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Judgment
PER KRINWANT SAHAY AM
Appeal in this case has been filed by the assessee against the order dated 13.02.2026 passed by the CIT(A)-24 Delhi for the A.Y. 2022-23. Grounds of appeal are as under :-
1.That the order of Ld. AO and CIT (A) is bad in Law and against facts of the case.
2.That the Ld. A.O. erred in making addition of Rs. 1,47,37,019/- without considering the submission of the assessee.
(1)Employees Benefits Expenses disallowed equal to Rs. 88,34,678/- for the reason tax not deducted at source despite the fact submitted during the course of proceeding that none of the employee's salary was liable for TDS and a detail chart of employees wise salary submitted.
(2)On the facts and circumstances of the case, the AO has erred in disallowing interest paid on unsecured loans obtained from director holding that the same was excessive in nature without appreciating the commercial expediency of the same. Interest on unsecured loan paid to director @ 18% Rs. 1,24,50,936/- but allowed only 12% and disallowed balance 6% equal to Rs. 41,50,312/-
(3)The AO has erred in disallowing 25% of the outstanding creditors equal to of Rs. 17,52,029/- despite the fact that all required information furnished about creditors in format provided in notice u/s 142(1) of the Act.
3.That the Ld. CIT(A). erred in not considering the documents/details furnished during the course of proceedings.
4.That the appellant carves leave to add, alter, modify or delete any of the ground of appeal.
PRAYER
On the facts and in the circumstances of the case and in view of judicial precedents, it is humbly prayed that:
1.The order passed by the Ld. A.O. U/s 143(3) of the Act be quashed and set aside; and
2.Expenses claimed as above be allowed and demand be deleted.
Facts of the case as submitted by the Ld. Counsel of the assessee are as under :-
During proceedings before us the Ld. Counsel argued that AO disallowed expenses of Rs.88,34,678/- for the reason that tax was not deducted at source. In this regard the Ld. Counsel argued that these expenses were related to payment of salary to employees whose total income was not liable for TDS.
The Ld. Counsel also submitted that a detailed chart of employees wise salary was also submitted to the AO but the AO did not consider the chart and made the addition on this issue.
During proceedings before us the Ld. Counsel repeated the same arguments on this issue.
The Ld. DR could not rebut the factual position, therefore, keeping in view the fact that the employees whose salary were not liable for TDS was salary expenses disallowed by the AO without considering the details and the documents filed by the assessee and the Ld. CIT(A) also did not take cognizance of the Act. Therefore, we are of this considered view that since total salary of the employees did not attract TDS, therefore, the assessee was justified in not deducting TDS from their salary. Accordingly, the disallowance of expenses on this ground by the AO and its confirmation by the Ld. CIT(A) cannot be sustained. Accordingly, assessee’s appeal on this issue is allowed.
Appeal on the second ground is regarding disallowance interest on unsecured loan on estimate basis. In the assessment proceedings the Ld. AO disallowed interest paid to the director on loan from director of the company and made ad-hoc disallowance of interest @18% during appellate proceedings the Ld. CIT(A) made it on 12% on estimate basis.
The Ld. Counsel of the assessee argued that the interest was paid to the director on loan taken by the company. Keeping in view the financial exigency but both lower authorities have restricted interest payment on the estimate basis only.
Per contra the Ld. DR relied on the order of the authorities below.
We have considered the findings given by the authorities below on this issue and we find that the disallowance of interest by both the authorities have been made on estimate basis without brining any reason on record. Even during proceedings before us the Ld. DR could not rebut the allegation of the Ld. Counsel of the assessee that the disallowance of interest on estimate basis has no legal or financial legs. Accordingly, in our considered view if the payment of interest was not justified then the lower authority should have disallowed the entire interest payment but disallowance made on ad-hoc /estimate basis is not justified. Accordingly, assessee’s appeal on this issue is also allowed.
The first and last ground of appeal is regarding disallowance of 25% of outstanding creditors equal to Rs.17,52,029/- despite the fact that all required information were furnished by the creditors in the format provided in notice u/s.142(1) of the Act.
During proceedings before us the Ld. Counsel submitted that the AO had given format to provide details of creditors in the notice issued u/s.142(1) of the Act and the assessee complied all the requirements and all necessary details and documents were filed. But here again the AO disallowed 25% of outstanding creditors and the Ld. CIT(A) confirmed this disallowance.
Per contra the Ld. DR again relied on the order of the lower authorities on this issue.
We have considered the findings given by the lower authorities below on this issue and we find that the disallowance of 25% of the outstanding creditors made by the AO in the assessment order and confirmed by the Ld. CIT(A) in the appellate order are just on ad-hoc / estimate basis nothing either by the AO or by the Ld. CIT(A) to prove that 25% of the creditors were not genuine.
During proceedings before us even the Ld. DR could also not rebut it. Accordingly, we are of this considered view that ad-hoc disallowance of 25% of the outstanding creditors on estimate basis is not justified without bringing any material on record to prove it. Accordingly, the assessee’s appeal on this issue is allowed.
In the result, the appeal filed by the assessee is allowed.