ALTEN CALSOFT LABS (INDIA) PRIVATE LIMITED ,BANGALORE V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU

ITTPA 1863/BANG/2024

AI Insights

The case involves M/s. Alten Calsoft Labs (India) Pvt. Ltd., which appealed against the final assessment order passed by the Deputy Commissioner of Income Tax, Bengaluru, concerning the assessment year 2020-21. The primary contention was regarding the disallowance of rental expenses claimed by the assessee. The Tribunal noted that the assessee had not been given sufficient time to comply with the show cause notice, which led to incomplete submissions. The Tribunal found merit in the assessee's arguments and evidence provided, which were not fully considered by the lower authorities due to procedural lapses. Consequently, the Tribunal decided to remit the matter back to the Assessing Officer for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708169 (ITAT-BANGALORE)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 14-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2020-2021
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERA MALHOTRA
• Assessee Lawyers: N V LAKSHMI
• Keywords: Set aside; Additional evidence; Transfer pricing; International transaction; Unexplained cash credit; TDS
• Section: 143(3); 142(1); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER S.P. No. 29/Bang/2025 (in IT(TP)A No. 1863/Bang/2024) & IT(TP)A No. 1863/Bang/2024 Assessment Year : 2020-21 M/s. Alten Calsoft Labs (India) Pvt. Ltd., IBC Knowledge Park, 7th Floor, Tower d 4/1, Bannerghatta Main Road, Bangalore – 560 029. PAN: AAECC2705R Vs. The Deputy Commissioner of Income Tax, Circle – 1 (1)(1), Bengaluru. APPELLANT RESPONDENT Assessee by : Ms. N V Lakshmi, Advocate Revenue by : Ms. Neera Malhotra, CIT-DR Date of Hearing : 17-04-2025 Date of Pronouncement : 14-07-2025 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the assessee challenging the final assessment order passed by the AO dated 23/07/2024 in respect of the A.Y. 2020-21 based on the directions given by the Ld.DRP. The assessee also raised the following grounds: Page 2 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 Page 3 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 Page 4 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 2. The brief facts of the case are that the assessee is a company doing the digital consulting, technology consulting, enterprise IT and product engineering catering to customers in multiple sectors like Education, Healthcare & Life Sciences, Networking & Telecom, Hi-Tech, ISV and Retail. The assessee filed their return of income u/s. 139(1) of the Act on 12/02/2021 declaring a total income of Rs. 27,69,31,340/- and also filed return u/s. 92CD on 28/03/2022 declaring a total income of Rs. 41,02,44,370/-. 3. Later on, the case of the assessee was selected for scrutiny u/s. 143(3) of the Act on the following reasons:  Deductees have claimed tax deduction against salary by a TAN in their ITRs however, corresponding TDS Page 5 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 statements are either not filed by the deductor or shows substantially lower figure of tax deducted  Claim of Large Value Refund  Substantial increase in share capital in a year  Deduction from Total Income(Chapter VI-A)  Large “any other amount allowable as deduction “claimed in Schedule BP of return 4. Thereafter, a notice u/s. 143(2) was issued on 29/06/2021. The assessee filed their reply to the said notice on 23/07/2021. Subsequently, the AO issued a notice u/s. 142(1) of the Act on 18/11/2021 and sought for the details of the nature and type of business, balance sheet, profit and loss account, capital account etc, computation of income, computation, evidence in support of deduction claimed u/s. 80IA, evidence in support of expenses claimed, ledger copy for the financial year 2019-20 etc. The assessee also filed their reply to the said notice. 5. During the assessment year, the assessee had some international transactions with associated enterprises and therefore to determine the arms length price, the case was referred to the transfer pricing officer u/s. 92CA of the Act. The transfer pricing officer also accepted the arms length price declared by the assessee and to that effect an order has been passed on 30/11/2022. Thereafter, another notice u/s. 142(1) was issued on 06/09/2023 which was not received by the assessee and therefore no reply has been filed to the said notice. 6. The AO, thereafter issued a show cause notice on 21/09/2023 in which the AO had proposed to treat the increase in share capital and share premium receipts as unexplained credit u/s. 68 of the Act. Similarly, the AO had proposed to disallow the deduction claimed u/s. 80JJAA of the Act. Apart from the said proposals, the AO has also proposed to restrict the expenses claimed towards rent. The AO in the show cause notice informed that if no details were made available, the proposals would be confirmed. The assessee replied to the show cause notice and furnished the documentary evidences in support of the increase in share capital as well as Page 6 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 the deduction claimed u/s. 80JJAA of the Act and the AO had accepted the said explanations and dropped the proceedings insofar as the two issues are concerned. 7. Insofar as the expenses towards the rent, the assessee submitted the details and enclosed the lease deed executed with the lessor viz., IBC Knowledge Park, Bangalore – 29. The assessee also submitted that the area taken out for rent by the assessee would be shared with Cresttek, ASM and Alten India. The assessee further submitted that the assessee would pay the entire rent to the owner and the sister concerns would reimburse the rental amount proportionately for the office space used by them. The AO in the show cause notice proposed to disallow 75% of the expenses claimed towards rent. The assessee further submitted that they had debited the rent in the P&L Account as per the rent straight line method and furnished the copy of the lease deed dated 05/10/2016. The AO based on the rental lease deed, had worked out the total rent payable by the assessee i.e Rs. 9,27,53,972/- and restricted the claim made in the P&L account and treated the difference amount of Rs. 4,80,05,569/- as the notional expenses and proposed to disallow the same. The AO not accepted the expenses offered by the assessee and disallowed the notional rent of Rs. 4,80,05,569/- u/s. 37 of the Act. 8. Insofar as the rental expenses claimed in the P&L account, the assessee submitted that their sister concerns shared the office space and therefore the amount debited in the P&L account is in order. The AO based on the lease deed submitted by the assessee, had worked out the rent payable at Rs. 9,27,53,972/- and out of the said amount, allowed the 25% of the amount as rent and disallowed the balance of Rs. 6,95,65,479/-. Thereafter the AO also proposed to initiate penalty proceedings u/s. 270A of the Act. On the above said lines, a draft assessment order u/s. 144C of the Act was made and communicated to the assessee for filing any objections to the same. Page 7 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 9. The assessee also submitted their objections in Form No 35A before the Ld.DRP-1, Bengaluru. The assessee gave an elaborate submissions in respect of the disallowance on the rental expenses. The assessee also requested the Ld.DRP to consider the additional evidences such as rent reconciliation workings, sub-lease agreements, invoices / debit notes /credit notes for the rental payments made to all the vendors and received from group entities and lease agreements with other vendors apart from IBC Knowledge Park. 10. The Ld.DRP also forwarded the additional evidences filed by the assessee and sought for the remand report. The Ld.DRP had not received any remand report from the AO and therefore the Ld.DRP considering the documents available on record arrived a conclusion that the taxpayer has not provided the relevant details and therefore observed that the AO seems to be, prima facie, justified. The Ld.DRP had not fully considered the additional evidences and pointed out some discrepancies in the additional evidences and on that basis, the Ld.DRP had not given any credence to the additional evidences filed by the assessee and thereby confirmed the addition made by the AO in the draft assessment order. Insofar as the penalty is concerned, the Ld.DRP observed that the same is consequential in nature and dismissed the said objections also. 11. Based on the said proceedings of the Ld.DRP, the AO had made the final assessment order on 23/07/2024 by sustaining the additions proposed in the draft assessment order. 12. As against the said final assessment order, the assessee is in appeal before this Tribunal. 13. At the time of hearing, the Ld.AR submitted that the AO had not granted sufficient time while issuing the show cause notice and therefore all the details, even though available with the assessee could not be filed before Page 8 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 him. The Ld.AR further submitted that apart from the lease agreement with the IBC Knowledge Park, the assessee had also entered into the lease agreements with other vendors and the assessee also entered into sub-lease agreements with other sister concerns and by considering all the documents, there would not be any excess rent claimed by the assessee. The Ld.AR further submitted that the 25% of the rental expenses estimated by the AO also without any basis and against the documents. The Ld.AR also submitted that the assessee had followed the straight line rent expenditure method recognised in the audited financial statements and therefore submitted that there was no excess claim of rental expenses. The Ld.AR also submitted that the assessee had also filed all the details by way of additional evidence before the Ld.DRP and an application was also filed to accept the said additional evidences but unfortunately the Ld.DRP observed that no remand report has been received from the AO and therefore on some small technical mistakes, had rejected the objections filed by the assessee. The Ld.AR also filed a paper book comprising page nos. 2 to 337 and enclosed the financial statements of the assessee and the additional documents such as rent conciliation workings, sub-lease agreements, invoices, debit notes, credit notes for the rental payments made to all the vendors and received from group entities and the lease agreements with other vendors apart from IBC Knowledge Park filed before the Ld.DRP. In the said paper book, the assessee also furnished the copies of the invoices raised by the assessee in the name of their sister concerns as well as the invoices raised by the various vendors to show that the assessee had incurred the rental expenses and also rents were reimbursed by their sister concerns. 14. The Ld.AR also filed an application on 29/11/2021 for admission of the further additional evidences such as the debit notes raised by the appellant on the group companies during the FY 2019-20. The Ld.AR would also submit that since the time to comply with the show cause notice was not available to the assessee, all the details filed before the Ld.DRP as well Page 9 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 as before this Tribunal, could not be filed before the AO and prayed that the documents may be considered and the appeal may be allowed. 15. The Ld.DR submitted that enough opportunities were granted by the AO and by the Ld.DRP and without availing the said opportunities, the assessee could not be permitted to file the said documents before this Tribunal and prayed to dismiss the appeal. 16. We have heard the arguments of both sides and perused the materials available on record. 17. The main issue to be decided in this appeal is about the disallowance of the rental expenses claimed by the assessee because sufficient materials were not placed before the AO. We have also perused the assessment order in which we came to know that the AO had issued notices u/s. 143(2) and notices u/s. 142(1) and finally a show cause notice was also issued on 21/09/2023. The assessee also submitted the details asked for by the AO to the notices issued u/s. 143(2) and 142(1) with the available details. The AO after considering the said documents had proposed to disallow the rental expenses and proposed to restrict the rent at 25% in the show cause notice dated 21/09/2023. It is the case of the assessee that the said notice was viewed by the assessee only on 25/09/2023 which being the last date for receipt of the reply and therefore the entire details sought for by the AO could not be filed while replying to the show cause notice. The fact remains that the assessee had responded to the notices and filed the details for the queries raised in the earlier notices but the full compliance to the show cause notice could not be done by the assessee since they do not have enough time to collect and file the details. 18. The assessee also filed their objections to the draft assessment order issued by the AO before the Ld.DRP and explained that there was no excess claim of rental expenses. Before the Ld.DRP, the assessee also filed an Page 10 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 application to accept the additional evidences such as rent reconciliation workings, sub lease agreements, invoices / debit notes / credit notes for the rental payments made to all the vendor and received from Group Entities and Lease agreements with other vendors apart from IBC Knowledge Park. 19. The Ld.DRP also forwarded the said additional evidences to the AO and sought for the remand report. The AO had not verified the said additional evidences and forwarded the remand report to the Ld.DRP. In such circumstances, the Ld.DRP had not fully considered the additional documents filed before it but only on verifying some details, had come to the conclusion that no credence could be given to the additional evidences furnished by the taxpayer. 20. We have also perused the additional evidences filed before the Ld.DRP which are all filed by way of paper book before us. In the additional evidences, the assessee had furnished the details of the several vendors other than IBC Knowledge Park, Bangalore which were not considered by the AO while making the assessment order. The assessee also filed their lease agreements with the other vendors in the paper book. Similarly, the sub-lease agreements were also filed by the assessee in the paper book to show that a portion of the area taken on rent was occupied by the sister concerns. The rent reconciliation workings and invoices / debit notes / credit notes for the rental payments made to all the vendors and received from their sister concerns were also furnished in support of their claim that the assessee had actually incurred the rental expenses. 21. The assessee also filed an application before us to admit the additional evidences in which the assessee had filed the debit notes raised by the appellant on the group companies during the F.Y. 2019-20. We are satisfied that the assessee had all the evidences to show that the rental expenses declared in their financial statements are correct and on actual. In the assessment order, the AO had considered the rental agreement with Page 11 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 IBC Knowledge Park only but not considered the other rental agreements made with other vendors such as Espee Engineering Works, Espee Associates, Ramaniyam Real Estates P Ltd., AWFIS Space Solutions Pvt. Ltd. and Imperial Servcorp. From the said details furnished by the assessee, it is established that the assessee had also paid rents not only to IBC Knowledge Park but also to other vendors as stated earlier. Apart from the rental expenses, the assessee also incurred rents for the office fitouts and maintenance of the office premises to various vendors. We have also found in the paper book the lease deeds executed with the other vendors as well as the sub-lease agreements with their sister concerns and the connected invoices in support of the claim that the assessee had incurred the rental expenses. 22. The additional documents filed before the Ld.DRP as well as before us were part of the claim made by the assessee towards the rental expenses and the expenses were also reflected in the financial statements and therefore, we cannot come to the conclusion that the claim made by the assessee is devoid of merits. Further, we are also satisfied that the said documents filed before the Ld.DRP as well as before us could not be produced before the AO since there was not enough time. Therefore the AO has no opportunity to cross verify the details furnished by the assessee before the Ld.DRP as well as before us. Even though the Ld.DRP had forwarded the said documents which were filed as additional evidences to the AO, the Ld.DRP had not received any remand report from the AO and therefore the AO had no opportunity to investigate the said documents filed by the assessee. 23. In such circumstances, in the interest of justice, we are of the view that one more opportunity may be granted to the assessee to appear before the AO with all the documents available with him including the documents furnished before the Ld.DRP as well as before us to verify the said claim made by the assessee. We, therefore, set aside the final assessment order of Page 12 of 12 S.P. No. 29/Bang/2025 & IT(TP)A No. 1863/Bang/2024 the AO dated 23/07/2024 and remit the issue to the jurisdictional assessing officer to pass an order afresh after hearing the assessee. We have disposed off the main appeal and therefore the stay petition becomes infructuous and dismissed. 24. In the result, the appeal filed by the assessee is allowed for statistical purposes and the stay petition is dismissed as infructuous. Order pronounced in the open court on 14th July, 2025. Sd/- Sd/- (PRASHANT MAHARISHI) (SOUNDARARAJAN K.) Vice – President Judicial Member Bangalore, Dated, the 14th July, 2025. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Bangalore "