SKF Engineering & Lubrication India Private Limited Vs ACIT (ITAT Bangalore)
Bengaluru ITAT-Manual Signature on E-Assessment Order Does Not Invalidate Assessment
The Bengaluru ITAT partly allowed the assessee’s appeal arising from an assessment under section 143(3) read with section 254, holding that the manual signature on an assessment order passed after e-proceedings does not render the order invalid, as section 282A expressly permits orders issued in paper form to be manually signed and any procedural defect is protected by section 292B. On merits, however, the Tribunal granted substantial relief by deleting multiple disallowances. It held that ₹23.03 lakh incurred on slotted-angle racks, heavy-duty racks, modules and similar items constituted revenue expenditure on repairs and maintenance, as no new asset or enduring benefit was created. The Tribunal also deleted the disallowance of ₹35.87 lakh towards consumables issued to the shop floor, observing that the Revenue had failed to appreciate the assessee’s accounting system under which materials were first purchased and later charged to the profit and loss account upon consumption. Further, it allowed the write-off of ₹6.97 lakh representing irrecoverable advances to vendors, holding that the loss arose in the ordinary course of business and was allowable as a business loss under section 28. However, it upheld the disallowance of ₹1.82 lakh contributed to the Uttarakhand Relief Fund, as the assessee failed to establish that the payment was incurred wholly and exclusively for business purposes under section 37(1), though it observed that the claim could be considered separately under section 80G, if otherwise eligible.
Cases Discussed
- Outotec Singapore Pte. Ltd. v. Deputy Commissioner of Income-tax [ITAT Delhi], [2025] 181 com743 (Delhi)
- Outsystems Singapore Pte. Ltd. v. Deputy Commissioner of Income-tax [ITAT Delhi], ITA No. 1601/Del/2025
- Sunil Kumar Income Tax Officer [ITAT Delhi], ITA No. 566/Del/2026
- Navyug Technologies v. Income Tax Officer [ITAT Delhi], ITA No. 4579/Del/2024
- UCWEB Mobile Private Limited v. Deputy Commissioner of Income-tax [ITAT Delhi], ITA Nos. 929 & 2355/Del/2022
- Cherukuri Mani v. Chief Secretary, Government of Andhra Pradesh (SC), (2015) 13 SSC 722
- Chandra Kishore Jha v. Mahavir Prasad and Others (SC), [1999] 8 SCC 266
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. SKF Engineering and Lubrication India Private Limited (“the assessee”/ “the appellant”) has filed this appeal for Assessment Year 2014-15 against the order dated 27 November 2025 passed by the National Faceless Appeal Centre, Delhi [“the learned CIT(A)”]. By the said order, the learned CIT(A) partly allowed the assessee’s appeal against the assessment order dated 28 April 2023 passed by the Assessing Officer under section 143(3) read with section 254 of the Income-tax Act, 1961 (“the Act”). Aggrieved by the appellate order, the assessee is in appeal before us and has raised the following grounds:
Ground number 1
invalidity of assessment order due to manual signing under e proceedings,
On the facts and in law, the learned CIT(A) erred in sustaining the assessment order passed under section 143(3) read with section 254 of the Income-tax Act, 1961, although the order was manually signed despite the entire assessment proceedings having been conducted through the electronic assessment framework/e-proceedings. The appellant submits that, under the CBDT instructions governing faceless and electronic assessments, an assessment order is mandatorily required to be digitally signed. Manual signing renders the order invalid, non-est, and void ab initio. This defect goes to the root of jurisdiction and is not a curable irregularity. Consequently, the assessment order deserves to be quashed, and all additions sustained therein are liable to be deleted. Ground no 2
assessment framed on a non-existent entity
The learned CIT(A) erred in law and on facts in upholding an assessment order passed in the Permanent Account Number of a non-existing entity, which had ceased to exist as on the date of the assessment order. It is settled law that an assessment framed on a non-existing entity is null in the eyes of law and unenforceable. The learned CIT(A) failed to appreciate that such a foundational jurisdictional defect cannot be cured under section 292B of the Income-tax Act, 1961. Accordingly, the assessment order is liable to be quashed or annulled on this ground alone.
Ground number 3
assessment order barred by limitation under section 153
The learned CIT(A) erred in upholding the assessment order dated 28 April 2023 passed by the Assessing Officer, as the order is barred by limitation under section 153(6) of the Income-tax Act, 1961. The ITAT order was dated 16 March 2022, and the statutory time limit of twelve months expired on 31 March 2023. The assessment order passed thereafter is therefore without jurisdiction and void ab initio. Reliance on the alleged date of receipt by the PCIT is misconceived and unsupported by any statutory evidence furnished to the appellant. The impugned order therefore deserves to be quashed. Ground number 4
violation of principles of natural justice in remand proceedings
The learned CIT(A) erred in confirming the additions despite the fact that, pursuant to the remand by the Hon’ble ITAT, the Assessing Officer issued notices after an inordinate delay of approximately eleven months and allowed only six working days to furnish voluminous documentary evidence. Despite this severe time constraint, the appellant submitted substantial details, including approximately 200 invoices, a fact acknowledged by the Assessing Officer. The learned CIT(A) failed to appreciate that the assessment framed in these circumstances is vitiated by a gross violation of the principles of natural justice, and the additions sustained thereunder are liable to be deleted on this ground alone.
Ground no 5
Erroneous treatment of revenue expenditure as capital expenditure The learned CIT(A) erred in law and on facts in treating the revenue expenditure as capital in nature, despite the expenditure neither resulting in the creation of any new asset nor conferring any enduring benefit in the capital field. The expenditure merely enabled the appellant to carry on its business operations more efficiently and did not augment its fixed capital structure.
Ground number 6
Disallowance of housekeeping and other expenses which are allowable under section 37 [1]
The learned CIT(A) erred in law and on facts in confirming the disallowance of housekeeping and other expenses, despite the appellant having demonstrated that such expenses were incurred wholly and exclusively for business purposes and are allowable under section 37(1) of the Act. These expenses were routine, recurring, and revenue in nature, incurred for the maintenance, cleanliness, and smooth functioning of the appellant’s business premises and operations. The learned CIT(A) failed to appreciate the business exigencies and commercial realities under which such expenditure was necessarily incurred.
Ground number 7
The learned CIT(A) erred in confirming the disallowance in a mechanical manner, without considering the appellant’s detailed submissions explaining the nature, necessity, and business nexus of the housekeeping and other expenses. The impugned appellate order does not address the specific factual explanations placed on record and therefore fails to qualify as a reasoned and speaking order.
Ground number 8
The learned CIT(A) erred in upholding the disallowance by disregarding the documentary evidence, invoices, ledger extracts, and detailed explanations furnished by the appellant during the assessment and remand proceedings. The disallowance was sustained merely on the alleged inadequacy of correlation, without bringing any material on record to show that the expenditure was bogus, fictitious, or not incurred for business purposes. The order therefore suffers from non-application of mind and is unsustainable in law.
Ground number 9
The learned CIT(A) erred in law and on facts in confirming the disallowance of the contribution made to the Uttarakhand Relief Fund, without appreciating that the payment was duly recorded in the books of account and claimed under section 80G of the Income-tax Act, 1961. The disallowance was sustained solely on the ground that the receipt or approval details were not furnished, without granting the appellant an opportunity to cure the alleged evidentiary lapse and without disputing the genuineness of the payment. The impugned finding is therefore mechanical and unsustainable in law.
Ground number 10
erroneous disallowance of old advances written off as non-recoverable
The learned CIT(A) erred in law and on facts in confirming the disallowance of old advances written off as non-recoverable, despite the appellant having demonstrated that the advances were made to vendors in the ordinary course of business and that no further supplies were received thereafter. The learned CIT(A) failed to appreciate that the appellant had furnished ledger extracts evidencing the advances and the absence of subsequent transactions and incorrectly held that no proof had been submitted. The impugned finding is contrary to the material on record, suffers from non-application of mind, and is unsustainable in law.
Ground number 11
failure to exercise coterminous appellate powers under section 250 The learned CIT(A) erred in failing to exercise the coterminous appellate powers conferred under section 250 of the Act by not directing further verification, calling for a remand report, or granting appropriate relief, despite being satisfied as to the genuineness of the expenditure and the availability of supporting documentation. This failure has caused grave prejudice to the appellant.
Ground number 12
general
The appellant craves leave to add, alter, amend, or withdraw any of the foregoing grounds of appeal at or before the hearing of the appeal.
2. The facts of the case are that the assessee is a private limited company engaged in the manufacture and trading of oil seals, bearing seals, engine seals, radial shaft seals, wheel seals, and similar products, and also manufactures large-size bearings. The assessee filed its return of income on 30 November 2014 declaring a total loss of ₹62,52,90,853. The return was processed under section 143(1) and was thereafter selected for scrutiny. The assessment was completed under section 143(3) on 23 December 2016, determining the total loss at ₹60,10,55,965. In appeal, the assessee obtained marginal relief, and the matter ultimately reached the Coordinate Bench in ITA No. 1773/Bang/2018. By order dated 16 March 2022, the Tribunal restored the matter to the file of the Assessing Officer for fresh adjudication on the issues relating to unreconciled tax deducted at source reflected in Form 26AS and the ad hoc disallowance of housekeeping and other expenses. Pursuant thereto, an order was passed on 28 April 2023 under section 143(3) read with section 254 of the Income-tax Act. In that order, the Assessing Officer held that ₹23,02,587, being expenditure on items such as heavy-duty racks, main modules and similar assets, provided enduring benefit and was therefore capital in nature. A further sum of ₹2,23,950 incurred on repair of the IT system was also treated as capital expenditure and disallowed. The Assessing Officer also disallowed ₹6,97,057 described as old advances written off as non-recoverable and classified under discounts to customers, on the ground that the assessee did not furnish supporting information, invoices or documents. Further, ₹1,82,093 paid towards Uttarakhand Relief Contribution was disallowed on the ground that the assessee had not furnished details and that the expenditure was not connected with its business. In addition, ₹35,87,477, passed through journal entries and described as miscellaneous items issued to the department, were disallowed in the absence of evidence or invoices substantiating the expenditure. Accordingly, the total loss was determined at ₹61,78,97,689 as against the returned loss of ₹62,52,90,853.
3. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). By order dated 27 November 2025, the learned CIT(A) dismissed the grounds challenging the validity of the assessment order, including the contention that the order was barred by limitation. As regards the disallowance of ₹25,26,537 treated by the Assessing Officer as capital expenditure, the learned CIT(A) upheld the characterization of the expenditure as capital in nature but directed the Assessing Officer to allow depreciation thereon. The disallowance of ₹6,97,057 towards old advances written off as non-recoverable/discounts to customers was confirmed. The disallowance of ₹1,82,093 towards Uttarakhand Relief Contribution was also sustained as not allowable as business expenditure under section 37(1) of the Act, though it was observed that the claim may be allowable, if otherwise eligible, under section 80G. The learned CIT(A) further confirmed the disallowance of ₹35,87,477 relating to consumables issued to the shop floor, holding that internal book entries unsupported by third-party evidence lacked probative value. The learned CIT(A) also rejected the assessee’s plea of violation of principles of natural justice and held that a substantial portion of the expense claim lacked third-party confirmation and was therefore unverifiable. However, relief was granted to the extent of rectifying the typographical mistake in the figures under section 154 of the Act. Accordingly, the assessee’s appeal was partly allowed.
4. Aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. The learned authorised representatives, Shri Aditya Monosobdar and Shri Yashwanth Kumar D. N., Chartered Accountants, appeared on behalf of the assessee and filed a detailed paper book running into 169 pages, along with written submissions. They were heard at length.
Whether the assessment order manually signed by the ld AO makes it invalid, non est Answer : NO 9 Section 282A (1) and (2)
5. On Ground No. 1, the learned authorised representative submitted that the assessment order passed by the Assessing Officer under section 143(3) read with section 254 of the Income-tax Act is invalid, as it was manually signed despite the entire assessment proceedings having been conducted through the electronic assessment framework/e-proceedings. It was submitted that, under the CBDT instructions governing faceless and electronic assessments, an assessment order is mandatorily required to be digitally signed. Manual signing, according to the assessee, renders the order invalid, non est, and void ab initio. The learned authorised representative further submitted that this defect goes to the root of jurisdiction and is not a curable irregularity. Consequently, the assessment order itself deserves to be quashed, and all additions sustained thereunder are liable to be deleted. To appreciate the assessee’s contention on Ground No. 1, the relevant portion of the written submissions is in substance as below:
1.1 The appellant respectfully submits that the impugned assessment order passed under section 143(3) read with section 254 of the Income-tax Act, 1961, is invalid in law and liable to be quashed, as the said order was manually signed by the learned Assessing Officer despite the entire assessment proceedings having been conducted exclusively through the e-proceedings facility of the Income Tax Department.
1.2 It is respectfully submitted that this ground goes to the very root of the validity of the impugned assessment order. The issue raised is a pure question of law apparent from the record and does not require examination of any new fact. The assessment order, having been manually signed, is demonstrably non-compliant with the mandatory procedural framework prescribed by the Central Board of Direct Taxes governing the authentication of orders issued through the electronic assessment mechanism.
1.3 The appellant respectfully submits that the defect arising from manual signing of an assessment order in a case governed by e-proceedings is not a curable procedural or technical irregularity. It is instead a substantive jurisdictional defect that vitiates the impugned order in its entirety. No administrative explanation or post facto justification by the Revenue can cure the departure from the mandatory prescription under the CBDT instructions and the Assessing Officer’s conduct in the present case. In these circumstances, the impugned order is non est in law, and all additions made and sustained thereunder are liable to be deleted.
1.4 It is undisputed that the assessment proceedings for the relevant assessment year were conducted through the e-proceedings facility available to the assessee through its account on the Income Tax Department’s e-filing portal. All notices issued by the Assessing Officer, including notices under section 142(1), and all other communications were issued electronically and served on the assessee through the e-proceedings interface. The assessee, in turn, filed its responses, submissions, and supporting documents through the same electronic interface in accordance with the prescribed procedure.
1.5 The impugned assessment order, being the final culmination of the electronic proceedings, was nevertheless signed manually by the Assessing Officer. A perusal of the assessment order received by the assessee confirms that the signature appearing thereon is a manual ink signature and not a digital signature, as mandatorily required under the applicable CBDT instructions.
1.6 In addition, the appellant submits a further and materially distinguishing fact that merits the Hon’ble Bench’s consideration. On the same date on which the impugned assessment order was passed and manually signed, the Assessing Officer issued a penalty notice bearing a valid and operative digital signature. This fact, apparent from the record and capable of verification, establishes that both the digital signing infrastructure and the Assessing Officer’s digital signature certificate were fully functional on the date of the impugned assessment order. The manual signing of the assessment order, therefore, was not attributable to any technical impediment, system failure, or administrative impossibility, but was an unexplained departure from the mandatory procedure prescribed by the CBDT.
1.7 In exercise of its administrative and supervisory powers under the Act, the CBDT issued Instruction No. 1/2018 [F. No. 225/157/2017-ITA.II] dated 12 February 2018, prescribing the operational framework governing the conduct of assessment proceedings through the e-proceedings facility.
1.8 Paragraph 4.2 of the CBDT Instruction categorically provides that, except in search-related assessments, all pending scrutiny assessment cases shall be conducted only through the e-proceedings functionality in ITBA/e-filing. This provision is central to the present ground and reads as under:
“4.2 Use of digital signature by the Assessing Officer: All departmental orders, communications, and notices issued to the assessee through the e-proceedings facility shall be digitally signed by the Assessing Officer.”
1.9 The legal position on manual signing of an assessment order in cases governed by e-proceedings is no longer res integra. The Hon’ble Income Tax Appellate Tribunal, Delhi, has consistently held that such manual signing constitutes an incurable defect warranting quashing of the assessment order.
1.10 In this regard, the appellant relies on the decision of the Hon’ble ITAT, Delhi Bench, in Outsystems Singapore Pte. Ltd. v. Deputy Commissioner of Income-tax [2025] ITA No. 1601/Del/2025, wherein it was held that an assessment order manually signed in proceedings governed by the e-proceedings framework suffers from an incurable defect and is liable to be quashed.
1.11 It is respectfully submitted that the decision in Outotec Singapore Pte. Ltd. has since been consistently followed by several Coordinate Benches of the Hon’ble Tribunal. The appellant places reliance on the following decisions, each of which has applied the ratio of Outotec Singapore Pte. Ltd. and quashed assessment orders that were manually signed in cases governed by electronic proceedings.
-
- Navyug Technologies v. Income Tax Officer [ITAT Delhi], ITA No. 4579/Del/2024.
- Sunil Kumar Income Tax Officer [ITAT Delhi], ITA No. 566/Del/2026.
- UCWEB Mobile Private Limited v. Deputy Commissioner of Income-tax [ITAT Delhi], ITA Nos. 929 & 2355/Del/2022.
1.12 The appellant further relies on the judgment of the Hon’ble Supreme Court in Chandra Kishore Jha v. Mahavir Prasad and Others, wherein it was held as follows:
“It is well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner.”
1.13 The appellant also relies on the judgment of the Hon’ble Supreme Court in Cherukuri Mani v. Chief Secretary, Government of Andhra Pradesh, wherein the Court held as follows:
“ Where the law prescribes a thing to be done in a particular manner following a particular procedure, it shall be done in the same manner following the provision of law, without deviating from the prescribed procedure the government order in the present case, directing detention is clear violation of the prescribed manner and contrary to the provision of law”
1.14 The Hon’ble Court further approved the settled principle, consistently followed in a long line of decisions, that where a statute or prescribed procedure requires an act to be done in a particular manner, that manner alone is legally valid, and no other mode, however convenient or expedient, can be substituted.
1.15 The Hon’ble Court quashed the Government order for violation of the prescribed procedure, without examining the merits of the matter, holding that deviation from the statutory procedure was itself sufficient to render the order illegal.
1.16 It is respectfully submitted that the ratio of these decisions, when applied to the facts of the present case, compels the conclusion that the impugned assessment order, having been passed in clear deviation from the mandatory procedure prescribed under CBDT Instruction No. 1/2018, is illegal and liable to be quashed.
1.17 In light of the foregoing, it is respectfully submitted that the legal position on the present ground stands conclusively established by a consistent and binding line of Coordinate Bench decisions of the Hon’ble Tribunal. These decisions uniformly hold that an assessment order passed in e-proceedings and manually signed by the Assessing Officer, in violation of the mandatory requirement of paragraph 4.2 of CBDT Instruction No. 1/2018 dated 12 February 2018, suffers from an incurable defect and is void ab initio.
1.18 It is therefore respectfully submitted that the impugned assessment order, being manually signed in a case governed by the electronic proceedings’ framework, is non est in the eyes of law, void ab initio, and liable to be quashed. Consequently, all additions made and demands raised pursuant to the impugned assessment order deserve to be deleted in their entirety.
6. The learned Departmental Representative submitted that the Assessing Officer manually signed the impugned assessment order and that no infirmity arises on that account. He contended that section 282A of the Act governs authentication and that its requirements were duly complied with. According to him, no prejudice was caused to the assessee and, therefore, the assessment order cannot be treated as invalid. He further submitted that the decisions relied upon by the learned authorised representative do not state the correct legal position.
7. We have carefully considered the rival submissions and perused the orders of the authorities below. It is necessary to examine the statutory framework. Section 282A of the Act, which deals with authentication of notices and other documents, provides that where any notice or other document is required to be issued by an income-tax authority, it shall be signed and issued in paper form, or communicated in electronic form, by that authority in accordance with the prescribed procedure. The relevant procedure is prescribed under Rule 127A of the Income-tax Rules, 1962. The second proviso further provides that any notice or document issued, served, or given for the purposes of the Act shall be deemed to be authenticated if the name and office of the designated income-tax authority are printed, stamped, or otherwise written thereon.
8. Thus, section 282A (1) prescribes the modes of authentication for notices and other documents. Where a notice or document is issued in paper form, it must be duly signed. Where it is communicated electronically, it must be issued in accordance with the procedure prescribed under Rule 127A of the Income-tax Rules, 1962. The provision therefore recognizes two distinct modes of communication: (i) signed if issuance in paper form and (ii) electronic communication in the manner prescribed by the Rules.
9. Sub-section (2) is a deeming provision. It provides that, for any notice or document required to be issued, served, or given for the purposes of the Act, authentication is deemed to be complete where the name and office of the designated income tax authority are printed, stamped, or otherwise written on such notice or document.
10. The assessment order placed before us at pages 14 to 21 of the paper book was issued by the Assistant Commissioner of Income-tax, Circle 6(1)(1), Bengaluru, in the name of Sivaseli T., and bears the signature of the Assistant Commissioner of Income-tax. The designation of the signing authority, the date of the order, and the Document Identification Number are duly mentioned. The order was issued in paper form and was signed. It therefore complies, in letter and substance, with the requirements of section 282A of the Act.
11. Section 292B of the Act provides that no assessment shall be invalid merely by reason of any mistake, defect, or omission therein, if the assessment is, in substance and effect, in conformity with the intent and purpose of the Act. In other words, where the substance, tenor, and effect of the assessment remain unchanged, the order cannot be held invalid on account of a procedural defect. Having already held that the assessment order complies with section 282A of the Act, we further hold that, even assuming any defect exists, the same is cured by section 292B of the Act.
12. The Document Identification Number is mentioned at serial number 7 in the caption of the assessment order, and this fact has not been disputed by the assessee. For this reason, also, the assessee’s contention is without merit.
13. We now turn to the judicial precedents relied upon by the assessee. The assessee has placed reliance on Outotec Singapore Pte. Ltd. v. Deputy Commissioner of Income-tax [2025] 181 com743 (Delhi), dated 10 December 2025. We have carefully perused the said decision of the Coordinate Bench. In that case, as recorded in paragraph 4, learned counsel for the assessee submitted that the impugned assessment order had been manually signed by the Assessing Officer. It was further contended that the relevant CBDT Instruction required assessment orders issued through e-proceedings to be digitally signed by the Assessing Officer and that manual signing rendered the order bad in law. The Coordinate Bench considered the said Instruction, particularly paragraph 4.2, and in paragraph 8 accepted the contention regarding the requirement of digital signature. In paragraph 10, the Bench also referred to the decisions of the Hon’ble Supreme Court, which have been cited before us as well, and concluded that the defect was incurable. However, it appears that the attention of the Coordinate Bench was not drawn to paragraph 4.5 of the Instruction, which recognizes circumstances in which manual proceedings may be conducted, or to paragraph 4.6, which states that the Instruction is to be followed through electronic mode “as far as possible”.
14. Further, on a careful reading of the Tribunal’s order, we find no reference to section 282A of the Act. The decision was therefore rendered without considering the statutory provision governing authentication, which stands higher in the legal hierarchy than administrative circulars or instructions. For this reason, it cannot be treated as a binding precedent on the issue before us. Although a precedent may bind where it lays down a clear principle on a common-law or constitutional issue, a decision turning on the interpretation of a specific statutory provision, without noticing or considering that provision, may be regarded as having been rendered sub silentio and therefore loses its binding force.
15. The decision of the honourable Supreme Court referred in the above decision of (2015) 13 SSC 722 in case of cherukuri Mani versus chief secretary has held that any deviation in the procedure prescribed by the statute renders the action illegal. In the present case the statute itself provides that that if the notice is orders are to be issued, if they are issued in a paper form, they are to be signed. The word used is shell. Does the assistant ordering is conformity with the provisions of section 282 capital a of the act. And it confirms that it is in accordance with the statute which is the mandate of the honourable Supreme Court. Further the second decision relied upon of the honourable Supreme Court in case of Chandra kishore Jha [1999] 8 SCC 266 also lays down the same law.
16. Further, the decisions of the Coordinate Benches in Navyug Technologies Private Limited and UCWEB Mobile Private Limited merely followed the decision in Outotec Singapore Pte. Ltd. It appears that the attention of those Benches was not drawn to the other relevant clauses of the CBDT Instruction or, more importantly, to the statutory provisions of the Act. Had these provisions been brought to the notice of the Benches by the learned authorised representative or the learned Departmental Representative, and had the Benches still taken the same view after considering them, those decisions would have constituted binding precedents for us.
17. However, when assessee was confronted with above, ld. AR sought withdrawal of this ground, however as both parties are heard,, it needs to be decided.
18. In view of the foregoing facts and findings, Ground No. 1 of the assessee’s appeal, challenging the validity of the assessment order on the ground that it was manually signed despite being issued under the e-proceedings framework, is rejected and dismissed.
19. Ground No. 2 of the assessee’s appeal relates to the assessment framed on a non-existing entity. The assessee neither filed any written submissions nor advanced any arguments on this ground. Accordingly, no adjudication is called for, and Ground No. 2 is dismissed.
20. Ground No. 3 challenges the assessment order as barred by limitation under section 153 of the Act. Since no arguments were advanced in support of this ground, it is dismissed.
21. Ground No. 4 alleges violation of the principles of natural justice in the remand proceedings. As no arguments were advanced on this ground, it is dismissed.
22. Ground No. 5 concerns the treatment of revenue expenditure as capital expenditure. The facts show that, under the head “other repairs,” the assessee recorded purchases from M/s Metal Impacts. The Assessing Officer noted that invoices Nos. 94, 95, 146 and 39 related to items such as heavy-duty racks and main modules. He held that these items provided enduring benefit, were liable to be capitalized, and did not form part of the housekeeping expenses debited to the profit and loss account. Accordingly, the expenditure was disallowed as capital in nature, and the learned CIT(A) confirmed the findings.
23. It was submitted before us that the assessee uses slotted-angle racks and heavy-duty racks as integral parts of its day-to-day business operations for storing, organizing, and moving products. The assessee contended that, in its industrial and commercial setting, these racks serve a function materially different from ordinary or domestic racks, as they are subject to intensive and continuous use on the shop floor for handling heavy products and goods. It was further submitted that the expenditure did not result in any enduring benefit. The assessee also submitted that part of the expenditure related to gauge meters, as evidenced by invoices from Fusion Electronics. According to the assessee, treating such expenditure as giving rise to an enduring benefit, without identifying the nature of that benefit, was unsustainable. The gauge meters were stated to be specialized measuring instruments used only to test viscosity, dimensional specifications, and quality parameters of seals manufactured by the assessee, so as to ensure conformity with customer-prescribed standards. These were not general-purpose instruments of a permanent nature but were procured and used for specific customer orders or manufacturing batches. Once the relevant order or batch was completed, the instruments ceased to be usable and were discarded. The assessee therefore submitted that no enduring advantage arose and that the expenditure was revenue in nature, not capital.
24. Having heard the parties, we find that the expenditure was claimed under “other repairs” and related to slotted angles, racks, heavy-duty racks, add-on modules, and similar items, aggregating to ₹23,02,587. The lower authorities treated the expenditure as capital merely because the purchases were made from a single party, M/s Metal Effects, and on the assumption that the assessee derived an enduring benefit. The assessee explained that the expenditure was in the nature of civil and electrical repairs and represented replacement of parts used in the existing plant and machinery, not acquisition of new plant or machinery. The invoices were furnished before the Assessing Officer and are tabulated in paragraph 7 of the assessment order; the relevant details are also placed at page 48 of the paper book. We find no basis to sustain the orders of the lower authorities. The expenditure forms part of repairs and maintenance and cannot be treated as capital expenditure. The statutory auditors also did not classify it as capital in nature. The Revenue authorities proceeded on surmises and conjectures, without recording any factual basis to show that the assessee obtained an enduring benefit or that the expenditure was not revenue in nature. We therefore reverse the orders of the lower authorities and direct the Assessing Officer to delete the disallowance of ₹23,02,587 and treat the expenditure as revenue expenditure. If any depreciation has been allowed pursuant to the order of the learned CIT(A), the same shall be withdrawn. Accordingly, Ground No. 5 of the appeal is allowed.
25. Ground No. 6 concerns the disallowance of consumables issued to the shop floor and debited under housekeeping and other expenses, amounting to ₹35,87,477. The Assessing Officer made the disallowance on the ground that no supporting invoices were furnished and that the claim was based only on internal journal entries. In paragraph 11 of the assessment order, he noted that the ledger description read “Mapix miscellaneous issued to the department” and held that, in the absence of invoices or other supporting evidence, the entries appeared to be internally generated. The disallowance of ₹35,87,477 was thereafter confirmed by the learned CIT(A).
26. Having heard the parties, we find that the assessee furnished complete details of the consumables issued to the shop floor, as set out in Annexure III to the submissions from page 56 onwards. The details identify each software-generated journal entry, the materials purchased from third parties under invoices, and the subsequent issue of those materials to the respective departments for housekeeping and related purposes. The assessee also furnished item-wise and quantity-wise particulars, including the account from which each item was transferred. The individual amounts range from ₹34 to ₹44,866. In these circumstances, the details cannot be rejected as unreliable. The lower authorities failed to appreciate the assessee’s accounting method: materials were first debited to the material purchase account when purchased and were charged to the profit and loss account only when issued for consumption. We therefore find no basis to sustain the disallowance of ₹35,87,477. Accordingly, we reverse the orders of the lower authorities and direct the Assessing Officer to delete the disallowance relating to consumables issued to the shop floor for cleaning and related purposes. Ground No. 6 of the appeal is allowed.
27. With respect to Grounds Nos. 7 and 8, the assessee filed written submissions. However, as the underlying issues have already been adjudicated on merits, these grounds have become infructuous and are accordingly dismissed.
28. Ground No. 9 relates to the disallowance of contribution to the Uttarakhand Relief Fund. The facts show that, in paragraph 10 of the assessment order, the Assessing Officer disallowed ₹1,82,093 claimed by the assessee as “Uttarakhand Relief Contribution by employer.” The Assessing Officer observed that no supporting details had been furnished and held that the expenditure was not connected with the assessee’s business. The learned CIT(A) confirmed the disallowance on the same basis.
29. Before us, the learned authorised representative submitted that the assessee had furnished ledger extracts and accounting entries evidencing the payment and that the amount was duly recorded in the books of account. It was further submitted that the Assessing Officer had not pointed out any defect in the evidence produced and, therefore, the claim ought to be allowed.
30. The learned Departmental Representative submitted that section 37(1) of the Act specifies the conditions for allowing business expenditure. Since the assessee failed to establish that the contribution was incurred wholly and exclusively for business purposes, the disallowance was rightly made.
31. We have considered the rival submissions. Section 37(1) allows deduction only of expenditure incurred wholly and exclusively for the purposes of business. The assessee has not substantiated how the contribution to the Uttarakhand Relief Fund satisfies this requirement. Mere proof of payment, genuineness of expenditure, or recording in the books of account is insufficient for allowance under section 37(1) unless the business purpose is also established. In the absence of such evidence, we find no infirmity in the orders of the lower authorities. Accordingly, Ground No. 9 of the appeal is dismissed.
32. Ground No. 10 relates to the write-off of old advances given by the assessee as non-recoverable. The assessment order shows that, in paragraph 9, the Assessing Officer examined the ledger extracts of other expenses furnished by the assessee and noted certain transactions described as old advances written off as non-recoverable and classified under discounts to customers. According to the Assessing Officer, the assessee did not furnish information, invoices, documents, or clarification to substantiate that the claimed expenses were allowable. He therefore identified seven such items aggregating to ₹6,97,057 and disallowed the claim. The learned CIT(A) confirmed the disallowance.
33. The assessee submitted that the amounts written off represented advances given to vendors in the ordinary course of business, against which no supplies were received and which became irrecoverable over time. Accordingly, the amounts were written off in the books of account as a matter of commercial prudence. The assessee further submitted ledger accounts and screenshots of accounting entries from its accounting system, showing that the original advances were made to vendors and that no corresponding supplies were received. It was contended that the Assessing Officer disregarded this evidence and disallowed the claim. The assessee submitted that the write-off represented a business loss incurred in the course of business and therefore deserved to be allowed. The learned authorised representative also referred to the details placed at pages 76 to 82 of the paper book.
34. In reply, the learned Departmental Representative strongly submitted that the claim was not allowable in the absence of the detailed supporting evidence called for by the Assessing Officer. He therefore submitted that the disallowance should be sustained.
35. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also examined the details placed at page 76 of the paper book, where seven items are listed along with the names of the vendors and the outstanding amounts stated to represent advances against materials that were not supplied. It is not the Revenue’s case that the advances were made for purchase of capital items or that they had no nexus with the assessee’s business. Once it has been found that the materials were not supplied during the year, the write-off represents a business loss incurred by the assessee and is allowable under section 28 of the Act. We therefore direct the Assessing Officer to delete the disallowance of ₹6,97,057. Accordingly, Ground No. 10 of the appeal is allowed.
36. Grounds Nos. 11 and 12 are general in nature. As no arguments were advanced on these grounds, they are dismissed.
37. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 27th July 2026
