MODINAGAR ROLLS PVT. LTD.,MODINAGAR V. DCIT CIRCLE 2(1)(1), GHAZIABAD

ITA 1106/DEL/2024

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The case involves Modinagar Rolls Pvt. Ltd., which appealed against the order of the CIT(A) concerning an adjustment made by the Centralized Processing Center (CPC) related to a contingent liability amounting to INR 64,07,005. The adjustment was initially made during the processing of the assessee's return under section 143(1) of the Income Tax Act, 1961, which included an income tax demand from earlier years under litigation and a bank guarantee. The assessee contended that these contingent liabilities were not claimed as expenditures in the Profit & Loss Account, and thus, their addition to income was unjustified and would result in double taxation. The CIT(A) did not entertain the objections due to a lack of documentary evidence, leading to the appeal before the Tribunal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471637 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-08-2024
• Assessment Year: 2020-2021
• Appeal Filed On: 11-03-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 250; 143(1); 37

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI YOGESH KUMAR US ITA No [Assessment Year : Modinagar Rolls Pvt.Ltd., Major Asha Ram Tyagi Road, Sikri Kalan, Modi Nagar, Uttar Pradesh-201204. PAN-AABCM0137C APPELLANT Appellant by Respondent by Date of Hearing Date of Pronouncement PER PRADIP KUMAR KEDIA The instant appeal has been filed at the instance of to assail the First Appellate order dated Commissioner of Income Tax (A), [“Ld.CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] pertaining to Assessment Year 2020-21. 2. As per the grounds of appeal, the assessee has challenged the adjustment/addition made by the Centralized Income Tax Department towards contingent liability of INR 64,07,005/ 3. When the matter was called for hearing, none appeared on behalf of the assessee. Therefore, the matter was accordingly, proceeded 4. On perusal of records, it is observed that e was processed u/s 143(1) of the Act by CPC on 18.12.2021 wherein adjustment of INR 65,99,305/- was made on account of contingent liability while IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “E” BENCH: NEW DELHI SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & YOGESH KUMAR US, JUDICIAL MEMBER ITA No.1106/Del/2024 Assessment Year : 2020-21] Modinagar Rolls Pvt.Ltd., Tyagi Road, Sikri Kalan, Modi Nagar, 201204. vs DCIT, Circle-2(1)(1), Ghaziabad. RESPONDENT None Shri Jatender Kumar Kale, Sr. DR 01.08.2024 Date of Pronouncement 30.10.2024 ORDER PRADIP KUMAR KEDIA, AM : The instant appeal has been filed at the instance of the assessee seeking to assail the First Appellate order dated 21.07.2023 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre, of the Income Tax Act, 1961 [“the Act”] pertaining to 1. As per the grounds of appeal, the assessee has challenged the adjustment/addition made by the Centralized Processing Center (“CPC”), Income Tax Department towards contingent liability of INR 64,07,005/ When the matter was called for hearing, none appeared on behalf of the assessee. Therefore, the matter was accordingly, proceeded ex-parte of records, it is observed that e-return filed by the assessee was processed u/s 143(1) of the Act by CPC on 18.12.2021 wherein adjustment was made on account of contingent liability while SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & , JUDICIAL MEMBER Shri Jatender Kumar Kale, Sr. DR assessee seeking .2023 passed by Ld. National Faceless Appeal Centre, Delhi of the Income Tax Act, 1961 [“the Act”] pertaining to As per the grounds of appeal, the assessee has challenged the Processing Center (“CPC”), Income Tax Department towards contingent liability of INR 64,07,005/-. When the matter was called for hearing, none appeared on behalf of the parte. return filed by the assessee was processed u/s 143(1) of the Act by CPC on 18.12.2021 wherein adjustment was made on account of contingent liability while processing the return of income of the assessee. records that the aforesaid amount of contingent liability break up of which is : [a] income tax demand of earlier years under litigation INR 62,32,005/-; and [b] bank guarantee of INR 1,75,000/ Loss Account at all. 5. The information on income tax demand and bank guarantee provided in the Tax Audit Report. The assessee has contended before Ld.CIT(A) that when no deduction has been claimed towards such contingent liability, expenditure and same addition of such account is not justified while making prima-facie adjustments u/s 143(1) of the Act. 6. It is observed that the CPC has made adjustment to the tune of INR 64,07,005/- to the income of the assessee u/s 37 of the Act on the basis of observations of the Auditor in Column No.21(g) of the Tax Audit Report wherein some wrong reporting has occurred. The assessee contends that it is a matter of fact that while the contingent liability has been duly reported in the Tax Audit expenses/contingent liability have not been claimed at all to warrant any disallowance. The additions towards contingent liability not claimed as expenditure would result in double taxation. 7. As per para 7.4 of the first appellate order, Ld.CIT(A) has not entertained the objections raised on behalf of the assessee due to lack of documentary evidences in support of the contention that contingent liability disallowed by the CPC was not claimed as expend 8. We have heard Ld. available on record. In this matter, we observe that certain uploaded by the assessee as admitted by Ld.CIT(A) himself but not found sufficient by Ld.CIT(A). The main contention of the assessee is that the expenditure cannot be disallowed unless such expenditure has been ITA No.1106/Del/2024 processing the return of income of the assessee. It further appears from the records that the aforesaid amount of contingent liability break up of which is : income tax demand of earlier years under litigation INR ; and bank guarantee of INR 1,75,000/- was not debited to the Profit Loss Account at all. The information on income tax demand and bank guarantee provided in the Tax Audit Report. The assessee has contended before Ld.CIT(A) t when no deduction has been claimed towards such contingent liability, addition of such account is not justified while making adjustments u/s 143(1) of the Act. It is observed that the CPC has made adjustment to the tune of INR to the income of the assessee u/s 37 of the Act on the basis of bservations of the Auditor in Column No.21(g) of the Tax Audit Report wherein some wrong reporting has occurred. The assessee contends before Ld.CIT(A) that it is a matter of fact that while the contingent liability has been duly it Report as well in the Audited balance expenses/contingent liability have not been claimed at all to warrant any The additions towards contingent liability not claimed as expenditure would result in double taxation. para 7.4 of the first appellate order, Ld.CIT(A) has not entertained the objections raised on behalf of the assessee due to lack of documentary the contention that contingent liability disallowed by the CPC was not claimed as expenditure at all. have heard Ld. Sr. DR for the Revenue and perused the material In this matter, we observe that certain Annexures uploaded by the assessee as admitted by Ld.CIT(A) himself but however by Ld.CIT(A). The main contention of the assessee is that the expenditure cannot be disallowed unless such expenditure has been ITA No.1106/Del/2024 Page | 2 It further appears from the records that the aforesaid amount of contingent liability break up of which is :- income tax demand of earlier years under litigation INR was not debited to the Profit & The information on income tax demand and bank guarantee were provided in the Tax Audit Report. The assessee has contended before Ld.CIT(A) t when no deduction has been claimed towards such contingent liability, addition of such account is not justified while making It is observed that the CPC has made adjustment to the tune of INR to the income of the assessee u/s 37 of the Act on the basis of bservations of the Auditor in Column No.21(g) of the Tax Audit Report wherein before Ld.CIT(A) that it is a matter of fact that while the contingent liability has been duly balance sheet, such expenses/contingent liability have not been claimed at all to warrant any The additions towards contingent liability not claimed as para 7.4 of the first appellate order, Ld.CIT(A) has not entertained the objections raised on behalf of the assessee due to lack of documentary the contention that contingent liability disallowed by and perused the material Annexures were however, were by Ld.CIT(A). The main contention of the assessee is that the expenditure cannot be disallowed unless such expenditure has been claimed while determining the taxable income of the assessee. We agree with such plea of the assessee on first principles. W restore the issue back to the file of Ld.CIT(A) to such documentary evidences as may be required grievances raised by the assessee on account of wrong adjustment toward contingent liability. Needless to say that proper opportunity shall be given to the assessee to corroborate its assessee to adhere such evidences as deemed expedient to support the returned income. Ld.CIT(A) 9. Grounds raised by the assessee are purposes. 10. In the result, appeal of the assessee is Order pronounced in the open Court on Sd/- (YOGESH KUMAR US) JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ITA No.1106/Del/2024 claimed while determining the taxable income of the assessee. We agree with such plea of the assessee on first principles. We thus, consider it expedient to restore the issue back to the file of Ld.CIT(A) to enable the assessee to submit such documentary evidences as may be required in justification of the grievances raised by the assessee on account of wrong adjustment toward contingent liability. Needless to say that proper opportunity shall be given to the assessee to corroborate its claim on the issue. It shall be open to the assessee to adhere such evidences as deemed expedient to support the Ld.CIT(A) shall pass speaking order in accordance with law. Grounds raised by the assessee are accordingly, allowed for statistical In the result, appeal of the assessee is allowed for statistical Order pronounced in the open Court on 30th October, 2024 Sd/- (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER ASSISTANT REGISTRAR ITAT, NEW DELHI ITA No.1106/Del/2024 Page | 3 claimed while determining the taxable income of the assessee. We agree with e thus, consider it expedient to nable the assessee to submit justification of the grievances raised by the assessee on account of wrong adjustment towards contingent liability. Needless to say that proper opportunity shall be given to It shall be open to the assessee to adhere such evidences as deemed expedient to support the shall pass speaking order in accordance with law. allowed for statistical allowed for statistical purposes. 4. PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER ASSISTANT REGISTRAR ITAT, NEW DELHI "