GARWARE SYNTHETICS LIMITED,THANE V. DCIT, CIRCLE-15(1)(2), MUMBAI

ITA 4386/MUM/2024

AI Insights

The case involves Garware Synthetics Limited, the appellant, contesting an order from the National Faceless Appeal Centre (NFAC), which upheld the disallowance of INR 43,68,932 under Section 40(a)(ia) of the Income Tax Act, 1961, and the non-adjustment of brought forward losses and unabsorbed depreciation by the Assessing Officer. The Tribunal found that the CIT(A) had not adequately addressed the Assessee's arguments and supporting documents, leading to the decision to remand the case back to the Assessing Officer for a thorough re-examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46918 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Set aside; Opportunity of being heard; Depreciation; TDS; Assessment record; Unabsorbed depreciation
• Section: 143(3); 250; 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “H(SMC)” BENCH, MUMBAI SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 4386/MUM/2024 (Assessment Year: 2018-2019) Garware Synthetics Limited Manish Textile Ind., Opp. Golden Chemicals, Penkar Pada, Post Mira, Thane – 401104, Maharashtra. [PAN:AAACG4208M] …………. Appellant The Deputy Commissioner of Income Tax Circle 15(1)(2), Mumbai Aaykar Bhavan, Mumbai – 400020, Maharashtra. Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Jay Bhansali Shri Pravin Salukhe Date Conclusion of hearing Pronouncement of order : : 14.01.2025 07.04.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the order, dated 08/08/2024, passed by the National Faceless Appeal Centre (NFAC), New Delhi [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 12/02/2021, passed under Section 143(3) read with Sections 143(3A) and 143(3B) of the Act for the Assessment Year 2018-2019. 2. The Assessee has raised following grounds of appeal : “1. Disallowance under section 40(a)(ia) of the Act of Rs. 43,68,932/- 1.1. The Commissioner of Income-tax (Appeals) (hereinafter ITA No.4386/Mum/2024 Assessment Year 2018-2019 2 referred to as \"the CIT(A)] erred in upholding the action of the Assessing Officer (hereinafter referred to as \"the AO\"] in disallowing a sum of Rs. 43,68,932/- under section-40(a)(ia) of the of the Income-tax Act, 1961 [hereinafter referred to as \"the Act\"]for reasons which are wrong, contrary to facts of the case and against the provision of law; 1.2. The CIT(A)/ AO failed to appreciate that the assessee ought to be allowed the said deduction of Rs. 43,68,932/-, earlier disallowed in Assessment Year 2009-10, by virtue of the first proviso to section 40(a)(ia) of the Act as the assessee has made payment of TDS in the previous year relevant to Assessment Year 2018-19; 1.3. The CIT(A)/ AO failed to appreciate that payment to contract workers was allowable expense in the relevant previous year on payment of applicable TDS irrespective, whether such corresponding credit has been claimed by the contractor or not; 2. Set off of brought forward losses and unabsorbed depreciation 2.1. The CIT(A)/ AO erred in not allowing the set off of brought forward losses of previous years without assigning any reason for the same. 3. The above grounds/sub grounds of appeal are without prejudice to each other.” 3. The relevant facts in brief are that the Assessee has filed return of income for the Assessment Year 2018-2019 declaring loss of INR.4,39,074/ which was selected for regular scrutiny. During the assessment proceedings, the Assessing Officer observed that the Assessee had claimed deduction of INR.43,68,932/- under Section 40(a)(ia) of the Act in respect of the expenses incurred in the Assessment Year 2009-2010. 4. The Assessing Officer rejected the above claim of deduction under Section 40(a)(ia) of the Act doubting the genuineness of the expenses. Further, while computing the tax liability, the Assessing Officer failed to adjust the brought forward losses of INR.15,36,210/- and unabsorbed depreciation of INR.1,96,309/-. 5. Being aggrieved, the Assessee carried both the issues in appeal ITA No.4386/Mum/2024 Assessment Year 2018-2019 3 before the CIT(A). Vide order, dated 08/08/2024, the CIT(A) dismissed the appeal preferred by the Assessee. 6. Now, being aggrieved, the Assessee has preferred the present appeal before the Tribunal on the grounds reproduced in paragraph 2 above. 7. We have considered the rival submissions and perused the material on record. 8. On perusal of the Assessment Order, the reason given by the Assessing Officer for disallowing deduction of INR.43,68,932/- claimed by the Assessee under Section 40(a)(i) of the Act was that the Assessee was getting the benefit of claiming deduction of INR.43,68,932/- on making payment of INR.90,000/- towards Tax Deducted at Source (TDS) and penal interest. The Assessing Officer did not doubt the factum of payment of TDS amount. During the appellate proceedings before the CIT(A), the Assessee had submitted the break-up of the disallowances made under Section 40(a)(ia) of the Act during various assessment years and the deduction claimed in respect of the amounts so disallowed in the subsequent assessment years on payment of TDS amount. It was also explained that the deduction of INR.43,68,932/- claimed by the Assessee during the Assessment Year 2018-2019 pertained to the following expenses incurred during the Assessment Year 2009-2010 and disallowed under Section 40(a)(ia) of the Act in the return of income: Particulars AY in which expenses incurred Deduction claimed u/s.40(a)(ia) Amount of TDS deducted and paid Wages & Allowances 2009-2010 40,29,695 83,012 Watch & Ward Expenses 2009-2010 68,000 1,401 Freight & Forwarding 2009-2010 2,62,225 5,402 Freight Inward 2009-2010 9,000 185 Total 43,68,920 90,000 Further, the Assessee had also placed before the CIT(A) supporting ITA No.4386/Mum/2024 Assessment Year 2018-2019 4 documents to establish the claim for deduction for the above expenses. A copy of the submission along with supporting documents (running into around 371 pages) has been placed before us as part of the paper-book filed by the Assessee. Bare perusal of the aforesaid written submission, dated 02/08/2024, shows that the Assessee had supported claim for deduction of expenses by furnishing TDS challans, audited financials, ledger accounts, petty cash book, supporting payment vouchers etc. However, without taking the same into consideration, the CIT(A) rejected the ground raised by the Assessee challenging the disallowance of INR.43,68,932/-. Even the ground raised by the Assessee seeking set off of the brought forward losses and unabsorbed depreciation was not adjudicated by the CIT(A). Therefore, order, dated 08/08/2024, passed by the CIT(A) is set aside. During the course of hearing it was contended on behalf of the Revenue that the documents furnished by the Assessee before the CIT(A) require verification as the same were not before the Assessing Officer. Accordingly, we deem it appropriate to remand the issues raised in appeal before the CIT(A) back to the file of the Assessing Officer with the directions to adjudicate the same after taking into consideration the submissions, dated 02/08/2024, and supporting documents/details filed by the Assessee before the CIT(A) along with other material forming part of the assessment record as per law after granting the Assessee a reasonable opportunity of being heard. Thus, in terms of the aforesaid the disallowance of INR.43,68,932/- made by the Assessing Officer is set aside and Ground No. 1 to 1.3 raised by the Assessee are allowed for statistical purposes. Since the Ground raised by the Assessee pertaining to set off of unabsorbed depreciation and brought forward losses was not adjudicated by the CIT(A) and the Assessing Officer denied Assessee’s claim while computing tax liability, we deemed it appropriate to remand the pertaining to set off of unabsorbed depreciation and brought forward ITA No.4386/Mum/2024 Assessment Year 2018-2019 5 losses back to the file of the Assessing Officer for denovo adjudication. Accordingly, Ground Nos. 2 to 2.1 raised by the Assessee are also allowed for statistical purposes. Since we have remanded the issues back to the file of the Assessing Officer, all the rights and contentions of the Assessee are left open. 9. Before parting we would like to observe that we are not in agreement with the approach adopted by the Assessing Officer while passing the Assessment Order, dated 12/02/2021, and therefore the Assessing Officer is directed not to reject the deduction of INR.43,68,932/- claimed by the Assessee merely on the ground that the Assessee is claiming deduction of INR.43,68,932/- on making payment of TDS amount of INR.90,000/-. We note that in the present case, the Assessee had paid the penal interest for delay in deposit of the aforesaid TDS amount and has furnished copy of the relevant challans. The aforesaid fact has not been disputed by the Revenue. The provisions contained in Section 40(a)(ia) of the Act read with proviso thereto permit an Assessee to claim deduction for expenses disallowed under Section 40(a)(ia) of the Act as deduction while computing income of the previous year in which tax has been paid. Since the Assessee has paid taxes during the relevant previous year the claim for deduction of INR.43,68,932/- made by the Assessee requires consideration. The Assessing Officer is directed to verify the claim in term of our directions in paragraph 8 above. 10. In result, in terms of paragraph 8 and 9 above, the present appeal preferred by the Assessee is allowed for statistical purposes. Order pronounced on 07.04.2025. Sd/- Sd/- (Om Prakash Kant) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated :07.04.2025 Milan,LDC ITA No.4386/Mum/2024 Assessment Year 2018-2019 6 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai "