DCIT, CENTRAL CIRCLE-2(3), MUMBAI, MUMBAI V. AVINASH CONSTRUCTION, PUNE

ITA 4245/MUM/2025

AI Insights

The case involves an appeal by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) which had deleted the disallowance of Rs. 2,41,71,700/- on expenditure claimed for advisory and consultancy services. The original disallowance was made by the Assessing Officer due to lack of supporting documents for cash expenses claimed by the assessee, Avinash Construction, following a search and seizure operation under section 132 of the Income Tax Act, 1961. The Tribunal's decision emphasized the need for the assessee to substantiate claims of expenditure with adequate documentation, failing which the disallowance was justified under the relevant sections of the Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 790594 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 26-06-2025
• Other Referred Cases: DCIT vs. Panna Corporation, CIT vs. Babulal Daga, CIT vs. President Industries, Pr. CIT Vs Mehul T. Desai, Greenfield Realty Pvt. Ltd. vs. ACIT, Dhanvarsha Builders and Developers Pvt. Ltd. vs. DCIT, Parthivi Constructions Pvt. Ltd. vs. ACIT, DCIT vs. GSNR Rice Industries Pvt. Ltd., Palam Gas Service vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Set aside; Business income; Opportunity of being heard; Business expenditure; Question of law; Unexplained expenditure; Document seized; Documents seized; Onus to prove; TDS; Search and seizure; Loose papers
• Section: 143(3); 132; 153A; 69C; 40A(3); 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “A” BENCH : MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No. 4245/Mum/2025 Assessment Year : 2017-18 DCIT, Central Circle-2(3), Room No. 803, 8th Floor, Old CGO Annexe Building, M.K.Road, Mumbai-400020. vs. Avinash Construction, Abil House 2, Ganesh Khind Road, Range Hill Corner, Pune-411007. PAN : AAEFA6358H (Appellant) (Respondent) For Assessee : Shri Vijay Mehta For Revenue : Shri Rajesh Kumar Yadav, CIT-DR Date of Hearing : 15-09-2025 Date of Pronouncement : 02-12-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld. CIT(A)’], dated 11-04-2025, pertaining to Assessment Year (AY) 2017-18, wherein the Revenue has taken the following grounds of appeal: “(i) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,41,71,700/- disallowing expenditure claimed for advisory and consultancy services under PGBP under the provisions of section 40A(3), 40(a)(ia) of the Income Tax Act, 1961, without appreciating that the assessee has not provided any bill/vouchers/proof of Printed from counselvise.com 2 ITA No. 4245/Mum/2025 challan towards payments in respect of these cash expenses and as per applicability of Section 40A(3) of the Income Tax Act. (ii) The appellant craves leave to add, Delete, alter, modify, rectify, substitute OR otherwise any OR all of the grounds of appeal at OR before the time of hearing of the appeal. (iii) The appellant, therefore, prays that on the ground(s) stated above, the order of the Ld. CIT(A), Mumbai may be set aside and that of the Assessing Officer to be restored.” 2. Briefly the facts of the case are that a search and seizure action u/s. 132 of the Income Tax Act, 1961 (‘the Act’) was carried out on ABIL Group on 21-07-2017 and in the said search, the assessee-partnership firm was also covered and at the residential premises of an employee of the assessee firm, Mr. Nitin Bharmnor, certain loose papers were found and seized referred to as Annexure-6, running into pages 1 to 38E, containing details of unaccounted cash receipts and un-accounted cash payments to various persons incurred on behalf of the ABIL Group. It was claimed that the source for the unaccounted expenses/payments were from advisory and consultancy services. In the return filed u/s. 153A for the impugned assessment year i.e., AY. 2017-18, the assessee-firm disclosed receipts of Rs. 8,25,00,000/- in cash on account of advisory and consultancy services and against the said receipts, has claimed cash expenses of 30% i.e., Rs. 2,47,50,000/- and offered net receipts of Rs. 5,77,50,000/- for taxation in its return filed u/s. 153A of the Act. 3. The assessment proceedings were initially completed u/s. 153A r.w.s. 143(3) of the Act vide order dt. 27-05-2019, wherein the AO inter alia brought to tax whole of the cash receipts of Rs. 8,25,00,000/- as income u/s. 69C of the Act and cash expenses of Rs. 2,47,50,000/- being 30% of the cash receipts were however disallowed. The assessee thereafter carried the matter in appeal before the Ld.CIT(A) and thereafter, before the Tribunal and the Co-ordinate Bench of the Tribunal vide its order dt.18- Printed from counselvise.com 3 ITA No. 4245/Mum/2025 01-2023 in ITA No.1797/Mum/2021, remitted the matter back to the file of the AO to determine the actual allowable expenditure since the assessee claims that these were incurred for the purposes of carrying on business and expenditure incurred are below the cash limit and AO was directed to verify the same after giving an opportunity of being heard to the assessee. 4. In the set aside proceedings, the AO issued various notices to the assessee followed by a show cause dt. 11-12-2023. In response, the assessee filed its submissions on 19-12-2023. In its submissions, the assessee submitted copies of seized documents highlighting expense entries and stated that such huge unaccounted business receipts of Rs. 8,25,00,000/- could not have been derived by the assessee without incurring any expenditure for the said business. It was also submitted by the assessee that it is bound to incur expenditure in the nature of travelling, salary, liasoning payments, business promotion etc. in order to derive the said business receipts. It was further submitted that the seized documents cannot be relied only to the extent they are advantageous to the Revenue and ignored on the aspects which are disadvantages to the Revenue. Therefore, if at all, the unaccounted receipts stated in the seized documents are to be considered, then the notings in respect of unaccounted expenditure mentioned in the very same seized documents also have to be taken cognizance of and only net real income earned by the assessee in respect of such unaccounted transactions has to be taxed. 5. The submissions so filed by the assessee were considered by the AO and taking into consideration the directions of the Co-ordinate Bench, wherein the Co-ordinate Bench remitted the issue of adhoc claim of expenditure to the file of the AO to determine the actual allowable expenses as the assessee submitted before the Tribunal that the Printed from counselvise.com 4 ITA No. 4245/Mum/2025 unaccounted expenditure was incurred, which is less than Rs. 20,000/- and Rs. 10,000/-, for which there is no violation under TDS provisions. Referring to the submissions filed by the assessee, the AO observed that most of the expenses are more than Rs. 20,000/-, for which the assessee has not provided bills and vouchers along with PANs. It was held by the AO that despite the opportunities given to the assessee, the assessee failed to provide details of PANs of the persons to whom the payments were made. During the course of assessment proceedings, it was held by the AO that no Pan available implies that no tax has been deducted on payment to these parties and, therefore, these expenses are liable for disallowance u/s. 40(a)(ia) of the Act. It was held by the AO that as per the provisions of section 40A(3) of the Act, only cash expenses upto Rs. 20,000/- can be allowable to the assessee. It was finally held by the AO that deduction may be allowed only if the assessee discharges the primary burden of proof and in the instant case, the assessee has failed to discharge its onus of proving the claim of expenditure made in its return of income and on verification of the details, it was observed that cash expenditure made below Rs. 20,000/- is only 5,78,300/- out of total expenses claimed by the assessee to the tune of Rs. 2,47,50,000/-. Hence, the amount of Rs. 5,78,300/- was allowed and balance of Rs. 2,41,71,700/- was disallowed. 6. The assessee again carried the matter in appeal before the Ld.CIT(A), who has since deleted the said disallowance so made by the AO and against the said order, the Revenue is in appeal before us. 7. The relevant findings of the Ld.CIT(A) which are under challenge by the Revenue are contained at paras 6.8 to 6.12 of the impugned order, which reads as under: Printed from counselvise.com 5 ITA No. 4245/Mum/2025 “6.8 I have found that during the course of search action, certain lose papers were found which contained details of unaccounted cash transactions. It is also observed that the receipt shown as per loose papers seized is Rs. 8,25,00,000/- and payments made as per seized materials of Rs. 7,56,51,667/- for the year under consideration. However, the appellant has offered undisclosed amount of Rs. 8,25,00,000/- and claimed expenditure of Rs. 2,47,50,000/- 30% of Rs. 8,25,00,000/-. However, the AO denied the same and disallowed the amount of claimed expenditure and added in the total income of appellant. 6.9 From above facts, I am the opinion that in respect of unaccounted receipts/sales, entire gross receipts cannot be subjected to tax and only the net profit element embedded therein constituting the 'real income' after considering the unaccounted expenditure incurred for earning such receipts and can be taxed as 'income'. The similar issue has been decided by various courts as under. 6.9.1 In the case of DCIT vs. Panna Corporation [74 ITR 89 (Guj.)], the relevant decision is reproduced as under. \"15. It can, thus, be seen that consistently, this Court and some other Courts have been following the principle that even upon detection of on money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves. If that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation. 16. In view of the legal position that not the entire receipts, but the profit element embedded in such receipts can be brought to tax, in our view, no interference is called for in the decision of the Tribunal accepting such element of profit at Rs.26 lakhs out of total undisclosed receipt of Rs.62 lakhs. In other words, we accept the legal proposition, the Tribunal accepting Rs.26 lakhs disclosed by the assessee as profit out of total undisclosed receipt of Rs. 62 lakhs, would not give rise to any question of law. 17. In the result, the tax appeals are dismissed.\" 6.9.2 In the case of CIT vs. Babulal Daga (387 ITR 114 (Guj.)], the relevant decision is reproduced as under: 3. \"Assessing Officer while making the addition as disclosed by the assessee essentially taxed the profit element whereas the Revenue desired that it should be the entire amount which should be taxed. By now it is well settled that even in case of unaccounted in the business which can be taxed and not the entire amount. In other words, if the assessee can point out that even on unaccounted Printed from counselvise.com 6 ITA No. 4245/Mum/2025 receipts, expenditure was also incurred for the purpose of business, it would be only the reasonable profit on such receipts which should be taxed.\" 6.10 It is further noted that, the appellant also mentioned that the disallowances u/s 40A(3), 40(a)(ia) etc. are not attracted while computing the undisclosed income on the basis of unaccounted sales/ business receipts and unaccounted expenditure noted in seized/ impounded documents which are not recorded in the books of accounts. In support of the facts, the appellant submitted certain decisions of judicial authorities in the following cases: i. DCIT v. Panna Corporation [74 DTR 89 (Guj)): ii. CIT v. Babulal Daga [387 ITR 114 (Guj) iii. CIT v. President Industries [258 ITR 654 (Guj) iv. Pr. CIT Vs Mehul T. Desai (2019 TaxPub(DT) 5219 (Guj-HC) v. Greenfield Realty Pvt. Ltd. v. ACIT IT (SS) A No. 289 292/Ahmedabad/2018] vi. Dhanvarsha Builders and Developers Pvt. Ltd. v. DCIT [102 ITD 375 (Pune) vii. Parthivi Constructions Pvt. Ltd. v. ACIT [ITA Nos. 93- 99/Raipur/2019] viii. DCIT v. GSNR Rice Industries Pvt. Ltd. ((2021) 213 TTJ 17 (Chennai). 6.11 Recently, Hon'ble ITAT, Mumbai bench vide its order dated 17.03.2025 in the case of M/s. Ganadhish GNP vs. DCIT Circle 6(1), Mumbai decided the similar issue in favour of assessee. The relevant portion of order is reproduced as under: \"These five appeals filed by the Revenue and the assessee are pertained to A.Y. 2019-20 to A.Y. 2021-22. These three appeals filed by the assessee and two appeals filed by the Revenue are ITA Nos.3966, 3965 & 3980/Mum/2024 & ITA Nos. 4481 & 4485/Mum/2024 M/s. Ganadhish GNP based on identical issue on similar facts, therefore, for the sake of convenience all these appeals are adjudicated together by taking the ITA No. 3966/M/2024 for the A.Y. 2019-20 filed by the assessee and ITA No. 4485/M/2024 for the A.Y. 2019-20 filed by the Revenue as a lead case and their findings will be applied to the other appeals mutatis and mutandis wherever applicable. \"On the facts of the case, in law and under the circumstances the Id. CIT(A), Central erred in estimating net profit @ 26% on unaccounted business receipts as against net income @ 20% offered by the assessee.\" Printed from counselvise.com 7 ITA No. 4245/Mum/2025 1. Whether on the facts and in the circumstances of the case the Id. CIT(A) erred in estimating the net profit @ 26% on unaccounted business receipts of Rs. 3,79,07,014/- by giving relief to the assessee of Rs. 2,80,51,190/- without appreciating the fact that the assessee has not submitted any documentary evidence that 74% of the expenses were incurred for the earning of such income and ignoring the fact that the cases of Hon'ble High Courts on which reliance was placed by the ld. CIT(A) are distinguishable on facts. xxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxx 9. The assessee has offered average net income from construction business in the audited books of accounts for the period A.Y. 2018-19 to 2022-23 at 18.33% The action of the AO to treat the whole on money receipt of Rs. 13,65, 13,712/- as part of net profit would result in abnormal net profit as about 70% on the sale amount of Rs. 32,97,59,363/- after adding the on-money result of Rs. 13,65,13,712/- to the net profit of Rs. 9,33,89,589/- already declared as per the books of account. We further noticed infirmities in the consolidated income computed by the id. CIT(A). Since the assessee was following the project completion method but for the A.Y. 2020-21 no sale/revenue was mentioned against the net income/net profit of Rs. 1,31,95,081/- which was shown for the A.Y. 2020-21 for the purpose of arriving consolidated income of all the years at the average net profit of 26% because the Id. CIT(A) at page no 20 of the order has considered the net profit for the A.Y. 2020-21 @ 13%. Therefore, we consider that the profit embedded in the on-money transaction is reasonable to estimate @ 22%. Therefore, we estimate the net profit @ 22% of accounted receipt of Rs. 3,79,07,014/- instead of 26% estimated by the ld. CIT(A). Accordingly, the appeal of the assessee is partly allowed and appeal filed by the Revenue is dismissed.\" 6.12 In view of above facts and relying on decisions above, I am the opinion that if all the unaccounted receipts stated in seized documents are considered then the notings in respect of unaccounted expenditure mentioned in seized documents have to be taken for net real income earned by appellant. As the appellant has already claimed unaccounted expenditure amount of 30% of unaccounted cash receipts, accordingly, the AO is directed to delete the addition made of Rs. 2,41,71,000/- Accordingly, the ground nos. 1 to 3 of appeal are allowed.” 8. During the course of hearing, the Ld.CIT-DR strongly contested the aforesaid findings of the Ld.CIT(A). It was submitted that as evident from Printed from counselvise.com 8 ITA No. 4245/Mum/2025 the order of the Ld.CIT(A), he has failed to appreciate the fact that this is the second round of appellate proceedings and in the first round, the Tribunal has given specific directions to the AO when the matter was remitted to the file of the AO for necessary verification and in light of the directions to the AO, he carried out the verification and has recorded his findings and in this regard, our reference was drawn to the relevant findings and directions of the Co-ordinate Bench of the Tribunal, which are contained at para 41 of its order in ITA No. 1797/Mum/2021 dated 18-01-2023. 9. It was submitted that the directions of the Co-ordinate Bench of the Tribunal were very specific and in the context of the submissions made by the assessee during the course of appellate proceedings that unaccounted expenditure was incurred less than Rs. 20,000/- and Rs. 10,000/- for which there is no violation under TDS provisions and the source of such expenditure is the consultancy income received in cash and considering the submissions so made by the assessee, the matter was remitted by the Coordinate Bench to the file of the AO to determine the actual allowable expenditure since the assessee claims that these are incurred for the purpose of carrying on business and the expenditure incurred are below the cash limit prescribed under the Act. It was accordingly submitted that in the set aside proceedings, the AO has to restrict himself and adhere to the directions of the Tribunal and following the same, has rightly made the disallowance u/s. 40A(3) of the Act, citing unverified cash payments and non-compliance with the statutory threshold as well as absence of PAN/TDS for payees u/s. 40(a)(ia) of the Act. 10. It was submitted that the Ld.CIT(A) wrongly accepted the assessee’s arguments of ‘net income determination’ and directed deletion of the Printed from counselvise.com 9 ITA No. 4245/Mum/2025 disallowance, relying on the alleged principles that if receipts are taxed off books as per seized documents, matching unaccounted expenses from those documents must also be allowed which is clearly beyond the scope of the directions of the Tribunal. 11. It was further submitted that Section 40A(3) of the Act mandates disallowance of cash expenses exceeding specified limit if unsupported by account payee cheque/draft/electronic means, save strictly defined exceptions. It was also submitted that the assessee’s only explanation is the existence of entries in seized documents, there is no PAN, bill, voucher, or confirmatory evidence submitted as to genuineness, necessity, or actual outflow to identified parties. It was further submitted that section 40(a)(ia) of the Act further bars deduction where TDS is to be deducted, but not done or not deposited. It was submitted that it is a settled law that the onus is on the assessee to substantiate with cogent primary evidence, every claim of business expenditure and the Ld.CIT(A)’s approach equates mere book entries/seized paper records with allowable deduction, bypassing strict statutory standards. It was submitted that ledger entries, if unsupported by any external material, do not establish incurrence nor payment of expenditure and allowing expenses merely because income was computed from the same record would defeat express legislative safeguards built into the Act u/s. 40A(3) and 40(a)(ia) of the Act. 12. It was further submitted that the principle of ‘netting’ or ‘netting of income’ applies only where both receipts and corresponding expenses are proved by satisfactory evidence. In the instant case, while the Department has taxed receipts recorded in seized documents as income, the claimed matching expenses remain wholly un-substantiated and thus cannot be allowed by default. Printed from counselvise.com 10 ITA No. 4245/Mum/2025 13. Further, reliance was placed on the decision of the Hon’ble Supreme Court in the case of Palam Gas Service vs. CIT [2017] 394 ITR 300 (SC). It was submitted that in the instant case, wherein the assessee made payments for services without TDS deduction and also failed to provide PAN or other verification, the disallowance u/s. 40(a)(ia) of the Act is mandatory regardless of whether the amount was paid during the year or remained payable at the close of the year. It was submitted that the decision of the Hon’ble Apex Court settles the issue that lack of TDS deduction (including where there is no PAN or verifiable identity), it will results in full disallowance of the claim regardless of timing. 14. It was also submitted that section 40A(3) of the Act applies regardless of the existence of expenditure entries in seized documents. It was accordingly submitted that the order of the Ld.CIT(A) is beyond the scope of specific direction of the Tribunal and contrary to statutory mandate u/s. 40A(3) and 40(a)(ia) of the Act and unsustainable in law and on facts. The onus to prove expenses has not been fulfilled by the assessee, and, therefore, the AO was right in disallowing Rs. 2,41,71,700/- and the principle of net income ‘matching’ does not override explicit statutory bar where no books/vouchers/evidence are produced. It was accordingly submitted that the order of the Ld.CIT(A) be set aside and that of the AO be restored. 15. In his submissions, the Ld. AR drawn our reference to the details of the cash receipts as per the seized documents and the details of the cash expenses. It was submitted that as against the total cash receipts of Rs. 16,21,49,667/- out of which Rs. 7,56,51,667/- pertains to the assessee, Printed from counselvise.com 11 ITA No. 4245/Mum/2025 the assessee has already came forward and declared cash receipts of Rs. 8,25,00,000/-. 16. It was further submitted that as regards the cash expenditure, there was total cash expenditure of Rs. 16,70,23,215/- and against that the assessee has only claim of 30% of Rs. 8,25,00,000/-. It was submitted that it is a well settled proposition that the seized documents have to be read as a whole and cannot be read in piecemeal to the extent they are advantageous to the interest of the Revenue. It was submitted that if at all the unaccounted receipts stated in the seized documents are to be considered, then the notings in respect of unaccounted expenditure mentioned in the very seized documents also needs to be taken cognizance of and only net income earned by the assessee in respect of such unaccounted transactions has to be taxed. 17. It was further submitted that even in respect of unaccounted receipts/sales, the entire gross receipts cannot be subjected to tax and only the net profit element embedded therein constituting real income after considering the unaccounted expenditure incurred for earning such receipts can be taxed as income. 18. It was further submitted that disallowance u/s. 40A(3) of the Act and 40(a)(ia) of the Act are not attracted where the income is computed basis the seized documents whether or not recorded in the Books of Account. In support, reliance was placed on the decision of the Co-ordinate Pune Bench of the Tribunal in the case of Dhanvarsha Builders & Developers (P.) Ltd., vs. DCIT [2006] 102 ITD 375 (Pune), wherein it was held that where in case computation of income of assessee is made dehors Books of Account and on the basis of seized material, provisions of section 40A(3) of Printed from counselvise.com 12 ITA No. 4245/Mum/2025 the Act are not applicable because this is not the case of the assessee or the Revenue that the computation of undisclosed income is on an exact basis as per the seized documents and the Books of Account. It was submitted that similar proposition has been laid down by the Co-ordinate Jaipur Bench of the Tribunal in the case of ACIT vs. Dr. Mohan Lal Swarnkar [2005] 95 TTJ (Jp) 969. 19. Further, reference was drawn to the decision of the Hon’ble Madras High Court in the case of SRS Mining vs. Union of India [2022] 141 taxmann.com 272 (Madras), wherein it was held that where it is a case of computation of income by the assessing authority, on the basis of certain seized documents, comprising loose sheets etc., keeping the regular Books of Account of the petitioner-firm aside and in such a situation, the disallowance u/s. 40A(3) of the Act could not have applied in these circumstances. It was submitted that the SLP filed against the said decision has since been dismissed by the Hon’ble Supreme Court as reported in 154 taxmann.com 346. 20. Regarding the contention raised by the Ld. DR in terms of directions of the Co-ordinate Bench of the Tribunal in the first round, the Ld.AR submitted that what the assessee has submitted in the first round was that the payment notings on the seized papers are incurred in cash and which is generally below Rs. 20,000/- or Rs. 10,000/- and since the cash expenses incurred are below Rs. 20,000/- or Rs. 10,000/-, no disallowance is called for u/s. 40A(3) of the Act. It was accordingly submitted that it was not submission of the assessee that all the payments are below the threshold of Rs. 20,000/- or Rs. 10,000/- and it was mentioned that generally the expenses are below the said prescribed threshold. It was accordingly submitted that the directions of the Printed from counselvise.com 13 ITA No. 4245/Mum/2025 Co-ordinate Benches of the Tribunal are, therefore to be seen in that context and which has rightly been appreciated by the Ld.CIT(A). 21. The ld AR accordingly supported the order and the findings of the Ld.CIT(A) and it was submitted that the Ld.CIT(A) has rightly appreciated the proposition so laid down by the various Benches of the Tribunal and Hon’ble High Court, wherein the seized documents have to be considered in totality and given that the assessee has claimed only 30% of the expenditure and not the actual expenditure as per the seized documents and prayed that the order so passed by the Ld.CIT(A) be confirmed and the appeal of the Revenue be dismissed. 22. We have heard the rival contentions and perused the material available on record. At the outset, it is noted that this is the second round of appellate proceedings before this Tribunal and in the first round, the Coordinate Bench has remitted the matter to the file of the AO and the relevant findings of the Co-ordinate Bench while remitting the matter read as under: “41. The next question is, the assessee has claimed the 30% of the consultancy charges declared as business income, without submitting any evidence. It was submitted that the unaccounted expenditures were incurred which are less than 20k and 10k, for which there is no violation under TDS provisions. The source for these expenditure are the consultancy income received in cash. There is merit in the arguments of the AO that assessee has not submitted any evidence of cash expenditure. Therefore, AO can make disallowance only the expenditure not the whole consultancy income, which assessee has already declared in its return of income. Therefore, we are inclined to remit the issue of adhoc claim of expenditure to the file of AO to determine actual allowable expenditure, since the assessee claims that these are incurred for the purpose of carrying of business and expenditures incurred are below the cash limit prescribed under the Act. Therefore, AO is directed to verify the same after giving opportunity of being heard to the assessee. Accordingly, the grounds raised by the assessee is partly allowed.” Printed from counselvise.com 14 ITA No. 4245/Mum/2025 23. We therefore find that the findings and directions of the Coordinate Bench are clear and specific where it has remitted the matter to the file of the AO. The findings of the Coordinate Bench are that it is a case of adhoc claim of expenditure by the assessee and the assessee has not submitted any evidence of cash expenditure. At the same time, it has taken into consideration the submissions made on behalf of the assessee and matter has been remitted to the file of the AO with certain specific directions. The directions of the Coordinate Bench are clear and specific to the AO wherein the AO has been asked to determine the actual allowable expenditure, to examine the claim of the assessee that the expenses were incurred for the purposes of carrying on business and also to examine the claim of the assessee that expenditure incurred are below the cash limits so prescribed under the Act. 24. In light of aforesaid directions of the Coordinate Bench, we find force in the contention advanced by the ld CIT/DR that the AO has to restrict himself and adhere to the directions so given by the Coordinate Bench while examining the claim of the expenditure so made by the assessee. 25. In this regard, we refer to the findings of the AO which are contained in para 9 and 10 of the assessment order passed u/s 153A r/w 254 of the Act which read as under: “9. In reply, the assessee filed submissions dated 19.12.2023, which are placed on record. The assessee submitted the copies of the seized documents highlighting expenses entries and stated that such huge unaccounted business receipts of Rs. 8,25,00,000/-could not have been derived by the assessee without incurring any expenditure for the said business. It was also submitted by the assessee that it is bound to incur expenditure in the nature of travelling, salary, liasoning payments, business promotion etc., in order to derive the above business receipts. Further, the assessee also stated that it is well settled law that the seized documents have to be read as a whole and not in bits and pieces. The seized documents cannot be read only to the extent they are advantageous Printed from counselvise.com 15 ITA No. 4245/Mum/2025 to the Revenue and ignored on aspects which are disadvantages to the Revenue. Therefore, if at all the unaccounted receipts stated in the seized documents are to be considered, then the nothing in respect of unaccounted expenditure mentioned in the very same seized documents also have to be taken cognizance of and only net real income earned by the assessee in respect of such unaccounted transactions has to be taxed. 10. In view of the above, considering the facts of the case, business of the assesse and directions given by the Hon'ble ITAT, it is observed that assessee has declared its cash receipts for advisory and consultancy services amounting to Rs. 8,25,00,000/- in his Return of Income filed u/s 153A. Further, as per directions of the Hon'ble ITAT, the Return of Income filed u/s 153A by the assessee is to be accepted as income of the assessee and the Hon'ble ITAT remitted the issue of adhoc claim of expenditure to the file of AO to determine the actual allowable expenses as the assessee submitted before hon'ble ITAT that the unaccounted expenditures were incurred which are less than Rs. 20,000/- and Rs. 10,000/-, for which there is no violation under TDS provisions. While going through the submission made dated 19.12.2023, it is observed that most of the expenditure are more than Rs. 20,000/-. For which the assessee has made not provided bills and vouchers along with PANs with respect to the parties under the head 'Advisory and consultancy expenses with TDS made. Despite opportunities given to the assessee, the assessee has failed to provide the details of PAN and to whom the expenses were made of the parties at point of time during the scrutiny assessment proceedings. No PAN available implies that no tax has been deducted with these parties also. As such, these expenses are liable for disallowance u/s 40(a)(ia) and 40A(3) also. Since the assessee has not provided any bill/vouchers/proof of challan towards payments in respect of these cash expenses and as per applicability of Section 40A(3) of the Income Tax Act only cash expenses upto Rs. 20,000/- can be allowed to the assessee. An expenditure or deduction will be allowed only if the assessee discharges the primary burden of proof. In the instant case, the assessee has failed to discharge its onus of proving the claim of expenditure made in its return of income. On verification of the details it was observed that cash expenditure made below Rs. 20,000/- is only Rs. 5,78,300/- out of total expenses claimed by the assessee to the tune of Rs. 2,47,50,000/-, related to receipts for advisory and consultancy services. Hence an amount of Rs. 5,78,300/- is allowed and balance of Rs. 2,41,71,700/- is disallowed.” 26. We therefore find that the AO during the set-aside proceedings has asked the assessee to substantiate its claim that the expenses were Printed from counselvise.com 16 ITA No. 4245/Mum/2025 incurred for the purposes of carrying on business and secondly, the expenditure incurred were below the cash limits so prescribed under the Act. In its submissions, the assessee has referred to copies of seized documents highlighting expense entries and it was submitted that it is bound to incur expenditure in the nature of travelling, salary, liasioning payments, business promotion etc in order to derive huge business receipts. The AO has however not accepted the submissions so made for the reason that most of the expenditure so claimed are more than Rs 20,000/- and the assessee has also not provided the requisite documentation in terms of bills/vouchers etc to substantiate its claim of the expenditure. At the same time, wherever the AO found that the expenditure so claimed were less than Rs 20,000/- being within the prescribed monetary limits for cash limits in terms of section 40A(3), he has allowed the expenditure which adds up to Rs 5,78,000/- and has sustained the remaining disallowance of Rs 2,41,71,700/-. We therefore find that the AO actions are clearly in consonance with the directions so given by the Coordinate Bench in the first round which are binding on the AO. 27. Coming to the findings of the ld CIT(A) wherein he has held that in respect of unaccounted receipts/sales, entire gross receipts cannot be subjected to tax and only the net profit element embedded therein constituting the 'real income' after considering the unaccounted expenditure incurred for earning such receipts can be taxed as 'income'; that the disallowances u/s 40A(3), 40(a)(ia) etc. are not attracted while computing the undisclosed income on the basis of unaccounted sales/ business receipts and unaccounted expenditure noted in seized/ impounded documents which are not recorded in the books of accounts; and that where all the unaccounted receipts stated in seized documents Printed from counselvise.com 17 ITA No. 4245/Mum/2025 are considered, then the notings in respect of unaccounted expenditure mentioned in seized documents have to be taken for net real income earned by appellant, we find that no such contentions or pleadings were raised before the Coordinate Bench in terms of determining the real income and these findings by the ld CIT(A) are therefore not arising in context of the specific directions of the Coordinate Bench wherein the matter was set-aside to the file of the AO for the limited purposes of determining the actual allowable expenditure which has been incurred for the purposes of carrying on business and also to examine the claim of the assessee that expenditure incurred are below the cash limits so prescribed under the Act. The ld CIT(A) has clearly failed to take into the consideration the specific directions of the Coordinate Bench and has failed to point out how the directions so given by the Coordinate Bench have not been complied with by the AO and to what extent. 28. The AO has passed the order u/s 153A r/w 254 of the Act and therefore, where the AO order is pursuant to specific directions of the Coordinate Bench in the first round, the AO is bound by the directions so given by the Coordinate Bench and equally, the ld CIT(A) is bound by the said directions. The ld CIT(A) cannot expand or reduce the nature and scope of the directions so given by the Coordinate Bench. The ld CIT(A) cannot entertain any new plea or contention raised on behalf of the assessee which has no bearing or connection with the directions so given by the Coordinate Bench, which has infact happened in the instant case where the ld CIT(A), in complete ignorance of the directions of the Coordinate Bench, has entertained fresh plea which has been raised on behalf of the assessee for the first time during the set-aside proceedings and has decided the matter. Printed from counselvise.com 18 ITA No. 4245/Mum/2025 29. In light of aforesaid discussions, we find that the various contentions raised by the ld AR during the course of hearing before us which are infact, reiteration of the contentions raised before the ld CIT(A) (which have been considered wrongfully by the ld CIT(A) as we have noted above) cannot be entertained and accepted for the simple reason that these contentions were not raised before the Coordinate Bench and therefore, these were not the subject matter of directions by the Coordinate Bench. The directions of the Coordinate Bench were limited and specific and therefore, the scope of the present appellate proceedings before us is also guided by the order so passed by the Coordinate Bench in the first round and as we have noted earlier, the same have been clearly adhered to by the AO in the set-aside proceedings. In view of the same, the decisions relied upon by the ld AR also doesn’t support the case of the assessee. 30. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, we set-aside the order and the findings of the ld CIT(A) and the order and the findings of the AO are hereby sustained. In the result, the appeal of the Revenue is allowed. Order pronounced in the open court on 02-12-2025 Sd/- Sd/- [ANIKESH BANERJEE] [VIKRAM SINGH YADAV] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 02-12-2025 TNMM Printed from counselvise.com 19 ITA No. 4245/Mum/2025 Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai Printed from counselvise.com "