Bhuvaneshwari Enterprises Vs ITO (ITAT Bangalore)
Bangalore ITAT Deletes Bonus Disallowance and Consequential Penalty; CIT(A) Faulted for Ignoring Additional Evidence
The Bangalore ITAT in Shri Bhuvaneshwari Enterprises v. ITO deleted the disallowance of ₹2.64 lakh bonus paid to employees and consequently quashed the penalty of ₹1.63 lakh levied for alleged misreporting of income. The assessee, a liquor business partnership firm, had claimed bonus expenditure which was disallowed by the Assessing Officer because the amount was not reflected in the salary ledger produced during assessment proceedings.
Before the CIT(A), the assessee explained that the bonus payments were maintained in a separate bonus ledger, duly recorded in the profit and loss account and audit report, and that failure to furnish the ledger before the Assessing Officer was due to an oversight. Although these details were available before the CIT(A), the appellate authority nevertheless confirmed the disallowance.
The Tribunal observed that once complete details of the bonus payment were on record and the expenditure was consistent with salary payments made to employees, there was no justification for sustaining the disallowance. ITAT further noted that the CIT(A) failed to properly exercise powers under Rule 46A by not appropriately considering the additional evidence and not following the prescribed procedure. Accordingly, the disallowance of ₹2,64,000 was directed to be deleted.
Since the penalty of ₹1,63,152 was levied solely on account of the disallowance of bonus expenditure, the Tribunal held that the penalty could not survive after deletion of the quantum addition. Both the quantum appeal and penalty appeal were therefore allowed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. ITA No. 1007/Bang/2026 for assessment year 2018-19 is filed by Shri Bhuvaneshwari Enterprises, the assessee-appellant, against the appellate order dated 23 January 2026 passed by the National Faceless Appeal Centre, Delhi. By that order, the appeal filed by the assessee against the assessment order dated 27 January 2021 passed by the National e-Assessment Centre, Delhi under section 143(3) read with sections 143(3A) and 143(3B) of the Income-tax Act, 1961, was dismissed.
