SUREEL ENTERPRISE PRIVATE LIMITED,CHHATRAL V. ACIT, CIRCLE, GANDHINAGAR

ITA 424/AHD/2025

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Sureel Enterprise Pvt. Ltd. appealed against the orders of the Commissioner of Income Tax (Appeals), which had upheld the disallowances made by the Assessing Officer under the head 'Employee Benefit Expenses' for the Assessment Years 2016-17 and 2018-19. The disallowances were based on the high percentage of employee benefit expenses to turnover, which the Assessing Officer deemed excessive and partly unverifiable. The Tribunal, referencing its own previous decisions on similar issues in the assessee's earlier years, found that the disallowances were not justified as the books of accounts were not rejected and no specific instances of unverifiable expenditure were pointed out.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787161 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2016-2017
• Appeal Filed On: 25-02-2025
• Other Referred Cases: ITA No.1868/Ahd/2017, ITA No.2325/Ahd/2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAMAL DEEP SINGH
• Assessee Lawyers: BANDISH SOPARKAR; HIMANSHU SHAH; ARS
• Keywords: Rule of consistency
• Section: 143(3); 234B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA R. KAMBLE, JUDICIAL MEMBER ITA Nos. 424 & 461/Ahd/2025 (Assessment Year: 2016-17 & 2018-19) Sureel Enterprise Pvt. Ltd., 513/B, National Highway Road, Chhatral, Tal. Kalol, Dist. Gandhinagar-382729 [PAN :AADCS 5160 K] Vs. ACIT, Circle, Gandhinagar (Appellant) .. (Respondent) Appellant by : Shri Bandish Soparkar & Shri Himanshu Shah, ARs Respondent by: Shri Kamal Deep Singh, Sr. DR Date of Hearing 04.09.2025 Date of Pronouncement 17.11.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- These two appeals have been filed by the Assessee against the separate orders of even date 20.12.2024, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “Ld. CIT(A)”], under Section 250 of the Income- tax Act, 1961 (‘the Act’ in short) relating to the Assessment Years 2016-17 & 2018-19. 2. Since common issues are involved in both the appeals, these were heard together and are being disposed of by this consolidated order for the sake of convenience. ITA No. 424/Ahd/2025 : AY 2016-17 3. The assessee has taken following grounds of appeal:- Printed from counselvise.com ITA Nos. 424 & 461/Ahd/2025 Sureel Enterprise Pvt Ltd Vs. ACIT Asst. Year : 2016-17 & 2018-19 - 2– “1) the In law and in facts and circumstances of the Appellant case, Learned Commissioner of Income-tax (Appeals) has grossly erred in points of law and facts. 2) In law and in facts and circumstances of the Appellant case, the Learned Commissioner of Income-tax (Appeals) has grossly erred in dismissing appeal summarily without giving reasons on various arguments raised by appellant. 3) In law and in facts and circumstances of the Appellant case, the Learned Commissioner of Income-tax (Appeals) has grossly erred in not dealt with ground regarding not considering details provided and not granting reasonable opportunity by Ld. AO. 4) In law and in facts and circumstances of the Appellant case, the Learned Commissioner of Income-tax (Appeals) has grossly erred in confirming disallowance of employees benefit expenses of Rs. 40,03,825/-. 5) In law and in facts and circumstances of the Appellant case, the Learned Commissioner of Income-tax (Appeals) has grossly erred in not adjudicating ground regarding charging interest u/s 234B of IT Act for Rs.3,51,912/-. 6) In law and in facts and circumstances of the Appellant case, the Learned Commissioner of Income-tax (Appeals) has grossly erred in not adjudicating ground regarding charging interest u/s. 234D of IT. Act of Rs. 15,354/-. 7) In law and in facts and circumstances of the Appellant case, the Learned Commissioner of Income-tax (Appeals) has grossly erred in not adjudicating ground regarding raising demand for Rs. 16,18,098/-.” 4. The brief facts in respect of this year are that the assessee filed its return of income on 14.10.2016, declaring income of Rs.46,01,970/-. The case was selected for compulsory scrutiny on account of recurring disallowances of employee benefit expenses in earlier years. During assessment proceedings, the assessee claimed an amount of Rs.6,96,82,702/- under the head “employee benefit expenses”, which constituted about 87.70% of its turnover. The Assessing Officer noted that, despite providing several opportunities, the assessee failed to provide detailed employee-wise salary records, registers, PF/ESIC details, or sufficient supporting documents. The Assessing Officer found the claim to be excessive and partly unverifiable, particularly with respect to ad hoc bonus provisions and incentive payments. Relying on past appellate Printed from counselvise.com ITA Nos. 424 & 461/Ahd/2025 Sureel Enterprise Pvt Ltd Vs. ACIT Asst. Year : 2016-17 & 2018-19 - 3– decisions in the assessee’s own case and judicial precedents, the Assessing Officer disallowed Rs.40,03,825/-, i.e. 1/15th of the total salary and bonus claimed; and added it to the returned income, and completed the assessment u/s 143(3) of the Act determining the total income at Rs.86,05,800/-. 5. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A) and the Ld. CIT(A) dismissed the appeal by observing as under:- “I have perused the assessment order, submissions of the appellant and the order of ITAT, Ahmedabad in the case of the assessee for A.Y. 2015- 16. In this case, the Assessing Officer has made addition out of employee benefit expenses of Rs.40,03,825/-. This assessee is engaged in the business of job work of converting raw material into detergent powder and supply of labour for the same kind of work. During the year under consideration, the ratio of employee benefit expenses to the total turnover is 87.70%. The Assessing Officer during assessment proceedings held that the claim of such payments to employees/labourers was substantially high and unreasonable as also that the provision of bonus made by the assessee was on an ad-hoc basis. The assessee failed to produce before the Assessing Officer details of salary and bonus of earlier years paid during the year with evidence and other details called for, by the AO. Such a disallowance has been made by the Assessing Officer in the case of the assessee for A.Y. 2013- 14 and 2015-16. In this year, the Assessing Officer has invoked provisions of section 145(3) of the I.T. Act that he is not satisfied about the correctness and completeness of the accounts of the assessee and has proceeded to make an assessment to the best of his judgement The Assessing Officer has made a comparative study of the expenditure incurred in this year as compared to A.Y. 2013-14 and 2015-16 before making the above addition. The decision of ITAT, Ahmedabad, in the case of this assessee for A.Y. 2015-16 is not applicable to the facts of this case for the reason that, decision of ITAT was rendered in the context of the Assessing Officer not rejecting the books of accounts before making the said addition. However, in this year, the Assessing Officer has invoked the provisions of section 145(3) of the I.T. Act Printed from counselvise.com ITA Nos. 424 & 461/Ahd/2025 Sureel Enterprise Pvt Ltd Vs. ACIT Asst. Year : 2016-17 & 2018-19 - 4– before disallowing expenditure. I find no infirmity in the order of the Assessing Officer. Therefore, the appeal filed by the appellant is dismissed.” 6. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. 7. We have heard the rival submissions and perused the material available on record. We find that similar disallowance of “employee benefit expenses” had been the subject matter of appeal before the Coordinate Bench of this Tribunal in assessee’s own cases for AY 2013-14 (ITA No.1868/Ahd/2017, order dated 11.12.2019) and AY 2015-16 (ITA No.2325/Ahd/2018, order dated 12.07.2021), wherein the Tribunal had deleted such disallowance, holding as under: “6. Heard both the sides and perused the material on record. During the course of assessment, the Assessing Officer observed that assessee has not furnished the details regarding basis of making payment under the head incentive to the employees/workers therefore 50% of such expenses were disallowed. The Id. counsel has reported that similar issue on identical fact has been adjudicated in favour of the assessee in the case of the assessee itself pertaining to assessment year 2013-14. With the assistance of Id. representatives we have gone through the decision of the Co-ordinate Bench of the ITAT vide ITA No. 1868/Ahd/2017 dated 11.12.2019. The relevant part of the decision of the ITAT is reproduced as under:- \"8. We have gone through the relevant record and impugned order. Assessee is in the business of conversion of Raw material into finished products on job work basis and for its activities, Assessee has to higher rate labourer from the nearby villages and sometimes from the nearby State Assessee contended that since 2009 his sales are increasing and in A.Y. 2009-10, it was 88.79% in A.Y. 2010-11, it was 88.94% in the A.Y. 2011-12, it was 91.65%, in the A.Y. 2012-13, it was 91% and in the A.Y. 2013-14, the ratio is 93.21%. Therefore, further stated details of the deduction of provident funds have given to the lower authorities Printed from counselvise.com ITA Nos. 424 & 461/Ahd/2025 Sureel Enterprise Pvt Ltd Vs. ACIT Asst. Year : 2016-17 & 2018-19 - 5– and all the details with regard to names and address as per the provident fund record have been submitted to the lower authorities. With regard to cash payment, assessee stated that most of the labourer are illiterate and they do not have accounts in the banks. Assessee also contended that workers turnover are high and therefore assessee had to pay more bonus as compared to other industrial labour. 9. As we can see, books of account were not rejected by the assessing officer and audit report has been filed by the assessee but no ambiguity was noticed in the audit report by the revenue. As can see from the submission filed before the lower authorities that turnover is every year is increasing. Therefore, it is employed that wages and salary will also increase. And in our considered opinion, same appears to be quite justifiable and genuine. Assessee regularly deducting EPF, ESIC from wages and regularly deposited the same with concerned authority and a details submission with regard to PPF number have been filed before the lower authorities. 10. In our considered opinion, after seeing the nature of job of the assessee which involves most of the unskilled labourers on cash payment made to them cannot be ruled out. Therefore, giving benefit of doubt to the assessee, we allow the appeal of the assessee. It is clear from the decision of the Co-ordinate Bench of the ITAT Ahmedabad in the case of assessee itself as reported above that identical issue has been adjudicated on similar fact in favour of the assessee after taking into consideration the nature of payment and not rejecting books of accounts by Assessing Officer. Respectfully following the decision of ITAT Ahmedabad supra this appeal of the assessee on identical facts and similar issue is allowed. Accordingly, this appeal of the assessee is allowed.” 8. In the present case, although the Assessing Officer has formally invoked section 145(3), no specific defect in the method of accounting or completeness of accounts has been pointed out. The disallowance is purely Printed from counselvise.com ITA Nos. 424 & 461/Ahd/2025 Sureel Enterprise Pvt Ltd Vs. ACIT Asst. Year : 2016-17 & 2018-19 - 6– ad hoc, based on percentage and comparison with earlier years, without establishing any inflation or unverifiable element. 9. Following the principle of consistency and respectfully relying upon the orders of the Coordinate Bench in assessee’s own cases for earlier years, we find no justification in sustaining the disallowance. Accordingly, the addition of Rs.40,03,825/- made on account of disallowance of employee benefit expenses is deleted. ITA No. 461/Ahd/2025 : AY 2018-19 10. For AY 2018-19, the assessee filed return of income on 20.10.2018 declaring total income of Rs.48,68,464/-. The assessment was completed under Section 143(3) r.w.s. 143(3A) and 143(3B) of the Act, determining the total income at Rs.1,38,44,285/-. Disallowance of Rs.89,75,821/- was made under the head Employees Benefit Expenses, following similar reasoning as in AY 2016-17. The Ld. CIT(A), on appeal, upheld the disallowance, without independent analysis, relying upon reasoning similar to that in AY 2016-17. The assessee is, therefore, in appeal before us. 11. We have heard both sides and perused the material available on record. The facts and circumstances in this year are identical to those in AY 2016–17. The Assessing Officer has once again proceeded on an estimated and ad hoc basis without pointing out any specific instance of unverifiable expenditure. 12. As discussed in earlier paragraphs, the Coordinate Bench of this Tribunal in assessee’s own cases for AYs 2013-14 and 2015-16 has already held that such disallowances are not sustainable in absence of rejection of Printed from counselvise.com ITA Nos. 424 & 461/Ahd/2025 Sureel Enterprise Pvt Ltd Vs. ACIT Asst. Year : 2016-17 & 2018-19 - 7– books or specific findings. Respectfully following the same, the disallowance of Rs.89,75,821/- made under the head “Employee Benefit Expenses” is deleted. 13. In the result, the appeals of the assessee are allowed. The order is pronounced in the open Court on 17.11.2025. Sd/- Sd/- (SUCHITRA R. KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 17.11.2025 **btk आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, , , , अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation … Words processed by Hon’ble VP on his PC on 10.09.2025 2. Date on which the typed draft is placed before the Dictating Member ….13.11.2025 3. Other Member …..17.11.2025 4. Date on which the approved draft comes to the Sr.P.S./P.S ….17.11.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 17.11.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S …..17.11.2025 7. Date on which the file goes to the Bench Clerk …..17.11.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order…………………………………… Printed from counselvise.com "