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Facts
The assessee appealed against the order of the CIT(A) concerning additions and disallowances made by the AO for AY 2018-19. The assessee contended that substantial relief was granted by the CIT(A) but also raised grounds against other additions. The Tribunal considered six effective grounds out of twelve.
Held
The Tribunal found no infirmity in the order of the CIT(A) and noted that the AR did not provide material to contradict the CIT(A)'s findings. Issues remanded back to the AO for verification were also deemed justified.
Key Issues
Whether the CIT(A) correctly sustained certain disallowances and additions made by the AO, and whether issues remanded to the AO for verification were justified.
Sections Cited
143(1), 143(3), 40A(7), 36(1)(va), 195, 40(a)(ia), 40A(2)(b), 37, 234
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Income Tax Appellate Tribunal, DELHI BENCH ‘E’: NEW DELHI
Before: SHRI YOGESH KUMAR U.S. & SHRI AVDHESH KUMAR MISHRA
A.Y. 2018-19 Tumlare Software Services Assistant Commissioner Pvt. Ltd. of Income Tax, 9th NDM-1 NSP Pitampura, Vs. Circle-25(1), New Delhi C. R. Building, I P Estate, PAN: AAACT6978M New Delhi (Appellant) (Respondent) Appellant by Sh. Manish Jain, CA Respondent by Sh. Dheeraj Kumar Jain, Sr. DR Date of Hearing 21/08/2025 Date of Pronouncement 17/11/2025 ORDER
PER AVDHESH KUMAR MISHRA, AM
This appeal for Assessment Year (‘AY’) 2018-19 filed by the assessee is directed against the order dated 21.07.2023 of the Commissioner of Income Tax (Appeals), NFAC, New Delhi [‘CIT(A)’].
Vide 12 grounds of appeal, the assessee has challenged various additions and disallowances made by the Ld. Assessing Officer (‘AO’) in assessment order dated 07.04.2021. The Ld. AO has computed the income after making following additions and disallowances:
Sr. Para no. of Issue as discussed in AO order No. AO’s order
1. 3 Schedule BP of return of Income an amount of Rs. 59,35,721/-. Actual payment made Rs. 51,60,265/-. Surplus claim of gratuity to the tune of Rs. 7,75,456 deserves to be added back. 2. 4 Company failed to deposit the Employees Provident Fund within stipulated time 3. 5 Loss on disposal of Fixed assets- Capital Expenditure and cannot be allowed to be debited from the P&L a/c. 4. 6 Cumulative total of cash payments made. The payment so made shall be deemed to be the Profits and Gains of business 5. 7 Assessee co. Made a provision of Rs. 11,25,618 on account of Leave Encashment Provision. Rs. 6,69,886 was paid being leave Encashment. Difference Rs. 4,55,732 disallowed 6. 8 Paid damages to EPFO Rs. 35,203/- and penalty on delay in filing of statutory tax audit report of Rs. 1,50,000/- 7. 9 Loss on misappropriation of Funds 8. 10 Difference between Depreciation claimed under Companies Act and Income Tax Act, 9. 11 Disallowance of Reimbursement u/s 40A(a)(ia) 10. 12 No specific explanation of Donation made 11. 13 Disallowance on account of payment of interest paid u/s 234 for default in payment of advance income-tax 12. 14 Other Expenses claimed – Repairs and maintenance cost are almost equal to the value of Fixed Assets 13. 15 Repair charges of building- No such building or immovable property is found or given in Schedule of Tumlare Software Services P. Ltd. Fixed Assets 14. 16 Other Expenses being debited on account of payment to auditors 15. 17 Difference in Sale of Services ascertained from the audited profit and loss account reported (Rs. 13,42,41,894-Rs. 11,78,26,561) 16. 18 Payment made u/s 195 of the IT Act without TDS 17. 19 Defaulted amount of Rs. 1830667 (being 30% of entire payment of Rs. 6108223 paid without TDS) within the meaning of provisions of Section 40(a)(ia) 18. 20 Interest paid against liability of payment of TCS 19. 21 Inadmissible expenditure or Disallowable expenditure in light of provisions of Section 37 of the IT Act 20. 22 Inadmissible expenditure of the assessee company on account of Excessive Remuneration paid to the specified person as defined in section 40(A)(2)(b) 3. At the outset, the Ld. Authorized Representative (‘AR’) of the assessee submitted that the assessee had got substantial relief by the Ld. CIT(A), though it had raised grounds relating to almost all additions and disallowances made by the Ld. AO [which also included the addition/ disallowance deleted by the Ld. CIT(A)]. On bench directions, the Ld. Senior Departmental Representative (‘Sr. DR’) submitted a copy of the order giving appeal effect to the order of Ld. CIT(A)’s, wherein we find that the disallowance of Rs.7,75,456/- made under section 40A(7) of the Income Tax Act, 1961 (‘Act’), disallowance of Rs.18,59,443/- made under section 36(1)(va) of the Act, disallowance of interest of Rs.16,58,380/- paid due to Tax Tumlare Software Services P. Ltd. Collection at Source (TCS) default and the disallowance of Rs.48,03,040/- sustained by the Ld. CIT(A) out of the disallowance of Rs.74,48,680/- made out of various expenditure require adjudication at our end. Further, the income determined under section 143(1) of the Act is also in challenge as it has a direct impact on assessed income under section 143(3) of the Act. Thus, six effective grounds out of 12 grounds of appeal
(ground no. 4, 5, 6, 8, 9 and 10) require adjudication at our end, which read as under: -
4. That the Ld. Assessing Officer has erred on facts and in law and grossly neglect the principle of natural justice by taking the income as determined u/s 143(1)(a) of the Act, of Rs.2,15,06,362/- as returned income as against the income of Rs.1,54,07,865/- as submitted by the assessee during assessment proceedings.
5. That the Ld. Assessing Officer has erred on facts and in law by disallowing of Rs.7,75,456/- in accordance with the provisions of section 40A(7) of the Income Tax Act, 1961 on account of surplus claim of gratuity, without tangible evidence and understanding of the real facts in the matter as the same has already been considered in the computation of income filed to the Ld. AO during assessment proceedings.
6. That the Ld. Assessing Officer erred on facts and in law while making a disallowance of Rs.18,59,443/- on account of alleged late deposit of PF (employees’ contribution), deposited prior to filing of income tax return.
8. That the Ld. Assessing Officer has erred on facts and in law by making an addition of Rs.85,937/- on account of non-deduction of TDS u/s 195 of the Act whereas the same has already been added to the total income in the computation of income submitted to the Ld. AO.
9. That the Ld. Assessing Officer has erred on facts and in law by making an addition of Rs.16,58,380/- on account of interest paid against the liability of non-deduction of TDS/TCS as per the provisions of Income Tax Act, 1961 whereas the same has already been added to the total income in the computation of income submitted to the Ld. AO.
10. That the Ld. Assessing Officer has erred on facts and in law by making an addition of Rs.74,48,680/- on account of inadmissible expenditure or disallowable expenditure whereas the same has already been added to the total income in the computation of income submitted to the Ld. AO and also by the Ld. A.O individually in its impugned order.”
4. Before us, the Ld. AR contended that the AO would have computed income after taking the returned income at Rs.1,54,07,865/- instead of income determined at Rs.2,15,06,362/- under section 143(1) of the Act. He therefore, prayed relief on this score i.e. difference of Rs.60,98,497/- (Rs. 2,15,06,362 - Rs.1,54,07,865/-). Further, he contended that the disallowance of Rs.7,75,456/- under section 40A(7) of the Act has already been made in the revised computation; hence, the same should have not been added back again. On our specific query that the disallowance of PF of Rs.18,59,443/- under section 36(1)(va) of the Act, in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Private Limited (448 ITR 518); prima- facie, appeared justified, the Ld. AR did not have a plausible reply. However, he submitted that the Ld. CIT(A) had restored this matter to the Ld. AO for verification, therefore, it would be better that this issue should be decided accordingly.
5. With respect to the disallowance of Rs.85,937/- made under section 195 of the Act and the disallowance of interest of Rs.16,58,380/- due to TCS default, the Ld. AR submitted that the assessee had already made suo-moto disallowances in revised computation of income filed during the course of assessment proceedings. Therefore, the Ld. CIT(A) should have not sustained Tumlare Software Services P. Ltd. these disallowances. On the issue of disallowance of Rs.48,03,040/- on account of inadmissible expenditure is concerned, the Ld. AR submitted that assessee had made suo-moto disallowance in the revised computation of income filed during the course of assessment proceedings; therefore, the Ld. CIT(A) was not justified to sustain the same disallowance.
6. On the other hand, the Ld. Sr. DR defended the impugned order and submitted that the Ld. CIT(A) had verified the disallowance from the computation of income under section 143(1) of the Act and granted the consequential relief. Only the admitted disallowance not being part of the computation of income under section 143(1) of the Act had been sustained by the Ld. CIT(A). Since the Ld. AO had not taken cognizance of the suo-moto disallowance made in the revised computation of income filed during the course of assessment proceedings; therefore, further relief as prayed by the Ld. AR was not called for.
We have heard both the parties and have perused the material available on the record. We do not find any infirmity in the order of the Ld. CIT(A) as it is well reasoned. The Ld. AR has not brought any material on the record to contradict the finding of the Ld. CIT(A). Hence, we are not inclined to interfere with the order of the Ld. CIT(A) on the above-mentioned disputed issues other than the matters remanded back to the Ld. AO for verifications by the Ld. CIT(A) on the reasoning that the Ld. CIT(A) has carried out due verification before deciding the appeal by the Ld. CIT(A) and the appellant assessee has Tumlare Software Services P. Ltd. not demonstrated that such verification is prima-facie wrong. The issues remanded back to the Ld. AO for verifications are also held justified. We therefore, dismiss the appeal of the assessee.
In the result, the appeal of the assessee stand dismissed as above.