing of Income Tax Return have been added as the same had been reported in Tax Audit Report, without appreciating the fact that the Contingent Liability had been wrongly disclosed Tax Audit Report, whereas the same had not been debited to Profit & Loss Account and the Leave Encashment & Labor Welfare fund had been duly paid before the filing of the Income Tax Return, documents of the same duly provided. 3. That the learned Addl./JCIT (A) failed to appreciate the factual position and legal principles, leading to a wrongful addition of Contingent Liability wrongly shown in Tax Audit Report where the same has been duly reported in Notes to the Balance Sheet as per the requirements of Accounting Standard 29 o Provisions, Contingent Liabilities and Contingent Assets. Also claim under Section 43B on account of payment for Leave Encashment and Labor Welfare Fund has been denied as the same was stated in Tax Audit Report, but without appreciating that the payment had been made after the filing of Tax Audit Report but before filing of Income Tax Return 4. That the learned Addl./JCIT (A) wrongly ignored the appellant's submissions and failed to provide proper reasoning for the order passed. 5. That the learned Addl./JCIT (A) failed to appreciate the facts and circumstances of the case and the law applicable, leading to a decision that is not in accordance with established legal principles and precedents. 6. That the learned Addl./JCIT (A) erred in ignoring the material evidence on record, which would have shown that the appellant‟s case deserved to be allowed in full or in part, and in sustaining the AO‟s additions/disallowances. 7. That the learned Addl./JCIT (A) failed to pass a speaking order, and as such, the appellant‟s rights to a fair and reasoned decision were prejudiced, as no adequate reasons were provided for dismissing the grounds of appeal.
That the appellant may further urge additional grounds based on further facts, evidence, or legal developments, if any, during the course of the proceedings before the Tribunal.”
None appeared on behalf of the assessee. We proceed to dispose of this appeal on hearing the ld DR and based on the materials available on record. In the annexure to Form 3CD tax audit report vide clause 21(g), a sum of Rs. 1,37,06,000/- was reported under contingent liability by the Tax AVG Logistics Ltd Auditor. The ld CPC, Bengaluru based on this Tax Audit Report proceeded to add a sum of Rs. 1,37,06,000/- while passing an intimation u/s 143(1) of the Act. It was submitted by the assessee that the said contingent liability was not even debited in the profit and loss account and was not even claimed as deduction by the assessee in the return. The tax auditor had also filed letter dated 31.12.2024 explaining the amount of Rs. 1,37,06,000/- as reported under Clause 21(g) of tax audit report to pertain solely to the disclosure requirement of contingent liabilities as per notes of account annexed to the balance sheet and further confirmed that the assessee company had neither made any provision for the above mentioned contingent liability in financial statement nor the same has been debited in the profit and loss account. It was submitted by the assessee that the said disclosure in the notes to balance sheet has been made as per the requirement of Accounting Standard 29 - “Provision for Contingent Liabilities and Contingent Assets” issued by The Institute of Chartered Accountants of India (ICAI) which is mandatory to be followed by every company. The assessee also drew the attention of the order of the ld CIT(A) wherein the assessee had given the following explanation for the contingent liabilities of Rs. 1,37,06,000/- which is reproduced herein:- “Kindly refer to Note 34 on Contingent Liability in the Balance Sheet Enclosed herewith, which clearly shows that it is made of two items with following details, reproduced below from Balance Sheet:
a.
Claims against the Company not acknowledged as debt: Rs.51.63
Lacs Footnote:
Authority before which it is pending
Nature of tax
Year ended March31.2020
Liability against pending civil cases
(Refer
Footnote i)
Civil case
Rs.
51.63 Lacs
AVG Logistics Ltd
Footnote (i)There are cases related to workman compensation and accidental compensation pending before the Labour Court filed by ex- employees of the Company. The quantum of liability cannot be ascertained and will be decided by the Labour Law Court in due course of time.
The above footnote clearly states that it is not a real liability only contingent which will depend on the future incident ie court decisions, further as the Company vehicles are insured the liability(if any) in accidental cases will be borne by the Insurer. Thus these items are only stated for DISCLOSURE
PURPOSE and have not been debited/charged as Expense in Profit and Loss
Account, thus cannot be added back. The statement in Balance Sheet is only DISCLOSURE as per the requirements of Accounting Standard 29 on Provisions, Contingent Liabilities and Contingent Assets.
b.
Interest and other charges on late payment of instalments (Refer
Footnote 1) : Rs.85.43 Lacs Footnote:
It represents interest and other late payment charges that may be levied by the Banks and Financial Institutions on delay in payment of equated monthly instalment (EMI), which is subject to final negotiation and settlement with Banks and financial institutions.
The above footnote clearly states that it is an estimate which is subject to negotiation and settlement and it has not been debited/charged as Expense in Profit and Loss Account, thus cannot be added back. The statement in Balance Sheet is only DISCLOSURE as per the requirements of Accounting
Standard 29 on Provisions, Contingent Liabilities and Contingent Assets.
Further, the Tax Auditor has wrongly shown both these items as Contingent in Tax Audit Report under clause Point 21 (g) specifying the details as provided in the balance sheet reproduced below out of abundant caution and taking the interpretation from Accounting Standard 29 on Provisions,
Contingent Liabilities and Contingent Assets:
Clause 21(g) Particulars of any liability of a contingent nature
S.No. Nature Of Liability
Amount in (Rs.)
Liability against pending civil cases not acknowledged as debt 51,63,000
Interest and other charges on late payment of instalments 85,43,000”
Similarly, with regard to yet another inconsistency in the disclosure made in Form 3CD for reporting Section 43B of the Act, with regard to AVG Logistics Ltd disallowance of certain items which were not paid up the date of filing of return of income in respect of provision of leave encashment of Rs. 2,31,262/- and labour welfare fund of Rs. 18,345/- , it was submitted that the leave encashment of Rs. 2,07,170/- and labour welfare fund of Rs. 18,345/- was paid by the assessee company before filing of income tax return on 27.03.2021. Since, the said dues were paid by the assessee before the filing the return of income for AY 2020-21, the same would be allowable as deduction u/s 43B of the Act. The ld CIT(A) did not agree to the contention of the assessee and upheld the addition made by the ld CPC, Benguluru in the intimation u/s 143(1) of the Act. 5. We find that the detailed explanation given by the assessee has not been considered by the ld CIT(A). Further, the explanation given by the assessee requires factual verification by the ld AO. Hence, in the interest of justice and fairplay, we deem it fit and appropriate to restore this appeal to the file of the ld AO for de novo adjudication in accordance with law qua the issues in dispute before us. The ld AO shall pass a speaking order after duly considering the aforesaid submission and fresh submissions, if any, in this regard. Accordingly, grounds raised by the assessee are allowed for statistical purposes. 6. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 15/12/2025. - - (C. N. PRASAD)
ACCOUNTANT MEMBER
Dated: 15/12/2025
A K Keot
AVG Logistics Ltd