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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This appeal arises from order dated 22.08.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Addl./JCIT(Appeals)-1, Kolkata. In this case, the assessee is seen to have incurred a lease rent liability of Rs.2,42,52,558/-. This amount was not debited to the profit and loss account and was found to be reflected in the audit report as a difference in the amount of contingent liability. The Ld. AO-CPC added this amount u/s 143(1) of the Act.
The assessee approached the Ld. Addl./JCIT(Appeals) where he could not succeed on the specific issue on the basis of a finding that the assessee allegedly did not justify its claim in this regard, along with supporting documents (page 12 of the impugned order).
The assessee, being further aggrieved has approached the ITAT with the following grounds: -
1.“That on the facts and circumstances of the case and in law, the order dated 22.08.2025 passed by the Ld. Addl./JCIT(Appeals) u/s 250 of the Income Tax Act, 1961 (“Act”) confirming an addition of Rs.2,42,52,558/- is arbitrary, bad in law and liable to be quashed.
2.That on the facts and circumstances of the case and in law, the Ld. Addl./Jt. CIT(Appeals) erred in confirming the disallowance of Rs.2,42,52,558/- without appreciating that the said amount is the actual lease rent paid during the year as per Indian Accounting Standard (Ind. AS) 116, duly claimed as allowable expenditure u/s 37 of the Act for income tax purposes in the Income Tax Return for the relevant assessment year and that the same is out of the amount already disallowed in earlier year.
The Appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal at the time of hearing.”
Before us the Ld. AR argued with the help of a paper book and written submissions. It was stated that the reflection in the audit report of the impugned amount was as per the Indian Accounting Standard as notified u/s 133 of the Companies Act, 2013. Under such Accounting Standard-116 dealing with leases, is what has been followed in depicting the impugned amount in the books and in the audit report. It was also averred that due to an oversight the correct portions of the ITR were not filled up to reflect this position in the ITR. It was the further submission that the correct position was duly brought to the notice of the Ld. Addl./JCIT(Appeals) but the same was not considered. Thereafter, the Ld. AR read out from the written submissions as under: -
2. Allegation that the Appellant has failed to furnish details justifying its claim
"a. It is humbly submitted that the treatment as per IInd AS 116 was explained in detail to the Ld. JCIT(Appeals).
b. However, the Ld. JCIT (Appeals) did not consider the same, and upheld the addition by stating that the Appellant has failed to justify its claim with supporting documents. In this regard, please note the following:
- The Ld. JCIT(Appeals) completely ignored the AFS where in the Note 31 “Leases", the amount of actual lease rent liability incurred during the subject AY is clearly disclosed. Further, in sub-note (h) “Leases” of Note 1.2 “Statement of Significant Accounting Policies”, the accounting treatment regarding leases covered by Ind AS 116 has been explained in detail.
- No specific details, documents, or explanations were sought by the Ld. JCIT(Appeals) to substantiate the claim of the Appellant.
- Lastly, the Appellant has duly deducted and deposited the tax at source from the lease rent amount, the details of which are already available with the income tax department. In this regard, the Appellant had also furnished a statement containing the details of the parties to whom rent was paid / payable during the relevant AY, along with the corresponding amounts and Permanent Account Numbers of such parties.”
The Ld. DR relied on the findings given in the impugned order and stated that the assessee had not filed the relevant documents in support of his clam.
We have considered the rival submissions and have gone through the records before us. It is seen that while there may have been an incorrect depiction of the impugned amount in the ITR Form but the facts were duly brought to the notice of the Ld. Addl./JCIT(Appeals). We find that as per AS-116 the assessee has correctly claimed the lease rent liability and there is no reason why the same should be added to its income u/s 143(1) of the Act.
In the result, appeal of the Assessee is allowed.