DCIT, CIRCLE-1(1)(1), AHMEDABAD, AHMEDABAD V. BLAZENET LIMITED, AHMEDABAD

ITA 1892/AHD/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle-1(1)(1), Ahmedabad as the appellant and Blazenet Ltd. as the respondent. The dispute centered on the additions made by the Assessing Officer in the assessment order for the Assessment Year 2018-19, which included disallowances under section 40(a)(ia) for alleged TDS default, and disallowances of network maintenance and unsubstantiated expenses. The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee after a detailed examination of the evidence provided during the remand proceedings. The Tribunal, after reviewing the remand report and the evidence, concurred with the findings of the CIT(A) and dismissed the Department's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712275 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHER SINGH
• Keywords: Set aside; Additional evidence; Business expenditure; TDS; Assessment record
• Section: 143(3); 201(1); 115JB; 40(a)(ia)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.1892/Ahd/2024 (Assessment Year: 2018-19) Deputy Commissioner of Income Tax, Circle-1(1)(1), Ahmedabad Vs. Blazenet Ltd., 403-404, Sarita Complex, Off. C.G. Road, Navrangpura H.O., Ahmedabad-380009 [PAN No.AAACB8732B] (Appellant) .. (Respondent) Appellant by : Shri Sher Singh, CIT DR Respondent by: None Date of Hearing 10.07.2025 Date of Pronouncement 30.07.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 02.09.2024 passed for A.Y. 2018-19. 2. The Revenue has raised the following grounds of appeal: “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.40,34,000/- made on account of disallowance u/s 40(a)(ia) of the Act, without appreciating the fact that the assessee did not furnish details of expense for verification? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the additioin of Rs.2,16,90,868/- made on account of disallowance of Network set up expenses, without appreciating the fact that the assessee did not furnish details of expense for verification? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.5,55,08,542/- made on account of disallowance of expenses, without appreciating the fact that the assessee has not furnished details of expenses? Printed from counselvise.com ITA No. 1892/Ahd/2024 DCIT vs. Blazenet Ltd. Asst.Year –2018-19 - 2– 4. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 5. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored?” 3. The brief background of the assessee’s case is that the assessee is a closely held company engaged in the business of providing internet services in the regions of Gujarat and Mumbai. It filed its return of income for the Assessment Year 2018-19 on 18.10.2018, declaring a total income of ₹1,63,83,290/- and book profit under section 115JB at ₹1,70,91,368/-. Subsequently, the return was selected for scrutiny primarily on the issues of default in TDS, allowability of business expenses, and related disallowances. The final assessment order was completed at a total income of ₹9,76,16,700/- after making disallowances aggregating to ₹8,12,33,410/-, including ₹40,34,000/- under section 40(a)(ia) for alleged TDS default, ₹2,16,90,868/- out of expenses claimed by the assessee, and ₹5,55,08,542/- towards unsubstantiated expenses. The assessee filed appeal before CIT(Appeals) against the order passed by the Assessing Officer. CIT(Appeals) allowed the appeal of the assessee, after calling for a remand report from the Assessing Officer. 4. Aggrieved by the order passed by Ld. CIT(A), the Department is now in appeal before us. On hearing both the parties before us and on perusal of assessment records, we note that in the assessment order, the Assessing Officer made disallowances aggregating to ₹8,12,33,410/- under three heads, namely: (i) disallowance under section 40(a)(ia) amounting to ₹40,34,000/-, (ii) disallowance of network maintenance expenses of ₹2,16,90,868/-, and (iii) disallowance of unsubstantiated expenses of ₹5,55,08,542/-. We note that additional evidences were placed on record before CIT(Appeals), who also sought a remand report from the Printed from counselvise.com ITA No. 1892/Ahd/2024 DCIT vs. Blazenet Ltd. Asst.Year –2018-19 - 3– concerned Assessing Officer. We observe that the Assessing Officer, in the remand proceedings, after issuing appropriate notices and obtaining complete details and supporting documents from the assessee, examined the claims afresh. In respect of the disallowance of ₹2,16,90,868/- towards network setup expenses, the AO noted that the assessee submitted complete party-wise expense details, including confirmations, sample invoices, communication details, bank statements and PAN details of all four parties under dispute. Upon verification, all documents were found to be valid and genuine. No adverse inference was drawn on this issue by the Assessing Officer in remand proceedings. Regarding the disallowance of ₹5,55,08,542/- on account of alleged unsubstantiated expenses, the AO confirmed that the assessee had submitted complete ledger accounts and sample invoices during remand proceedings. The documents were verified and no discrepancies were found. Accordingly, the AO accepted the genuineness of these expenses, and again, no adverse inference was drawn. As to the disallowance of ₹40,34,000/- under section 40(a)(ia) of the Act, the assessee submitted Form 26A certificates, duly signed by a Chartered Accountant, along with income tax return acknowledgments and computation details of the payees. The AO acknowledged that the conditions under the first proviso to section 201(1) were satisfied, and therefore, as per law, the assessee could not be treated as an assessee in default. Accordingly, even in respect of this issue, no adverse inference was drawn by the Assessing Officer in remand proceedings. From the above findings by the Assessing Officer in his remand report, it is evident that all three additions made in the original assessment order are not sustainable in view of the material evidences produced by the assessee and accepted by the AO in remand proceedings. Therefore, in light of the assessee’s facts and the findings given by the Assessing Officer in remand Printed from counselvise.com ITA No. 1892/Ahd/2024 DCIT vs. Blazenet Ltd. Asst.Year –2018-19 - 4– proceedings, in our considered view, the additions made by the AO in the assessment order under section 143(3) of the Act are liable to be deleted. Accordingly, we find no infirmity in order of Ld. CIT(A) so as to call for any interference. 5. In the result, the appeal filed by the Department is Dismissed. This Order pronounced in Open Court on 30/07/2025 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 30/07/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 21.07.2025 (Dictated over dragon software) 2. Date on which the typed draft is placed before the Dictating Member 21.07.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 21.07.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 30.07.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 30.07.2025 7. Date on which the file goes to the Bench Clerk 30.07.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… Printed from counselvise.com "