MACHINO POLYMERS LTD,DELHI V. ACIT,CIRCLE-2(1), GURGAON

ITA 4056/DEL/2025

AI Insights

Machino Polymers Ltd. filed an appeal against the order of the Commissioner of Income Tax (Appeals) which had confirmed various additions and disallowances made by the AO in the assessment for the year 2016-17. The main issues in the appeal included the addition of provisions for gratuity and compensated absences, disallowance of bad debts, and disallowance of traveling and conveyance expenses. The ITAT found that the provisions for gratuity and compensated absences were not claimed as deductions in the profit and loss account but were merely shown as liabilities in the balance sheet, leading to the deletion of that addition. The issues of bad debts and traveling expenses were remanded back to the AO for further examination.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 838199 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2016-2017
• Appeal Filed On: 23-06-2025
• Other Referred Cases: TRF Ltd. v. CIT [2010] 323 ITR 397 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: ANIL BHALLA; NITIN KUMAR SHARMA
• Keywords: Additional evidence; Bad and doubtful debts
• Section: 143(3); 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCH: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.4056/Del/2025 [Assessment Year : 2016-17] Machino Polymers Ltd. Plot No.2, Sector-33 Delhi Jaipur Highway Gurgaon, Haryana-122001 PAN-AABCM9618E vs ACIT Circle-2(1), HSIDC Building, Vanijya Nikunj, Udyog Vihar, Phase-V, Gurgaon, Haryana-122001. APPELLANT RESPONDENT Appellant by Shri Anil Bhalla, CA & Shri Nitin Kumar Sharma, CA Respondent by Shri Manish Gupta, Sr.DR Date of Hearing 22.12.2025 Date of Pronouncement 20.02.2026 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by assessee against the order dated 11.06.2025 by Ld. Commissioner of Income Tax(A), National Faceless Appeal Centre (“NFAC”), Delhi [“ld. CIT(A)”] in Appeal No. CIT(A), Gurgaon-1/10990/2018-19 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of the assessment order dated 29.12.2018 passed u/s 143(3) of the Act pertaining to Assessment Year 2016- 17. 2. Brief facts of the case are that assessee company filed its return of income, declaring income of INR 7,74,50,890/- on 30.09.2016. The return was processed u/s 143(1) of the Act and case was selected for Printed from counselvise.com ITA No.4056/Del/2025 Page | 2 scrutiny under CASS (Complete Scrutiny). Notice u/s 143(2) of the Act was issued on 08.08.2017 followed by notices u/s 142(1) alongwith questionnaire. In response, assessee filed part information and details from time to time. Thereafter, the AO assessed the income of the assessee at INR 13,25,86,670/- vide assessment order dated 29.12.2018 passed u/s 143(3) of the Act. 3. Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 11.06.2025, dismissed the appeal of the assessee. 4. Aggrieved by the order of ld. CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. “The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the addition of Rs. 68,81,189/-on account of disallowance of provision for gratuity and compensated absences without appreciating the fact that no deduction was claimed by the appellant in the computation of income in respect of these provisions. The Assessing Officer failed to appreciate that these were mere year-end accounting entries without any actual claim of deduction in the return of income. 1.1. The learned Commissioner of Income Tax (Appeals) has also erred in not allowing the appellant's legitimate claim of deduction of Rs. 24,82,598/-being the amount of reversal of earlier year provisions for gratuity and compensated absences, which had been disallowed when originally created. The said amount, having already been subjected to tax in earlier years and reversed in the current year, ought to have been allowed as a deduction in the present assessment. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the disallowance of Rs. 4,51,20,129/- being the amount of bad debts written off by the appellant. The authorities below failed to consider that the appellant had duly written off the said debts in its books of account during the relevant financial year and had furnished complete party-wise details, thereby satisfying the requirements of section 36(1)(vii) read with Printed from counselvise.com ITA No.4056/Del/2025 Page | 3 section 36(2) of the Income Tax Act, 1961. It is well-settled by the Hon'ble Supreme Court in the case of TRF Ltd. v. CIT [2010] 323 ITR 397 (SC) that after 1.4.1989, it is not necessary for the assessee to establish that the debt has become irrecoverable; it is sufficient if the same is written off in the books. 3. The learned Commissioner of Income Tax (Appeals) has further erred in confirming the ad hoc disallowance of Rs. 30,34,457/- being 30% of the total travelling and conveyance expenses incurred by the appellant. The disallowance has been made without any cogent basis or examination of documents, and merely on the presumption that such expenditure could be personal in nature. The authorities below have failed to appreciate that the appellant had duly furnished details and explanations for the said expenses and that the expenditure was incurred wholly and exclusively for business purposes. 4. The appellant society craves leave to add, alter or amend the ground of appeal at a later stage.” 5. Ground of appeal No.1 raised by the assessee is with respect to the addition of INR 68,81,189/- made towards the gratuity provision made of INR 33,07,363/- and compensated absences of INR 35,73,826/-. 6. Before us, Ld.AR for the assessee stated that assessee has not claimed expenditure as added by the AO in the Profit & Loss Account rather they are shown as Liability in the Balance Sheet. For this, ld. AR drew our attention to page 27 of the Paper Book, where under the head ‘short term provisions’ and ‘long term provision’ are appearing and further referred page 38 of the paper Book where details of long term and short term provisions appearing, according to which the gratuity provision and compensated absences are shown as long term provision which were added by the AO. He therefore, prayed for the deletion of the same. Printed from counselvise.com ITA No.4056/Del/2025 Page | 4 7. On the other hand, Ld. Sr. DR for the Revenue supported the orders of the lower authorities and submits that the matter may be sent back to the AO for necessary verification. 8. Heard the contentions of both parties at length and perused the material available on record. From the perusal of the copy of Balance Sheet submitted before us, it is observed that these figures are taken by the AO from the Balance Sheet where the same were shown as provision in the liability side. Further, from the perusal of Profit & Loss Account available at page 28 of Paper Book and corresponding Schedule-22 of employee’s benefits at page 41 and other expenses at page 42 in Note No.24 itself, it is observed that assessee has not claimed any expenditure in respect of gratuity and compensated absences. Since no expenses was claimed on account of these provisions, therefore, no additions could be made. Accordingly, we delete the said addition. Ground of appeal No.1 raised by the assessee is thus, allowed. 9. Regarding Ground of appeal No.2 wherein assessee has challenged the disallowance of INR 4,51,20,129/- claimed as bad debt which was disallowed by AO. The AO has made disallowance by observing that the assessee has failed to furnish any documents. 10. Heard the contentions of both parties at length and perused the material available on record. Before ld. CIT(A) also, assessee only produced the list of parties however, has failed to file further details whether this amounts were ever offered for tax as provided in section Printed from counselvise.com ITA No.4056/Del/2025 Page | 5 36(1)(vii)/36(2) of the Act, as held by Hon’ble Supreme Court in the case of TRF Ltd. reported in 323 ITR 397 (SC). Claim of the assessee is that these amounts were offered for tax and therefore, assessee has fully satisfied the condition laid down u/s 36(1)(vii) of the Act. It is further observed that assessee has filed additional evidences before ld. CIT(A) regarding the claim of bad debts however, in the Remand Report, AO observed that assessee has filed copy of ledger accounts in respect of only Five parties out of total 96 parties, balances of which were claimed as bed debts and full documents were not filed. 11. Before us, assessee had filed a table containing name, PAN and amount written off, placed at pages 68 & 69 of Paper Book and further filed copies of ledger accounts of few parties however, from the perusal of same, we could not be able to point out whether the amounts written off was offered for tax or not in any of the preceding Assessment Years. Therefore, in the interest of justice, we remand this issue back to the file of AO and direct to examine whether the assessee has fulfilled all the conditions laid down u/s 36(1)(vii)/36(2) of the Act, claiming the bad debts. The assessee has also directed to file all the necessary documents/evidences in support of bad debts claimed during the year. Accordingly, Ground of appeal No.2 raised by the assessee is allowed for statistical purposes. 12. Ground of appeal No.3 raised by the assessee is with respect to adhoc disallowance of INR 30,34,457/- made @ 30% out of the travelling and convenience expenses. Printed from counselvise.com ITA No.4056/Del/2025 Page | 6 13. Heard the contentions of both parties at length and perused the material available on record. The AO has made disallowance as assessee has failed to submit all the details which were finally submitted before the ld. CIT(A) as additional evidences. In Remand Report, the AO observed that assessee has failed to establish that these expenses were wholly and exclusively incurred for the purpose of business and part details were filed with respect to the foreign travelling conducted by the Director and their relatives. Despite of repeated requests and opportunities given by the lower authorities, assessee has not been able to substantiate the travelling expenses as incurred wholly and exclusively for the purpose of business. However, looking to the entirety of facts, one more opportunity is granted to the assessee and the issue is remanded back to the file of AO for making fresh verification. Assessee is also directed to file all the necessary evidences to establish that travelling expenses were claimed for the purpose of business. With these directions, Ground of appeal No. 3 raised by the assessee is allowed for statistical purposes. 14. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 20.02.2026. Sd/- Sd/- (SATBEER SINGH GODARA) JUDICIAL MEMBER Date:- 20.02.2026 *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Printed from counselvise.com ITA No.4056/Del/2025 Page | 7 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "