RIDDHI SIDDHI REALTY,INDORE V. INCOME TAX OFFICER 4(1), INCOME TAX INDORE

ITA 170/IND/2025

AI Insights

The case involves Riddhi Siddhi Realty, which appealed against the order of the CIT(A) that upheld the addition of Rs.7,61,540/- to the assessee's income for the Assessment Year 2017-18. This amount was initially disallowed by the Assessing Officer as it pertained to expenses claimed in a different financial year than when they were incurred. The Tribunal's decision to set aside the impugned order was based on the understanding that the losses in both relevant years made the tax effect of the disputed amount revenue neutral, and both parties agreed to a declaration to ensure proper accounting of the carry forward losses.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 778116 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 08-02-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH PORWAL
• Assessee Lawyers: RAM GILDA
• Keywords: Set aside; Tax effect; TDS
• Section: 143(3)

Judgement Text

" Page 1 of 12 आयकर अपीलीय अिधकरण, इंदौर Ɋायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER AND SHRI PARESH M JOSHI, JUDICIAL MEMBER ITA No.170/Ind/2025 (Assessment Year : 2017-18) Riddhi Siddhi Realty, 39 Shardhanand Marg, Indore (PAN:AALFR4212J) बनाम/ Vs. Income Tax Officer 4(1), Indore (Assessee/Appellant) (Revenue/Respondent) Assessee by Shri Ram Gilda, AR Revenue by Shri Ashish Porwal, DR Date of Hearing 30.09.2025 Date of Pronouncement 06.10.2025 आदेश / O R D E R Per Paresh M Joshi, J.M: This is an appeal filed by the assessee Under Section 253 of the Income Tax Act, 1961 (hereinafter referred to as the “Act” for sake of brevity) before this Tribunal. The assessee is aggrieved by the order bearing Number ITBA/APL/S/250/2024- 25/1072525205(1) dated 24.01.2025 passed by the Ld. CIT(A) u/s 250 of the Act which is hereinafter referred to as the “Impugned order”. The relevant Assessment Year is 2017-18 Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 2 of 12 and the corresponding previous year period is from 01.04.2016 to 31.03.2017. 2. FACTUAL MATRIX 2.1 That as and by way of an intimation order u/s 143(3) of the Act, dated 21.12.2019, the assessee’s total income exigible to tax was computed at Rs.37,990/-. In para 8 of the aforesaid order following is recorded:- “8. Therefore considering the above facts remaining amount of Rs.7,61,540/-(Rs.10,04,045/ Rs. 2,42,505/-)claimed by the assessee in P& L A/c for the F.Y.2016-17 hereby disallowed since these amount assessee paid in F.Y.2015-16.so an amount of Rs.7,61,540/- added to the total income of the assessee. Penalty proceeding u/s 270A of the Income Tax Act are initiated for under-reporting of Income by assessee. 9. Subject to the above remarks and on the basis of data made available on records, total income is determined as under: Income as per return of income:- (-)Rs,7,23,551/- Add: (i) As discussed above Rs. 7,61,540/- Assessee Income Rs 37,990/- 10. Assessed u/s 143(3) of the I.T. Act 1961 and Give credit for prepaid taxes, if any, after due verification. Charge Interest u/s 234-A/B/C and/or D of the Act, as the case may be. Issue demand notice and challan accordingly. I.T.N.S. 150 forms part I.T. Act”. That the aforesaid assessment order dated 21.12.2019 is hereinafter referred to as the “impugned assessment order”. Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 3 of 12 2.2 That the assessee being aggrieved by the “impugned intimation order” prefers the first appeal u/s 246A of the Act before the Ld. CIT(A) who by the “impugned order” has dismissed the 1st appeal of the assessee on the grounds and reasons stated therein. The core grounds and reasons for the dismissal of the first appeal of the assessee was as under:- “However, after a detailed examination of the facts and circumstances, the following observations are made: i) Principle of Matching Income and Expenditure: The principle of matching income and expenditure requires that an expenditure related to a particular financial year must be accounted for in the same year to ensure a true and fair representation of financial statements. Failure to adhere to this principle results in a distortion of taxable income for the relevant year. In the present case, the payment to contractors pertained to A.Y. 2016-17 but was neither claimed as an expense in that year nor recorded in the profit and loss account. The appellant's argument that the tax effect remains unchanged because of losses in both years is irrelevant, as income-tax law does not permit carrying forward expenditure or retroactively adjusting expenses in a subsequent year without a valid statutory mechanism. It is also noted that the assessment for A.Y. 2016-17 was completed under scrutiny and the same has attained finality. Apparently no action permissible under Income Tax Act, 1961 was taken to correct this error while bar due to limitation was not activated. The Income Tax Act does not provide for the shifting of expenses from one assessment year to another based on convenience or error. ii) Relevance of Losses in Both Years: The appellant has argued that there is no tax effect since both A.Y. 2016-17 and A.Y. 2017-18 resulted in losses. However, this argument does not hold water. Tax law requires correct reporting and compliance in each assessment year to ensure accurate computation of income and proper carry-forward of losses, where Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 4 of 12 applicable. An incorrect adjustment could distort future tax computations and is impermissible. iii) Revenue's Right to Ensure Correct Assessment: The addition of Rs. 7,61,540/- made by the Assessing Officer ensures compliance with the provisions of the Act and upholds the principle of assessing income and expenditure in the appropriate year. Allowing the appellant to shift this expenditure to A.Y. 2017-18 would not only violate the principles of income recognition but also set an undesirable precedent. In view of the above, the addition of Rs. 7,61,540/- made by the Assessing Officer is fully justified and in accordance with the provisions of the Income-tax Act, 1961. This ground of appeal is, therefore, dismissed. Ground No. 3: Leave to add, alter, or withdraw grounds The appellant has requested the right to amend, add, or withdraw grounds at a later stage. However, no additional grounds or arguments were raised during the appellate proceedings. Therefore, no further adjudication is required on this ground. In light of the above, it is evident that the appellant has failed to substantiate its claims with adequate evidence or legal justification. The addition of Rs. 7,61,540/-made by the Assessing Officer under Section 143(3) of the Income-tax Act is upheld. Consequently, all grounds of appeal raised by the appellant are hereby dismissed. 6. Decision: As a result, the Appeal is dismissed”. 2.3 That the assessee being aggrieved by the “impugned order” has preferred the instant second appeal before this Tribunal and has raised following grounds of appeal in the Form No.36 against the “impugned order” which are as follows:- “1. That the order passed and confirmed u/s 143(3) is illegal wrong and bad-in-law. 2. That the addition made and sustained of Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 5 of 12 Rs. 7,61,540/- is illegal, wrong and bad-in-law. 3. That the appellant firm craver leave to add, after amend and/or withdraw any grounds of appeal on or before the hearing of appeal” 3. Record of Hearing 3.1 The hearing in the matter took place before this Tribunal on 30.09.2025 when the Ld. AR for and on behalf of the assessee appeared before us and filed a paper book containing pages 1 to 17 and another submissions containing 3 pages with the judgments from page 1 to 8. The Ld. AR then contended that the “impugned order” is bad in law and illegal. It must therefore be set aside in order to secure ends of justice. At the outset and threshold the Ld. AR emphasized that it should be noted by the tribunal that relevant assessment year is 2017-18. It is case of tax deducted at source popularly called “TDS” on payment of Rs.7,61,500/- to contractors. In the instant case the assessee Riddhi Siddhi Realty had deducted TDS of Rs.7615/- against payment of Rs.7,61,500/- made to several parties. The names of the parties and the respective amount including TDS are all reflected in paper book at page-1 for the Assessment Year 2016-17 i.e. previous year 01.04.2015 to 31.03.2016. The Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 6 of 12 relevant page No.1 of the paper book was read out by him. The amount paid to the parties mentioned therein in the aggregate comes to Rs.7,53,885/-. In support of his plea the Ld. AR invited our attention to the paper book page 2 to 7 which are copies of the Form No.16A evidencing the TDS deduction of Rs.7615/- in respect of parties mentioned on page 1 for the Assessment Year 2016-17. The relevant entries of “TDS” deducted were shown and demonstrated. It was also urged by the Ld. AR that there is a typographical error in respect of figures mentioned in page 1 of the paper book and internal page-6 of the “impugned assessment order” and there is a slight mismatch between the figure of Rs.7615/- as TDS deducted on page 1 of paper book and figure of Rs.6452/- appearing on page 6 of Ld. A.O’s order. The Ld. AR then contended that for the Assessment Year 2016-17 the aforesaid amount could not be debited in the profit and loss account of the assessee bonafidely. However it was shown in the balance sheet and invited our attention to the paper book page 12 wherein the amount of Rs.7,61,500/- is shown in the Annexure forming the part of balance sheet under caption “contractor” for Financial Year 2015-2016/ Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 7 of 12 Assessment Year 2016-17. The Ld. AR then contended that in the Assessment Year 2017-18 i.e. Financial Year 01.04.2016 to 31.3.2017, the year under consideration, the aforesaid amount is debited in the profit and loss account of the assessee. The Ld. AR has also contended that in both the years i.e. Assessment Year 2016-17 and Assessment Year 2017-18 there is a “Loss” to the assessee and hence the entire exercise is revenue neutral in nature. The Ld. AR also pleaded that if the aforesaid amount is allowed i.e. Rs.7,61,500/- in the year under consideration i.e. Assessment Year 2017-18 then also the loss would continue to prevail and if not allowed there would be a profit. The Ld. AR also pleaded that currently the penalty proceedings are pending. Thereafter a brief debate in the hearing took place with regard to the “carry-forward loss”. Generally carry forward loss can be carry-forward till 8 years and if the year under consideration i.e. Assessment Year 2017-18 is taken into consideration the assessee would get extra one year. Per contra the Ld. DR appearing for and on behalf of the revenue contended that the “impugned assessment order” of the Ld. Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 8 of 12 A.O is correct in law and emphasized in para 7 of the “impugned assessment order” which is as under:- “7. As mentioned in above assessee has paid an amount of Rs.7,61,540/- to contractor in F.Y.2015-16, whereas assessee has claimed this expenditure in F.Y.2016-17 which is not allowable since as per mercantile accounting method expenses are recognized when they accrue So an amount of Rs.7,61,540/- debited by the assessee on the account of payment to contractors in Trading and Profit & Loss account for the F.Y 2016-17 is disallowed because same is treating prior expenses”. The Ld. DR then contended that the mercantile year is of the importance and that the “impugned order” is correct in law. The Ld. DR laid emphasis on internal page 8 & 9 of the “impugned order” i.e. concept of matching income and expenditure, relevance of losses in both the years and revenue’s right to ensure correct assessment. During the course of brief debate since there is a loss in both the years in question it transpired that it would be just, fair and prudent that a declaration/undertaking can be given to the Ld. A.O by the assessee in such a manner that it would restrict the assessee to claim the benefit of the extra/additional one year in respect of the carry forward loss if benefit is given/extended for the year under consideration i.e. Assessment Year 2017-18. There was a near unanimity on this score by both Ld. AR and Ld. DR in this Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 9 of 12 regard of declaration/undertaking. It was then agreed by the Ld. AR that the assessee is willing to sign the said declaration/ undertaking during the course of the day only. Accordingly the assessee on 30.09.2025 itself has filed the following undertaking before this tribunal which is reproduced below:- “Before The Hon'ble Members Income-Tax Appellate Tribunal Indore Bench. Indore. In the matter of M/S Riddhi Siddhi Realty 39, Shradhanand Marg, Indore (M.P.) Pan No. AALFR4212J Subject: Filing of Undertaking in ITA /170and/IND/2025 MAY IT PLEASE YOUR HONOUR That I Deepak Agrawal partner of M/s.Riddhi Siddhi Realty do hereby undertake and confirm that the loss arising in AY 2016-17 (including loss of Rs. 7,61,500/-not debited in AY 2016-17 and debited in AY 2017-18) has been claimed in only subsequent eight years from AY 2016-17 and not thereafter. Submitted by Sd/- Deepak Agrawal (partner)” 4. Observations,findings & conclusions. 4.1 We now have to decide the legality, validity and the proprietery of the “impugned order” basis records of the case and contentions canvassed before us. Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 10 of 12 4.2 We have carefully perused the records of the case as presented to this Tribunal by both the Ld. AR & the Ld. DR to determine the legality, validity of the “impugned order” basis law and by following the due process. 4.3 We basis records of the case and after hearing and upon examining the contentions are of the considered opinion that the “impugned order” should be set aside as ultimately during the course of the hearing both the Ld. AR & Ld. DR seems to be on same page with regard to the undertaking issue. We accordingly set aside the “impugned order” in order to secure ends of justice on account of loss in both years (supra). However before departing with the case we additionally direct the assessee to furnish an affidavit cum declaration that the assessee shall reckoned the period of 8 years for the carry forward loss purposes w.e.f. Assessment Year 2016-17 and not thereafter. We direct such an affidavit cum declaration to be also filed additionally before the Ld. A.O and direct the CPC to keep open the window for this limited purpose for a period not beyond 30 days from the date of receipt of this order, so that even on portal this affidavit cum declaration is reflected. This exercise is done in Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 11 of 12 order to prevent distortion of future tax computation. The assessee is expected to comply with the other provisions of the Act in this regard. After this additional exercise is over by the assessee the Ld. A.O is directed to delete the addition/disallowance of Rs.7,61,540/- (supra). 5. Order 5.1 In view of the premises drawn up by us the “impugned order” is set aside, in order to secure ends of justice on account of “loss” in both years (supra). The Ld. A.O is accordingly directed to delete the addition/disallowance of Rs.7,61,540/- (supra) after the assessee has complied with the additional direction as mentioned in para 4.3 (supra). 5.2 In the result the appeal of the assesse is allowed for statistical purpose. Order pronounced in open court on 06.10.2025. Sd/- Sd/- (B.M. BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore िदनांक / Dated : 06.10.2025 Dev/Sr. PS Printed from counselvise.com Riddhi Siddhi Realty ITA No.170/Ind/2025 - A.Y. 2017-18 Page 12 of 12 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore Printed from counselvise.com "