BIOCHEMICAL AND SYNTHETICS PRODUCTS PRIVATE LIMITED,HYDERABAD V. DCIT., CIRCLE-1(1), HYDERABAD

ITA 1306/HYD/2025

AI Insights

The case involves Biochemical and Synthetics Products P Ltd, which appealed against the order of the Learned Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, which had dismissed their appeal and upheld the disallowances made by the Assessing Officer. The disallowances pertained to various expenses claimed by the assessee, including repairs and maintenance, sales commission, legal and professional fees, and CSR expenses, totaling significant amounts. The Tribunal found that the CIT(A) had not properly considered the additional evidences submitted by the assessee and had not communicated any decision regarding their admission or rejection, thus violating the principles of natural justice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780048 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2020-2021
• Appeal Filed On: 18-08-2025
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHARATH JANARTHANAN
• Keywords: Set aside; Business income; Opportunity of being heard; Additional evidence; Business expenditure; Principle of natural justice
• Section: 143(3)

Judgement Text

" ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 1 of 10 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ DB-B ‘ Bench, Hyderabad Įी ͪवजय पाल राव, उपाÚ य¢ एवं Įी मधुसूदन सावͫडया, लेखा सदè य क े सम¢ । Before Shri Vijay Pal Rao, Vice-President A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.1306/Hyd/2025 (िनधाŊरण वषŊ/Assessment Year: 2020-21) Biochemical and Synthetics Products (P) Ltd Hyderabad PAN: AAACB9753C Vs. Dy.CIT Circle 1(1) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Advocate Bharath Janarthanan राज̾ व Ȫारा/Revenue by:: Dr. Sachin Kumar, Sr. DR सुनवाई की तारीख/Date of hearing: 08/10/2025 घोषणा की तारीख/Pronouncement: 10/10/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by Biochemical and Synthetics Products Private Limited (“the assessee”), feeling aggrieved by the order pass by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”), dated 23.07.2025 for the A.Y 2020-21. Printed from counselvise.com ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 2 of 10 2. The assessee has raised the following grounds of appeal: “1 The order of the Learned Commissioner of Income-Tax (Appeals)-National Faceless Appeal Centre CIT(A)-NFAPC is contrary to the facts and circumstances of the case and is against the principles of equity and natural justice. Validity of order of CIT(A): 2. The Learned CIT(A)-NFAPC erred in passing an ex-parte order dismissing the appeal of the appellant without providing an opportunity of being heard and is therefore, in violation of' principles of equity and natural justice. 3. The Learned CIT(A)-NFAPC erred in passing an ex-parte order dismissing the appeal of the appellant merely for the reason that the appellant did not respond to the hearing notices issued without attempting any physical delivery of the said notices and is therefore, again passed in violation of principles of equity and natural justice. 4. The Learned CIT(A)-NFAPC erred in passing an ex-parte order dismissing the appeal of the appellant without even considering a request for an extension of time on 23.07.202S to file the written submissions within a week and therefore, is again, in violation of principles of' equity and natural justice and therefore, ought to be set aside. 5. The Learned CIT(A)-NFAC erred in dismissing the appeal of the appellant by holding that the appellant filed only the ledgers and no other documents substantiating the claims without even considering the evidences and documents furnished by the appellant as additional evidences on 02.01.2025 when in fact, the appellant furnished the bills and invoices on 02.01.2025 to support the claim and therefore. the impugned order of the CIT(A)-NFAC is passed without considering the documentary evidences on record and deserves to be set aside. Validity of disallowance of repairs and maintenance Rs.50,00,000: 6. The learned CIT(A)-NFAPC erred in upholding the disallowance made by the assessing officer towards repairs and maintenance expenses incurred by the appellant on an estimated basis to the tune of Rs.50,00.000. Printed from counselvise.com ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 3 of 10 7. The learned CIT(A)-NFAPC erred in upholding the disallowance made by the assessing officer towards repairs and maintenance expenses without considering the evidences and documents furnished by the appellant including the bills submitted by the appellant as additional evidences on 02.01.2025 and therefore, the disallowance ought to be deleted. 8. The learned CIT(A)-NFAPC erred in upholding the disallowance made by the assessing officer towards repairs and maintenance expenses based on surmises and conjectures and without considering the fact that the expenses incurred by the appellant are for the purposes of business and are revenue in nature and that merely because disallowances were allegedly made in the earlier years for being capital in nature, it cannot automatically lead to the conclusion that the said expenses are not revenue in nature for the year under consideration as well. 9. The learned CIT(A)-NFAPC erred in upholding the disallowance made by the assessing officer towards repairs and maintenance expenses without considering the actual nature of expenses incurred and that most of the expenses in the year under consideration were carried out based on the recommendations made by an agency engaged by the appellant to comply with World Health Organization Good Manufacturing Practices guidelines and therefore, the disallowance made ought to be deleted. Validity of disallowance of sales commission expenses Rs.56,04,000: 10. The Learned CIT(A)-NFAPC erred in upholding the disallowance made by the assessing officer towards sales commission expenses incurred by the appellant on an estimated basis to the tune of Rs.56,04,000 and by restricting the allowance only to the tun of 0.12% of the total sales. 11. The learned CIT(A)-NFAC erred in upholding the disallowance made by the assessing officer towards sales commission expenses without considering the evidences and documents furnished by the appellant including the bills submitted by the appellant as additional evidences on 02.01.2025 and therefore, the disallowance ought to be deleted. Printed from counselvise.com ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 4 of 10 12. The learned CIT(A)-NFAC erred in upholding the disallowance made by the assessing officer towards sales commission expenses based on surmises and conjectures and without considering the fact that the expenses are genuine and are incurred for the purposes of the business and that merely because the total sales has reduced in the year under consideration, it cannot be a reason to disallow the expenses as allowability of claim of expenses under the Act is not dependent upon the benefit accrued as a result of incurrence of such expenditure. 13. The Learned CIT(A)-NFAC erred in upholding the disallowance made by the assessing officer towards the increase in sales commission expenses and allowing only the expenses only to the tune of 0.12% of total sales without considering the fact that the increase in commission during the year is primarily because of the attributable to the commission paid to M/s Camus Pharma Pyt ltd to the tune of Rs.55,25,000 for securing a big order and clearing the stock of the appellant and therefore, the disallowance ought to be deleted. 14. The learned CIT(A)-NFAPC erred in upholding the disallowance made by the assessing officer towards sales commission expenses for the reason that the total business receipts for the year under consideration is reduced despite increase in commission expenses when in fact, the total decrease in sales is attribution to reduction in export turnover only whereas, the domestic sales within India has increased in the year under consideration and therefore. the disallowance is without any basis and therefore, ought to be deleted. Validity of disallowance of legal and professional fees - Rs. 10,00,000: 15. The Learned CIT(A)-NFAC erred in upholding the disallowance made by the assessing officer on an adhoc basis to the tune of Rs.10.00,000 towards legal and professional fees paid by the appellant. 16. The learned CIT(A)-NFAPC erred in upholding the disallowance made by the assessing officer towards legal and professional fees without considering the evidences and documents furnished by the appellant including the bills submitted by the appellant as additional evidences on 02.01.2025 and therefore. the disallowance ought to be deleted. Printed from counselvise.com ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 5 of 10 17. The learned CIT(A)-NFAPC erred in upholding the disallowance made by the assessing officer towards legal and professional fees based on surmises and conjectures and without considering the fact that the expenses are genuine and are incurred for the purposes of the business and without considering the bills and other documentary evidences furnished by the appellant to substantiate the claim of expenses and therefore, the disallowance made ought to be deleted. 18. The Learned CIT(A)-NFAC erred in upholding the disallowance made by the assessing officer towards legal and professional fees based on surmises and conjectures and without Identifying the individual payments, which according to the assessing officer, are not incurred for the business of the appellant and therefore, the adhoc disallowance made is without any basis and therefore, ought to be deleted. Validity of disallowance of CSR expenses Rs.26,21,000: 19. The learned CIT(A)-NFAPC erred in upholding the disallowance made by the assessing officer towards Corporate Social Responsibility [\"CSR\"] expenses incurred by the appellant to the tune of Rs.26.21.000. 20. The Ld.CIT(A) NFAC erred in upholding the disallowance made by the Assessing Officer towards CSR exp eses incurred by the appellant by invoking Explanation 2 to section 37(1)of the Act when in fact, the said provision is not applicable to the instant case under consideration and therefore, the disallowance made cannot be sustained. Other Grounds 21. For these and such other grounds as may be raised during the course of hearing” 3. The brief facts of the case are that the assessee is a company engaged in the business of manufacture of pharmaceutical, medicinal chemicals, and botanical products. The assessee filed its return of income on 28.01.2021 declaring total income of Rs.20,30,46,190/-. The case of the assessee was selected for complete scrutiny, and accordingly, the Learned Printed from counselvise.com ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 6 of 10 Assessing Officer (“Ld. AO”) issued notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) on 29.06.2021. During the course of assessment proceedings, in order to verify the genuineness of certain expenditure claimed, the Ld. AO called for evidences from the assessee. In response, the assessee filed only the ledger accounts of such expenses. However, in the absence of supporting bills or vouchers, the Ld. AO made an addition of Rs.1,42,25,000/- and completed the assessment under section 143(3) read with section 144B of the Act on 22.09.2022, determining the total income of the assessee at Rs.21,72,71,190/- 4. Aggrieved by the order of the Ld.AO, the assessee preferred an appeal before the Ld. CIT(A). During the appellate proceedings, the assessee filed additional evidences along with a petition for admission of additional evidence under Rule 46A of the Income Tax Rules, 1962 (“the Rules”). However, the Ld. CIT(A) rejected the petition for admission of additional evidences and dismissed the appeal, upholding the order of the Ld. AO. 5. Aggrieved with the order of the Ld. CIT(A), the assessee has preferred the present appeal before this Tribunal. The Learned Authorised Representative (Ld. AR) invited our attention to page nos. 1 to 192 of Paper Book No.1 and submitted that the additional evidences were duly filed before the Ld. CIT(A) on 02.01.2025 along with a petition under Rule 46A of the Rules. He further submitted that subsequent to such filing, the Ld. CIT(A) issued notices dated 09.06.2025 and 15.07.2025, but neither made any reference to the additional evidences filed nor Printed from counselvise.com ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 7 of 10 communicated any decision regarding their admission or rejection. It was further pointed out that the assessee had filed replies to both the said notices; however, without considering the adjournment sought or the evidences already submitted, the Ld. CIT(A) proceeded to dismiss the appeal. The Ld. AR submitted that this action amounts to violation of the principles of natural justice, as the Ld. CIT(A) failed to provide an opportunity of being heard before rejecting the additional evidences. The Ld. AR also drew our specific attention to page no.13 of the appellate order, wherein the Ld. CIT(A) has inconsistently observed that the additional evidences are “not acceptable as the contention of the assessee is not reasonable,” while simultaneously remarking that “the assessee has not filed relevant bills and vouchers.” Such contradictory findings, according to the Ld. AR, demonstrate non- application of mind on the part of the Ld. CIT(A). It was further submitted that the evidences in question viz., including invoices and supporting bills for the impugned expenditure were genuine in nature, but could not be filed during the assessment stage as the Ld. AO proceeded to complete the assessment without affording further opportunity. Therefore, in the interest of justice, the Ld. AR prayed that the matter may be remanded to the file of the Ld. AO for de novo consideration, so that the case can be decided on merits after examination of the additional evidences. 6. Per contra, the Learned Departmental Representative (Ld. DR) vehemently opposed the plea for remand. He submitted that adequate opportunities had already been provided by both the lower authorities, which the assessee failed to avail. The Ld. Printed from counselvise.com ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 8 of 10 DR argued that the assessee cannot take advantage of its own inaction and that the Ld. CIT(A) had rightly rejected the additional evidences after considering the overall conduct of the assessee. Therefore, he supported the orders of the lower authorities. 7. We have carefully considered the rival submissions and perused the material placed on record. It is an undisputed fact that the assessee had filed additional evidences before the Ld. CIT(A) on 02.01.2025, accompanied by a petition under Rule 46A of the Rules. However, there is nothing on record to show that the Ld. CIT(A) had communicated any decision regarding the admission or rejection of the said evidences to the assessee. Further, we have also gone through page no.13 of the order of the Ld. CIT (A), the relevant portion of which is reproduced as under: “ln the light of these facts and on perusal of appellant various contentions/GOA/submissions as advanced during the appeal proceedings, its is noticeable that apparently appellant is reiterating the same/similar submissions as advanced before AO contending the genuineness of expenditure as incurred for its business activities and requested to consider. On the analogy, appellant further claimed to seek submission of additional evidences involving such bills and vouchers as attributable to these expenses for filing as applicable under Rule 4GA and requested to consider. However appellant failed to provide these bills and vouchers as sought by AO during the assessment proceedings by providing multiple opportunities including the SCN dated 25.03.2022 as explained in the assessment order and for which apparently appellant filed only part submissions/mere ledger extracts etc., as attributable to these expenses without submitting supporting bills and vouchers as sought by AO with specific observation to examine such excessive expenditure as reconciled in comparison to similar expenditure of earlier year . As appellant failed to avail these multiple opportunities apparently appellant claim to seek such submission of additional evidences as eligible under Rule 464 of I.T. Rules as contended is not reconcilable as appellant failed to Printed from counselvise.com ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 9 of 10 substantiate the same as applicable to the appellant facts of case as per law. ln the light of these facts. appellant mere contentions to seek such submission of additional evidences as qualified as per Rule 46A of I. T. Rules as pleaded is to be treated as not reasonable and thereby same are treated as not acceptable. Notwithstanding the same on perusal of appellant claims as advanced with this petition under Rule 464, it is observed that appellant is only adducing relevant expenses ledger extracts without substantiating the same with such supporting final bills and vouchers as attributable to these expenses as involving appellant business expenses as incurred for its verification by AO as per law. ln the absence of the same, appellant mere claims to seek such expenses as claimed with only supporting ledger extracts as involving explainable/verifiable business expenses is to be treated as not justifiable as appellant could not adduce all relevant bills and vouchers as incurred against these ledger extracts/expenses as sought by AO during assessment proceedings as well as during this appeal proceedings.” 8. On perusal of above, we find that the Ld. CIT(A) has made contradictory remarks i.e. on one hand rejecting the additional evidences as “not acceptable” and on the other, observing that “the assessee has not filed relevant bills and vouchers.” Such inconsistency indicates that the Ld. CIT(A) has not objectively considered the application under Rule 46A in accordance with law. In the present case, we find merit in the contention of the Ld. AR that the Ld. CIT(A) has rejected the additional evidences without granting proper opportunity to the assessee, thereby violating the principles of natural justice. The evidences in question are crucial for determination of the genuineness of the impugned expenditure, which goes to the root of the matter. Accordingly, in the interest of justice, we set aside the impugned order of the Ld. CIT(A) and restore the matter to the file of the Ld. AO with a direction to consider the additional Printed from counselvise.com ITA No 1306 of 2025 Biochemical and Synthetics Products P Ltd Page 10 of 10 evidences filed by the assessee. The Ld. AO shall afford adequate opportunity of being heard to the assessee and pass a reasoned order in accordance with law after proper verification. The assessee is also directed to fully cooperate with the Ld. AO during the proceedings and shall not seek unnecessary adjournments. 9. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 10th October, 2025. Sd/- Sd/- (VIJAY PAL RAO) VICE PRESIDENT (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER Hyderabad, dated 10th October, 2025 Vinodan/sps Copy to: S.No Addresses 1 Biochemical & Synthetics Products (P) Ltd, 11-6-2029 Phase II, SVCIE, Balanagar, Hyderabad 500037 2 Dy. CIT, Circle 1(1), IT Towers, Professor Elyas Burney Road, AC Guards, Masab Tank, Hyderabad 500004 3 Pr. CIT - Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order Printed from counselvise.com "