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Judgment
O R D E R
PER M. BALAGANESH, A. M.:
The appeal in ITA No.18/Del/2026 for AY 2020-21, arises out of the order of the Addl. CIT/ JCIT(A)-1, Pune [hereinafter referred to as ‘ld. JCIT(A)’, in short] dated 23.12.2025 against the order of assessment passed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 24.12.2021 by the Assessing Officer, NFAC, New Delhi (hereinafter referred to as ‘ld. AO’).
The assessee has raised the following grounds of appeal before us:-
“1.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred both in law and on facts in dismissing the appeal of the assessee as not maintainable, without any valid basis and without appreciating the facts and circumstances of the case, and in complete violation of the principles of natural justice.
2.That in any case and in any view of the matter, action of Ld. CIT(A) in dismissing the appeal as not maintainable is illegal, bad in law, and contrary to the facts and circumstances of the case.
3.That having regard to the facts and cirmstances of the case, Ld. CIT(A) ought to have adjudicated the appeal on merits and should have deleted the addition of Rs 22,09,99,099/-made by the Ld. ADIT, CPC under section 143(1), which was made without any basis and without properly appreciating the facts and circumstances of the case.
4.That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
We have heard the rival submissions and perused the materials available on record. In this case, the Learned CITA had dismissed the appeal on the ground of delay. In the first round, the assessee approached the Tribunal and the Tribunal in ITA No. 1029 / Del / 2024 for assessment year 2020-21 dated 26-3-2025 vide para 4 thereon had restored the appeal to the file of Learned CITA with the direction to condone the delay and decide the appeal afresh on merits. Hence, this is the second round of proceedings. In the second round of proceedings, the Learned CITA reproduced the written submissions filed by the assessee from pages 5 to 10 of the order. This is a case wherein contingent liability not debited in the profit and loss account at all, but has been reported by the tax auditor in the Form 3CD, had been sought to be disallowed. We find that assessee is a company engaged in the business of manufacturing of pharmaceuticals, medicinal chemicals and botanical products. The return of income for the assessment year 2020-21 was filed on 13-2-2021 declaring nil income. Subsequently, the said return was processed under section 143(1) of the Act wherein the assessee received a communication proposing an adjustment / disallowance of Rs 22,09,99,099 on account of inconsistency in any other amount not allowable under section 37 claimed in the schedule OI and audit report. The assessee duly responded to the said communication by submitting that the said amount of Rs 22,09,99,099 is on account of contingent liability which was not even debited to the profit and loss account and therefore, there would be no question of disallowance of the same in the assessment. The Learned CPC ignored the aforesaid communication and passed an intimation under section 143(1) of the Act dated 24-12-2021 making the said disallowance on the ground of inconsistency in any other amount not allowable under section 37 claimed in return in schedule OI and audit report.
Before the Learned CITA, the assessee furnished the details of the said contingent liabilities as under :-
| S.No. | Particulars | Amount |
| 1 | Pending demand tinder Income Tax (Rs. 2,96,21,147 + Rs. 17,54,28,27) | Rs 19.60.47,421/- |
| 2 | Differential Bonus liability not recognized by the assessee company in view of the stay granted by Hon’ble High Court. | Rs. 37,65,865/- |
| 3 | Corporate Guarantee for bank loan taken by Subsidiary Company | Rs 1,96.S5.813/- |
| 4. | Other disputed demands. | Rs 15.00 000 |
| Total | Rs. 22,09,99,099/- | |
The assessee categorically stated that no deduction has been claimed for the aforesaid amounts in the return of income and hence there would be no question of any disallowance thereon. The assessee also stated that the said items are forming part of the notes on accounts under the head ‘contingent liabilities’ in the audited financial statements of the assessee as evident from note 32 of the audited financial statements. The Learned CITA however, did not agree with the contentions of the assessee and merely confirmed the disallowance without even ascertaining the fact whether any deduction has been claimed by the assessee for the said amount reflected in contingent liabilities.
From the details of contingent liabilities reproduced in the aforesaid table, it is very clear that assessee had not even claimed the same as deduction in the profit and loss account and in the income tax return. These are only contingent liabilities which are to be reflected mandatorily as per the mandate provided in the provisions of the Companies Act, 2013. The fact that assessee had not claimed any deduction in respect of the aforesaid sums has not been doubted by the revenue. Hence, there is no question of making any disallowance for the same in the assessment. Hence, we have no hesitation in directing the Learned AO to delete the said disallowance. Accordingly, the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.