ECOTECH IT SOLUTIONS PRIVATE LIMITED,PUNE V. DCIT CIRCLE1(1), PUNE

ITA 1061/PUN/2025

AI Insights

The case involves Ecotech IT Solutions Private Limited appealing against the order of the National Faceless Appeal Centre, Delhi, which arose from an assessment order under sections 143(3) read with section 144B of the Income Tax Act, 1961. The primary issues in the appeal were the disallowance of a provision for Exgratia/Long Term Service Award amounting to 88,00,000 and a provision for Leave Encashment of 1,20,565. The Tribunal heard arguments from both the assessee's counsel and the Departmental Representative, reviewed the relevant documents, and made determinations based on the legal provisions and facts presented.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792251 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2022-2023
• Appeal Filed On: 18-04-2025
• Other Referred Cases: Bharat Earth Movers Ltd. v. CIT ((2000) 245 ITR 428 (SC))
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: BHARAT ANDHALE
• Assessee Lawyers: RAHUL SARDA; AADITYA DASTANE
• Keywords: Set aside; Corroborative evidences

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “A”, PUNE BEFORE DR.MANISH BORAD, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1061/PUN/2025 Assessment Year : 2022-23 Ecotech IT Solutions Private Limited, Survey No.22/2/B, Sunshree Woods, NIBM Road, Kondhwa Khur, Pune 411 048, Maharashtra PAN : AABCE2644L Vs. DCIT, Circle-1(1), Pune Appellant Respondent आदेश / ORDER PER DR. MANISH BOARD, ACCOUNTANT MEMBER : The captioned appeal at the instance of assessee pertaining to A.Y. 2022-23 is directed against the order dated 25.02.2025 framed by National Faceless Appeal Centre, Delhi arising out of Assessment Order dated 07.03.2024 passed u/s.143(3) r.w.s.144B of the Income Tax Act, 1961. 2. Assessee has raised following grounds of appeal : “The following grounds are taken without prejudice to each other - Issue 1-Provision for Long-Term Service Award 1. That the learned CIT(A) erred in law and on facts in upholding the disallowance of ₹88,00,000 made on account of provision for long- Appellant by : Shri Rahul Sarda & Aaditya Dastane (virtual) Respondent by : Shri Bharat Andhale (virtual) Date of hearing : 02.12.2025 Date of pronouncement : 04.12.2025 Printed from counselvise.com ITA No.1061/PUN/2025 Ecotech IT Solutions Private Limited 2 term service award, without appreciating that the said provision was ascertained, based on a reasonable estimation, and actually paid in subsequent years. 2. That the CIT(A) failed to appreciate the supporting evidence including employee-wise working and post-year-end payments, and erred in treating the same as an unascertained liability. 3. That the disallowance is against the principles laid down by the Hon'ble Supreme Court in Bharat Earth Movers Ltd. v. CIT ((2000) 245 ITR 428 (SC)). Issue 2-Provision for Leave Encashment (₹1,20,565) 4. That the learned CIT(A) erred in confirming the disallowance of ₹1,20,565 on account of provision for leave encashment, without appreciating that the said sum had already been disallowed suo motu by the appellant in the computation of income filed with the return. 5. That the confirmation of the said disallowance has resulted in double disallowance, which is factually incorrect and unjustified. 6. That the lower authorities failed to consider the computation of income and tax audit report, leading to an erroneous enhancement of total income. General 7. That the orders passed by the authorities below are arbitrary and contrary to law and facts, and hence liable to be set aside. 8. The appellant craves leave to add to, alter, amend, or withdraw any of the above grounds at the time of hearing.” 3. The first issue for our consideration is regarding disallowance of provision for Exgratia/Long Term Service Award at ₹88.00 lakh. 4. At the outset, ld. Counsel for the assessee submitted that the said provision for Exgratia/Incentive to employees is an ascertained liability and the payment has been made in the subsequent year and Tax at source has been deducted and therefore the same deserves to be allowed. Printed from counselvise.com ITA No.1061/PUN/2025 Ecotech IT Solutions Private Limited 3 5. On the other hand, ld. Departmental Representative supported the order of ld.CIT(A). 6. We have heard the rival contentions and perused the record placed before us. We observe that the assessee is a Private Limited company and return of income for A.Y. 2022- 23 furnished on 29.10.2022 declaring income of ₹98,68,020. After the case being selected for scrutiny, assessment u/s.143(3) r.w.s.144B of the Act framed on 07.03.2024 making certain disallowance/additions. Against these additions assessee preferred appeal before ld.CIT(A) and partly succeeded. In the assessee’s appeal, the first issue is raised against the disallowance of deduction for Exgratia/Long Term Service Award at ₹88.00 lakh. 7. The contention of ld. Counsel for the assessee is that the alleged provisioning is an ascertained liability and deserves to be allowed. During the course of hearing, ld. Counsel has referred to a chart placed at page 97 of the paper book providing details of employees and the number of years of their service and the gross salary. In this detail, reference has been made to the monthly salary for October, 2023 (F.Y. 2023-24) for 11 employees and for the remaining 03 employees the major sum of ₹56.00 lakh has been paid, details of salary are not available. Ld. Counsel for the assessee fairly admitted that for the alleged provisioning made during F.Y. 2021-22 the details exhibiting the ascertained liability based on the salary paid to the employees during F.Y. 2021-22 are not available on record and if an opportunity is granted the same shall be placed before ld. Jurisdictional Assessing Officer in order to satisfy that correct provisioning has been made. Printed from counselvise.com ITA No.1061/PUN/2025 Ecotech IT Solutions Private Limited 4 8. Under these facts and circumstances, we are of the considered view that provisioning of Exgratia/Long Term Service Award at ₹88.00 lakh would be allowed to the assessee only if the assessee satisfies the ld. JAO about the calculation of ascertainment of the liability during the year under consideration. For this purpose, we remit back the first issue raised by the assessee to the file of ld. JAO who shall carry out the exercise and decide in accordance with law. Accordingly, the first issue raised in the Grounds of appeal is allowed for statistical purposes. 9. The second issue for our consideration is disallowance of provision for Leave Encashment at ₹1,20,565. 10. We have heard the rival contentions and perused the record placed before us. Ld. Counsel for the assessee has referred to the relevant pages of the paper book including the computation of income to show that the alleged sum has already been added back to the income and offered to tax and the alleged disallowance would tantamount to double addition. Ld. Departmental Representative could not controvert the said contention. We have gone through the computation of income which is placed at pages 2 to 6 of the paper book and find that the assessee had added inadmissible expenses which include disallowance u/s.43B of the Act and further details show unpaid expenditure u/s.43B and which contains the Leave Encashment amount of ₹5,43,783 and there is further details of such Leave Encashment and the Leave Encashment for F.Y. 2021-22 is stated at ₹1,20,565. It is also admitted that such provision for Leave Encashment is not allowed and the Printed from counselvise.com ITA No.1061/PUN/2025 Ecotech IT Solutions Private Limited 5 expenditure can be claimed in the year of payment. However, since the assessee has suo motu added the alleged sum to its total income the impugned disallowance is uncalled for. Finding of ld.CIT(A) is reversed. The second issue raised by the assessee in the Grounds of appeal is allowed. 11. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on this 04th day of December, 2025. Sd/- Sd/- (VINAY BHAMORE) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; \u0001दनांक / Dated : 04th December, 2025. Satish आदेश क\u0002 \u0003ितिलिप अ ेिषत / Copy of the Order forwarded to : 1. अपीलाथ / The Appellant. 2. \u000eयथ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, “A” ब\u0014च, पुणे / DR, ITAT, “A” Bench, Pune. 5. गाड\u0004 फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Assistant Registrar, आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. Printed from counselvise.com "