LALL CONSTRUCTION COMPANY ,DELHI V. DEPUTY COMMISSIONER OF INCOME TAX (34) 1, DELHI, DELHI

ITA 4059/DEL/2025

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The case involves Lall Construction Company, which filed appeals against the orders of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, concerning disallowances made by the Assessing Officer under the Income Tax Act, 1961. The primary issues were the disallowance of TDS credit on mobilization advances and the disallowance of contributions received from employees for ESI/PF under Section 36(1)(va) of the Act. The Tribunal found that the CIT(A) and AO erred in their decisions and set aside their orders, directing the AO to allow the TDS credit and to reconsider the disallowance of ESI/PF contributions after a proper hearing.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839857 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2021-2022
• Appeal Filed On: 24-06-2025
• Other Referred Cases: ACIT vs Peddu Srinivasa Rao, Toyo Engineering India Limited vs ACIT, Supreme Renewable Energy Limited Vs. ITO, Kanoi Paper & Industries Ltd. vs ACIT, Benson Movers Pvt. Ltd. vs ACIT-CPC ITA No. 959/Del/2021, Weather Comfort Engineers Private Limited vs ACIT-CPC ITA No. 959/Del/2021, Sentinel Consultants (P) Ltd. vs ACIT, Checkmate Pvt. Ltd. vs CIT, Khyati Realtors (P) Ltd. vs ACIT, B. L. Kashyap & Sons Ltd. vs ACIT, VVDN Technologies Pvt. Ltd. vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SALIL KAPOOR; SUMIT
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Capital receipt; Period of limitation; Capital expenditure; Principle of natural justice; TDS; FORM 26AS
• Section: 143(3); 37; 37(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’: NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.4060/Del/2025 (ASSESSMENT YEAR 2017-18) Lall Construction Company, Plot No.28, Third Floor, Karuna Kunj, Sector-3, Dwarka, New Delhi-110 088. PAN-AACFL0648M Vs. Special Range-12 AS AO. (Appellant) (Respondent) ITA No.4059/Del/2025 (ASSESSMENT YEAR 2021-22) Lall Construction Company, Plot No.28, Third Floor, Karuna Kunj, Sector-3, Dwarka, New Delhi-110 088. PAN-AACFL0648M Vs. Deputy Commissioner of Income Tax (34)-1, Delhi. (Appellant) (Respondent) Assessee by Shri Salil Kapoor, Adv., Sumit Lalchandani, Adv., Ananya Kapoor, Adv. and Shivam Yadav, Adv. Department by Shri Manish Gupta, Sr. DR Date of Hearing 27.11.2025 Date of Pronouncement 23.02.2026 O R D E R PER VIMAL KUMAR, JM: The application for condonation of delay of 267 days in filing appeals and appeals of the assessee are against the orders of Learned Commissioner of Income Printed from counselvise.com 2 ITA Nos.4059 & 4060/Del/2025 Lall Construction Company vs. DCIT Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the Ld. CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’), dated 18.07.2024 and 25.07.2024 arising out of assessment orders dated 26.12.2019 and 20.06.2023 of Ld. Assessing Officer, Special Range-12/CPC u/s 143(3) of the Act u/s 143(1) r.w.s. 154 of the Act for Assessment Years 2017-18 and 2021-22 respectively. 2. First we take up the appeal in ITA No.4060/Del/2025 for Assessment Year 2017-18 for adjudication. 3. Brief facts of the case are that the assessee filed return of income on 28.10.2017 and subsequently revised the return on 22.01.2019 declaring income of Rs.1,97,52,630/-. During the course of assessment proceedings, assessee was asked to furnished the reconciliation of TDS in Form TDS in Form 26AS and that claimed in ITR. In reply, assessee claimed TDS deducted on mobilization/secured advances of Rs.24,39,087/- on completion of proceedings. The Ld. AO disallowed TDS credit of Rs.24,39,087/- vide order dated 26.12.2019. 4. Against order dated 26.12.2019 of Ld. AO, the assessee filed appeal before the Ld. CIT(A) which was dismissed vide order dated 18.07.2024. 5. Being aggrieved, the appellant assessee filed appeal with following grounds of appeal: “1. That the assessment order dated 26.12.2019 passed by the DCIT, Special Range 12 (AO\") under section 143(3) of the Income-tax Act, 1961 (\"the Act\") for the Assessment Year (\"AY\") 2017-18, and the disallowances made are illegal, bad in law, without jurisdiction and barred by time limitation. The National Faceless Appeal Centre ('NFAC\") vide order dated 18.07.2024 has also erred in upholding the disallowances qua the same. Printed from counselvise.com 3 ITA Nos.4059 & 4060/Del/2025 Lall Construction Company vs. DCIT 2. That in view of the facts and circumstances of the case and in law, the AO as well as the NFAC have erred in facts and in law in disallowing the TDS credit of Rs. 24,39,087/- due to the assessee. 3. That in view of the facts and circumstances of the case and in law, the AO as well as the NFAC have erred in facts and in law in not allowing credit of TDS deducted on mobilization/secured/machinery advance amounting to Rs. 24,39,087/- without considering the fact that it is a settle position of law that credit of TDS deducted on mobilization advance is allowable in the year of deduction itself. 4. That in view of the facts and circumstances of the case and in law, the AO as well as the NFAC have erred in facts and in law in not accepting the fact that entire credit of TDS deducted on mobilization advance is allowable in the year of deduction itself. 5. That the documents, explanations filed by the Appellant, and the material available on record have not been properly considered and judicially interpreted and have been wrongly ignored by the AO as well as the NFAC. 6. That in view of the facts and circumstances of the case, the AO has erred on facts and in law in making the addition without giving adequate and reasonable opportunity of being heard and to enable the appellant to file further evidences in support of his case. That the NFAC too has failed to appreciate the same. 7. That in view of the facts and circumstances of the case and in law, the AO has erred in initiating the penalty proceedings against the assessee under section 270A of the Act.” 6. The Ld. Authorized Representative submitted that there is delay of 267 days in filing appeal due to illness, bypass surgery of the partner of assessee. In view of submissions and affidavit dated 18.06.2025 of partner of assessee, it is apparent on record that there is delay of 267 days in filing appeal due to illness. The explanation does not smack of malafide as appellant has not gained anything by not filing appeal within period of limitation, therefore, the delay of 267 days in filing appeal is condoned. 7. The Ld. Authorized Representative for appellant assessee submitted that the appellant assessee is a Contractor and TDS deducted by the Contractee was qua Printed from counselvise.com 4 ITA Nos.4059 & 4060/Del/2025 Lall Construction Company vs. DCIT mobilization advances. The issue involved is squarely covered in ITA No.5842/Del/2013. 8. The Ld. Departmental Representative relied on the order of Ld. CIT(A). 9. From examination of record in the light of aforesaid rival contention, it is crystal clear that Ld. CIT(A) vide order dated 18.07.2024 upheld the order dated 26.12.2019 of Ld. AO disallowing excess TDS credit of Rs.24,39,087/- claimed by assessee. The appellant assessee has claimed TDS already paid for unadjusted mobilization advances. 9.1 The Co-ordinate Bench in ITA No.5842/Del/2013 in para No.6 & 7 held as under: “6 We have heard the rival submissions and have also gone through the relevant records. We agree with the contention of the Ld. AR that the assessee’s case is covered in favour of the assessee by the order of the ITAT, Visakhapatnam in the case of ACIT vs Peddu Srinivasa Rao (supra). ITAT Visakhapatnam Bench has discussed the issues at length in paragraphs 3,4,6,8 and 10 of the impugned order. The relevant portion of these paragraphs are being reproduced for a ready reference:- \"3. ………this mobilization advance the nature of loan, on which interest @ 8% is chargeable as per the terms of sub-contract agreement. The mobilization advance capital receipt being in the nature of a loan and therefore, there was no legal obligation deduct tax at source. However, M/s Gammon India Limited deducted tax at source in respect of such mobilization advance also..4.. mobilization advance was granted to the assessee in order to enable it to deploy machinery and man power sufficient quantity at awarded to assessee. It was further contended that since the mobilization advance is not in the nature of income, TDS can be deducted but it was however, deducted by Gammon India Limited. Therefore, the credit of the same is to be allowed to the assessee. The contentions of the assesses were examined by the CIT(A) and following the der of the Tribunal, Mumbai Bench in case of Toyo Engineering India Limited, 5 SOT 616 = 2005-TIOL-234- ITAT-MUM directed the A.O. to allow the credit of TDS in the year under consideration. Printed from counselvise.com 5 ITA Nos.4059 & 4060/Del/2025 Lall Construction Company vs. DCIT 6……..Undisputed tax was deducted at the source on payment of the mobilization amount though this mobilization amount is merely an advance given to the assessee and not chargeable to tax. But once deducted on any payment made to the assessee, though it is chargeable to tax, a credit of the same should be given to the assessees. mobilization amount would not be adjusted against one contract receipt. It would be adjusted in part in subsequent years whenever the subcontract bills were raised. Therefore, it would be very difficult claim a proper set off of the TDS deducted in subsequent years in which no separate certificate would be issued. The certificate Issued in the year in which this mobilization amount was paid to the assessees. The Ld. Counsel for the assessee further contended that all these aspects were examined by the Tribunal in the case of Supreme Renewable Energy Limited Vs. ITO 32 DTR 140.8..... As per amended provisions of section 199, in subsection 1, it has been stated that any deductions made in accordance with the foregoing provisions of this chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made. Therefore, as per the amended provisions, once the TDS was deducted, a credit of the same to be given to the assessees, irrespective of the year to which it relates………….. 10. From a careful perusal of the legal propositions laid down through the aforesaid orders by the Tribunal and the relevant provisions of the Act, we are of the view that once the TDS was deducted Government, a credit of the should be given to the assessees in order to avoid all sorts of complications in the year of deduction of the TDS. Therefore, we find no infirmity in the order of the CIT(A) who has rightly directed the A.O. to allow the credit of the TDS in the impugned assessment year. Accordingly, the order of the CIT(A) is confirmed.\" 7. In view of the aforesaid order of the ITAT, Visakhapatnam Bench, we set aside the order of the Ld. CIT(A) and direct the Assessing Officer to grant credit of TDS of Rs.8,77,950/-” 10. In view of the above material facts and well settled principle of law, it is held that the action of Ld. CIT(A) and the Ld. AO in disallowing the TDS already paid for unadjusted mobilization advances being illegal are set aside and Ld.AO is directed to allow TDS credit to the assessee. Accordingly, ground of appeal Nos.1 to 7 are allowed. Printed from counselvise.com 6 ITA Nos.4059 & 4060/Del/2025 Lall Construction Company vs. DCIT 11. Secondly in ITA No.4059/Del/2025, Ld. AO vide order dated 20.06.2023 made addition of Rs.5,71,510/- because of disallowance u/s 36(a)(va) of the Act on account of contribution received from empoyee’s share for ESI/PF. Against the order dated 20.06.2023 of Ld. AO, the assessee filed appeal before the Ld. CIT(A) which was partly allowed vide order dated 25.07.2024. 12. Being aggrieved appellant assessee field appeal in ITA No.4059/Del/2025 with following grounds of appeal: “1. On the facts, and circumstances of the case, the order dated 25.07.2024 passed under Section 250 of the Income Tax Act, 1961 ('the Act') by the National Faceless Appeal Centre ('NFAC) confirming the additions made by the Centralized Processing Centre Processing Unit (CPC) is illegal, bad in law. without jurisdiction, not in accordance with the provisions of the Act, and in gross violation of principles of natural justice. 2. In view of the facts and circumstances of the case, the NFAC has erred in confirming the order dated 20.06.2023 passed by CPC under Section 154 of the Act and the addition made therein is illegal, bad in law, without jurisdiction, and void ab initio. The addition made is erroneous, unjustified, and illegal. 3. In view of the facts and in the circumstances of the case, the NFAC has erred in confirming the addition/disallowance of Rs. 3,43,150/- on account of contributions received from employees for funds referred in Section 36(1) (va) of the Act and assessing the total income of the Assessee at Rs. 6,21,25,660/-. 4. In view of the facts and circumstances of the case NFAC has failed to consider that the CPC has erred in making disallowance of Rs. 3,43,150/- u/s 36(1)(va) of the Act on account of contributions received from employees for funds referred in Section 36(1)(va) of the Act. 5. In view of the facts and circumstances of the case and in law, the NFAC has failed to appreciate that no disallowance is called for where employee's share of contribution is paid before the due date of filing the return under Section 139(1) of the Act. Therefore, the disallowance amounting to Rs. 3,43,150)/-made on this account is illegal, bad in law and liable to be deleted. 6. In view of the facts and circumstances of the case, the NFAC has failed to consider that the addition has been made under Section 143(1) of the Act and is beyond the scope of the said section and as such the CPC had no power/authority/jurisdiction to make the said addition u/s 143(1) of the Act. Printed from counselvise.com 7 ITA Nos.4059 & 4060/Del/2025 Lall Construction Company vs. DCIT 7. That in view of the facts and circumstances of the case, the NFAC has failed to consider the fact that the deposit of employee contribution should be reckoned from a month in which the salary has been actually disbursed rather than the month for which the salary relates. 8. That the CPC and NFAC has failed to provide any opportunity to the Assessee and the same is in violation of the principle of natural justice and the impugned orders are liable to be set aside on this ground alone. 9. That the documents, explanations filed by the assessee, and the material available on record have not been properly considered and judicially interpreted and have been wrongly ignored.” 13. The Ld. Authorized Representative submitted that there is delay of 267 days in filing appeal due to illness, bypass surgery of the partner of assessee. In view of submissions and affidavits dated 18.06.2025 of partner of assessee, it is apparent on record that there is delay of 267 days in filing appeal due to illness. The explanation does not smack of malafide as appellant has not gained anything by not filing appeal within period of limitation. Therefore, the delay of 267 days in filing appeal is condoned. 14. The Ld. Authorized Representative submitted that the issue is covered in favour of the assessee in ITA No.4206/Del/2024 for Assessment Year 2020-21. Reliance was placed on ITA No.3207/Del/2025 decided on 19.10.2025. 15. The Ld. Departmental Representative relied on the order of Ld. CIT(A). 16. From examination of record, it is crystal clear that Ld. CIT(A) confirmed addition of Rs.3,43,150/- on account of late deposit of employees contribution towards ESI & PF u/s 36(1)(va) of Income Tax Act, 1961. Printed from counselvise.com 8 ITA Nos.4059 & 4060/Del/2025 Lall Construction Company vs. DCIT 16.1 The Co-ordinate Bench in ITA No.4206/Del/2024 vide order dated 09.04.2025 in para No.5 held as under: “5. The contention raised in this appeal is that the due date of deposit of PF & ESI contributions shall be reckoned from the month in which disbursement of salary was made. Reliance was placed on various decisions to support the above contention. We observe that identical issue came up before the coordinate bench in the case of Sentinel Consultants (P) Ltd. vs. ACIT (153 taxamnn.com 151), wherein the Tribunal restored the appeal to the file of the Assessing Officer on identical issue and to examine the contention raised by the assessee and in the light of the observations of the Kolkata Bench of the Tribunal in the case of Kanoi Paper & Industries Ltd. vs. ACIT (supra). Similar view has been taken by the coordinate benches referred to above. Thus, respectfully following the said decisions we restored this issue to the file of the Assessing Officer to decide the issue in the light of the observations made by the Tribunal in the case of Kanoi Paper & Industries Ltd. vs. ACIT (supra). Needless to say the Assessing Officer shall provide adequate opportunity of being heard to the assessee, the assessee is at liberty to provide all the necessary information in support of its contention.” 16.2 The Co-ordinate Bench in para No.6 & 7 in ITA No.3207/Del/2025 has held as under: “6. Coming to alternative plea of the assessee. Considered the rival submissions and this plea was considered by the coordinate Bench in the case of Benson Movers Pvt. Ltd. (supra) and the relevant decision of the coordinate Bench is as under: “5. In so far as employees contributions towards PF & ESI H noticed that the issue as to whether the due date under PF/ESI Acts should be as per the calendar month for which the salary is payable or from the month in which the salary is paid to the employee by the employer came up for adjudication in the case of Sentinel Consultants Pvt. Ltd. Vs. ACIT (supra) and the Tribunal restored the issue to the file of the AO with the following observations: - \"9. We have carefully considered the rival submissions and perused the material available on record. The disallowance of employees' contribution to PF/ESIC for breach of condition under Section 36(1)(va) is in controversy. 9.1 We notice at the outset that an opportunity was given via electronic platform of the deptt. For the proposed adjustments and in the absence of e-response, the adjustments were carried out the CPC-Bangluru and intimation was issued enhancing the assessed income in the captioned assessment years. The CIT(A) in the first appeal has sustained the adjustments towards belated deposits of employees' contribution to PF/ESIC in the light of the judgment rendered by the Hon'ble Supreme Court in Checkmate Pvt. Ltd. vs. CIT (2022) 143 Printed from counselvise.com 9 ITA Nos.4059 & 4060/Del/2025 Lall Construction Company vs. DCIT taxmann.com 178 (SC). The contention of the Assessee that such additions cannot be made under the umbrella of S. 143(1) is covered against the assessee the decision of the co-ordinate bench in the case of Weather Comfort Engineers Private Limited vs. ACIT-CPC ITA No. 959/Del/2021 order dated 15/02/2023. The action of CPC and CIT(A) thus cannot be faulted where some opportunity was admittedly given for e- response. 9.2 We now turn to alternate plea on behalf of the assessee for grant of deduction under general provisions for deduction of expenditure under S. 37 of the Act. We do not see any merit in such plea that the belated deposit of employees contributions to PF/ESIC governed under Section 36(1)(va) is also simultaneously amenable to deduction under Section 37(1) of the Act. In terms of the provision, Section 37(1) permits deduction of expenditure which is not in the nature of expenditure prescribed in Sections 30 to 36 of the Act and also not being in the nature of capital expenditure or personal expenses of mandate of law, the deduction of expenditure under the general clause of Section 37(1) would not extend to expenditure specially covered within the ambit of Section 36(1)(va) of the Act. The Hon'ble Supreme Court in the case of Checkmate Pvt. Ltd. (supra) itself explains this position in Para 32 of the Judgment. made in recent judgment of the Hon'ble Supreme Court in the case of Pr. CIT vs. Khyati Realtors (P) Ltd. (2022) 141 taxmann.com 461 (SC). The alternate plea is thus without any merit. 9.3 We also take note of yet another plea made out on behalf the assessee towards methodology of calculation of default under the relevant PF/ESIC Act. The Ld. Counsel contends that the month during which the disbursement of salary is actually made would be relevant for the purposes of determination of due date of deposit under the respective statute. The accrual of liability towards payment of salary without actual disbursement would not fasten obligation for deposits of employees contribution in the labour Acts per se. as observed by the co-ordinate bench in Kanoi Paper and Industries Ltd. vs. ACIT (2002) 75 TTJ 448 (Cal). This aspect has not been found to be examined by the Assessing Officer or CIT (A). Hence without expressing any opinion on merits on this aspect, we deem it expedient to restore the matter to the file of designated AO. It shall be open to the assessee to place factual matrix before the AO and take such plea for evaluation of the AO. The AO shall examine this aspect and fresh order in accordance with law after giving proper opportunity.\" 6. We find similar view has been taken by the co-ordinate benches in the cases of B. L. Kashyap & Sons Ltd. (supra) and VVDN Technologies Pvt. Ltd. (supra). The Id. Counsel submits that in view of these decisions the matter may be restored to the Assessing Officer to ascertain the due date for remittance of the PF/ESI contributions of employees. Considering the decisions of the coordinate benches referred to above we restore this issue to the file of the Assessing Officer to decide in the light of the observations made by the Tribunal Printed from counselvise.com 10 ITA Nos.4059 & 4060/Del/2025 Lall Construction Company vs. DCIT in the case of Kanoi Paper & Industries Ltd. Vs. ACIT (supra). Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee and the assessee is at liberty to provide all the necessary information in support of its contention.\" 7. Since the above issue is squarely covered by the above decision, we are inclined to remit the issue back to the file of AO to consider the alternative plea of the assessee as per law after giving proper opportunity of being heard to the assessee. Accordingly, the appeal filed by the assessee is partly allowed for statistical purposes.” 17. In view of above material facts in light of above judicial precedents, it is apparent on record, the Ld. CIT(A) failed to consider that CPC had erred in making disallowance of Rs.3,43,150/- u/s 36(1)(va) of the Act on account of ESI/PF contribution received from employees was bad in law. Therefore, the action of Ld. AO and Ld. CIT(A) are set aside and the matter is restored to the file of Ld. AO for passing afresh order in accordance with law after affording fair opportunity of being hearing to the appellant assessee. 18. In the result, the appeal in ITA No.4060/Del/2025 is allowed and ITA No.4059/Del/2025 is allowed for statistical purposes. Order is pronounced in the Open Court 23.02. 2026. Sd/- Sd/- (S. RIFAUR RAHMAN) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23.02.2026 *PK, Sr. Ps* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "