Skytop Builders Private Limited Vs Assessment Unit (ITAT Bangalore Bench)
Spam Folder Delayed the Appeal, but Double Disallowance Needed a Recheck: 882-Day Delay Condoned; Claims U/s s 36(1)(va) & 40(a)(ia) Restored—Bangalore ITAT
Summary: The Bangalore ITAT condoned an extraordinary delay of 882 days after accepting that the CIT(A)’s order was automatically diverted to the spam folder of the company’s registered email account & the accountant handling tax matters had abruptly left employment. On merits, the Tribunal restored disallowances of ₹2.31 lakh u/s 36(1)(va) & ₹29.88 lakh u/s 40(a)(ia) to verify whether the assessee had already made corresponding suo motu disallowances & whether the payees had offered the relevant amounts to tax.
Assessment Triggered by TDS Discrepancies
The assessee-company was engaged in construction, formation of building layouts, sale of sites & earning layout-formation income. It filed its return for AY 2018-19 declaring total income of ₹59,68,670.
The return was selected for scrutiny because the disallowance made by the assessee in its computation was lower than the amount reported by the tax auditor.
The tax auditor had reported failure to deduct TDS on a payment of ₹3 lakh, against which the assessee had disallowed ₹90,000, being 30% of the expenditure u/s 40(a)(ia).
During assessment, the AO also noticed that employees’ contributions towards provident fund/ESI had not been deposited within the respective statutory due dates. Out of the employees’ contribution, ₹1,98,179 was deposited belatedly & ₹33,279 remained unpaid. Consequently, an aggregate disallowance of ₹2,31,458 u/s 36(1)(va) was made.
The AO further found that TDS of ₹1,99,167 had been deducted but not remitted to the Government. The assessee stated that it had deducted ₹2,36,111 u/s 194C from contractor payments aggregating to ₹1,24,20,133, but had failed to deposit the shortfall.
The AO determined that tax corresponding to payments of ₹99,58,350 had either not been deducted or not been deposited to the Central Government. He accordingly disallowed 30% of that expenditure, amounting to ₹29,87,505 u/s 40(a)(ia).
The total income was assessed at ₹91,87,633.
The CIT(A) confirmed the employees’ contribution disallowance by following the Supreme Court’s decision in Checkmate Services Private Limited v. CIT. He also sustained the TDS-related disallowance because the assessee failed to produce supporting evidence, relevant returns or the prescribed Chartered Accountant’s certificate.
Appeal Order Went to Spam
The CIT(A)’s order was passed on 02.06.2023, but the Tribunal appeal was filed after a delay of 882 days.
The assessee explained that the order was sent to its registered email address but was automatically diverted to the spam folder instead of appearing in the primary inbox. Therefore, it did not come to the company’s notice.
Further, Mr. Girish, the accountant responsible for the company’s tax matters, had abruptly left its employment. Consequently, no other person in the organisation was aware of the appellate communication or able to access & act upon it.
The Revenue opposed condonation, arguing that such a prolonged delay had not been satisfactorily explained. The Tribunal, however, accepted that the combination of automatic email diversion & sudden departure of the responsible accountant constituted sufficient cause. The delay was therefore condoned & the appeal admitted.
Ex Parte Ground Rejected
The assessee alleged that the CIT(A) had dismissed its appeal ex parte. The Tribunal rejected this contention because the appellate order specifically recorded & considered the detailed written submissions filed by the assessee.
Thus, the mere absence of physical or virtual appearance did not make the order ex parte where written submissions had been examined.
Employees’ Contribution—Possible Double Disallowance
The assessee contended that the sum of ₹2,31,458 had already been disallowed in its computation of income. If so, a further addition by the AO would amount to taxing the same sum twice.
However, no computation or supporting evidence was produced before the Tribunal to verify the claim. The issue was accordingly restored to the AO.
The Tribunal directed that if the assessee had already made the suo motu disallowance, the duplicate addition must be deleted. If no such disallowance had been made, the addition would stand confirmed in view of Checkmate Services.
Section 40(a)(ia)—Two Routes to Relief
The TDS disallowance of ₹29,87,505 was similarly restored. The AO must first verify whether the assessee had already disallowed this amount voluntarily. If yes, the duplicate addition must be deleted.
If not, the assessee must be given an opportunity to establish that the respective payees had included the relevant receipts in their returns, filed those returns & paid the resulting taxes. The assessee must also furnish the prescribed Chartered Accountant’s certificate contemplated by the proviso to s.201(1).
If these conditions are satisfied, the assessee would not be treated as an assessee in default & the corresponding relief under the second proviso to s.40(a)(ia) must be examined. If the assessee fails to furnish the required evidence, the disallowance would be confirmed.
The appeal was accordingly allowed for statistical purposes.
Author’s Comments
The order carries two practical messages. First, electronic service is efficient, but companies must actively monitor registered email accounts, spam folders & portal communications, particularly when employees handling compliance leave.
Secondly, neither employees’ contribution nor TDS expenditure can be disallowed twice. Before sustaining an addition, the AO must verify the return computation. For s.40(a)(ia), proof that the payee has already paid tax can also neutralise the payer’s disallowance.
In short, spam may explain a delayed appeal—but only the computation can expose a duplicated tax bill.
Cases Discussed
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, Bangalore Bench
01. ITA No. 347/Bangalore/2026, relating to assessment year 2018–19, has been filed by Mr. Skytop Builders Private Limited, the assessee/appellant. The appeal challenges the appellate order dated 2 June 2023 passed by the National Faceless Appeal Centre (NFAC), Delhi. By that order, the NFAC dismissed the assessee’s appeal against the assessment order dated 13 April 2021 passed under section 143(3) of the Income-tax Act, 1961 by the National e-Assessment Centre, Delhi. The assessment determined the assessee’s total income at ₹9,187,633, as against the returned income of ₹5,968,670.
02. The assessee is aggrieved and has raised several grounds of appeal before us. Briefly, the assessee is a company engaged in construction, preparation of building layouts, sale of sites, and receipt of layout-formation income. It filed its return of income on 13 November 2018, declaring total income of ₹5,968,670. The return was processed and selected for scrutiny to examine defaults in tax deduction at source and the related disallowance. Accordingly, the necessary notices were issued. The scrutiny was initiated because the assessee had disallowed an amount lower than the amount reported by the auditor in the audit report. On verification, it was found that the auditor had reported failure to deduct TDS on a payment of ₹300,000, against which the assessee had disallowed ₹90,000 under section 40(a)(ia), being 30% of that payment. During assessment proceedings, it was also found that the assessee had received employees’ contribution towards provident fund amounting to ₹299,268. Of this, ₹198,179 was not deposited with the concerned authorities on or before the due date, and ₹33,279 was not paid at all. After issuing a show-cause notice and considering the assessee’s explanation, the Assessing Officer disallowed ₹231,458. It was further found that the assessee had deducted tax at source but had not deposited ₹199,167 with the Government. The assessee submitted that it had deducted ₹236,111 under section 194C on payments of ₹12,420,133 made to various contractors, but failed to deposit short TDS of ₹199,167. Since tax corresponding to payments of ₹9,958,350 was not deducted or deposited to the credit of the Central Government, 30% of that amount, i.e., ₹2,987,505, was disallowed. Accordingly, the assessment order was passed under section 143(3), read with sections 143(3A) and 143(3B) of the Income-tax Act, determining the assessee’s total income at ₹9,187,633.
03. Aggrieved by the assessment order, the assessee filed an appeal before the learned CIT(A). While deciding ground no. 2, the learned CIT(A) confirmed the disallowance of ₹231,458 on account of delayed payment of employees’ contribution to the Employees’ State Insurance and provident fund. In doing so, the learned CIT(A) followed the decision of the Hon’ble Supreme Court in Checkmate Services Private Limited v. CIT, Civil Appeal No. 233 of 2016, dated 12 October 2022. The learned CIT(A) also confirmed the disallowance of ₹2,987,505, being 30% of ₹9,958,350, on account of non-deduction or non-deposit of tax at source. The disallowance was sustained because the assessee did not furnish supporting evidence for its claim, such as copies of the relevant returns or a chartered accountant’s certificate. Accordingly, the assessee’s appeal was dismissed. Assessee aggrieved with the same is in appeal before us.
04. The Registry has pointed out a delay in filing the assessee’s appeal. As per Form No. 36, the order of the learned CIT(A) was passed on 2 June 2023; however, the assessee filed the appeal after a delay of 882 days. Seeking condonation of the delay, the assessee submitted an application. The learned Authorised Representative, Shri V. Chandrasekhar, Advocate, strongly supported the assessee’s petition for condonation of delay. He submitted that the delay in filing the appeal was unintentional and occurred for sufficient cause; therefore, it ought to be condoned. The learned Departmental Representative strongly opposed the petition, contending that the assessee had not explained the 882-day delay by showing sufficient cause and, therefore, the delay did not deserve to be condoned.
05. We have carefully considered the rival contentions and perused the orders of the lower authorities. The assessee’s appeal is delayed by 882 days. The assessee explained that the appellate order was sent to the registered email address, [email protected], but was automatically diverted to the spam folder instead of being delivered to the primary inbox. As a result, the appellate order passed by the learned CIT(A) did not come to the assessee’s attention. It was further submitted that Mr. Girish, the accountant who handled the assessee’s tax matters, had abruptly left the company. Consequently, no person within the organisation was aware of or able to access the relevant email communication. The assessee contended that, because of the automatic diversion of official communication to the spam folder and the change in accounting staff during the relevant period, the delay in filing the appeal occurred for reasons beyond its control. Considering these facts, we find that the assessee has shown sufficient cause for the delay. Accordingly, the delay is condoned, and the appeal is admitted for adjudication on merits.
06. Ground No. 1 concerns the assessee’s grievance that its appeal was dismissed ex parte. However, we find that, in paragraph 4.1 of the appellate order, the learned CIT(A) recorded and considered the detailed written submissions filed by the assessee while deciding the appeal. Accordingly, Ground No. 1 is dismissed.
07. Ground No. 2 challenges the assessed income determined by the learned Assessing Officer. Since this ground is general in nature, it is dismissed.
08. Ground No. 3 concerns the assessee’s grievance against confirmation of the disallowance of ₹231,458 made by the Assessing Officer under section 36(1)(va) of the Income-tax Act. The assessee contends that this amount had already been disallowed in its computation of income. However, no evidence has been produced before us to verify whether the assessee had, in fact, made this disallowance while filing its return of income. We therefore restore this ground to the file of the learned Assessing Officer for verification. If the assessee has already disallowed the amount on its own, the corresponding disallowance shall be deleted. If no such suo motu disallowance has been made, the disallowance shall be confirmed in view of the decision of the Hon’ble Supreme Court followed by the learned CIT(A). Accordingly, Ground No. 3 is allowed for statistical purposes, subject to verification by the learned Assessing Officer.
09. The learned Authorised Representative further submitted that the assessee had already made a suo motu disallowance in respect of the amount on which tax was not deducted at source, as reported by the tax auditor. It was therefore contended that the disallowance made by the learned Assessing Officer resulted in a double disallowance. In view of the arguments placed before us, as no corresponding computation of total income or any other evidences produced before us, we restore the issue relating to the disallowance of ₹2,987,505 under section 40(a)(a) of the Income-tax Act to the file of the Assessing Officer. The Assessing Officer shall verify whether the assessee has already disallowed ₹2,987,505, being 30% of the amount on which tax was not deducted. If such disallowance has already been offered by the assessee, the corresponding addition/disallowance shall be deleted. Otherwise, the assessee shall be given an opportunity to satisfy the Assessing Officer that the payees have included the relevant income in their returns of income, filed such returns, and furnished the required chartered accountant’s certificate as per second proviso that sub section to ascertain whether the assessee is ‘assessee deemed to be in default’ . The assessee is directed to submit the necessary information before the Assessing Officer. If the assessee fails to do so, the disallowance shall be confirmed. Accordingly, Ground No. 4 of the assessee’s appeal is allowed for statistical purposes with the above directions.
10. Ground No. 5 duplicates Grounds Nos. 3 and 4 and is, therefore, dismissed.
11. Ground No. 6 relates to the charging of interest, which is consequential in nature. It is therefore dismissed.
12. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 31st August, 2026.
