SASA Stone Private Limited Vs DCIT (ITAT Bangalore Bench)
One TDS Challan Cannot Be Forced Into One Financial Year: Disallowance u/s 40(a)(ia), ₹10.70-Crore Credits u/s 68 & Penalty u/s 271AAC Remanded—Bangalore ITAT
Summary: The Bangalore ITAT restored the entire assessment for fresh verification of the disallowance u/s 40(a)(ia) & additions aggregating to ₹10.70 crore u/s 68. It held that TDS deposited through a common challan on 25.03.2019 could not automatically be attributed entirely to one financial year & reverse-grossed to determine expenditure. It further ruled that non-response by a creditor to notice u/s 133(6) during Covid could not, by itself, justify an addition without examining identity, creditworthiness & genuineness. The connected penalty u/s 271AAC was also remanded.
Scrutiny of TDS Defaults & Unsecured Loans
The assessee filed its return for AY 2018-19 declaring total income of ₹4,22,51,100. Its case was selected for scrutiny to verify defaults in deduction/deposit of tax at source & unsecured loans.
The AO noticed that TDS under different provisions had been deposited on 25.03.2019, beyond the prescribed due date of 31.10.2018. He grossed up the TDS amounts by applying the corresponding rates of 1%, 2% & 10% to determine the underlying expenditure at ₹4,11,41,460.
Since the assessee had already disallowed 30% of certain expenditure in its computation, the AO made a further net disallowance of ₹31,57,460. A separate addition of ₹3,55,405 was made for a difference relating to amounts written off.
Loans From Two Individuals Added u/s 68
The assessee received unsecured loans of ₹60,37,883 & ₹10,01,716 from two individuals. It furnished their income-tax return acknowledgements, but the AO held that these documents were insufficient to prove creditworthiness & genuineness.
Consequently, the aggregate amount of ₹70,39,649 was added u/s 68.
Before the Tribunal, the assessee sought admission of additional evidence comprising confirmations, bank statements showing payments through cheques & copies of the lenders’ income-tax returns. It explained that the documents could not be produced earlier due to Covid-related circumstances.
The Tribunal admitted the evidence in the interest of justice but held that the AO must verify whether the documents genuinely established all three ingredients required u/s 68.
₹10-Crore Loan—Tuscan Paid, Ozone’s Name Appeared
The assessee had also received ₹10 crore from Tuscan Consultants & Developers Private Limited. The AO issued notice u/s 133(6), but the company did not respond. The amount was therefore added u/s 68.
The assessee explained that the funds were received pursuant to a master loan agreement dated 08.05.2017 among group companies. Although Tuscan remitted the money, the loan was accounted for in the name of Ozone Infra Developers Private Limited.
A confirmation from Ozone dated 10.04.2026 & Tuscan’s HDFC Bank statement reflecting the transfer were relied upon. According to the assessee, the addition resulted only from the mismatch between the name of the entity remitting the money & the name in which the credit was recorded.
It was also submitted that Tuscan could not respond to the AO’s notice issued in January 2021 because of the disruption caused by Covid.
Non-Response u/s 133(6) Is Not Conclusive
The Tribunal held that the ₹10-crore credit required detailed verification. Mere failure of the creditor to respond to notice u/s 133(6), particularly during the Covid period, could not automatically justify an addition in the assessee’s hands.
However, the burden remained upon the assessee to establish Tuscan’s identity & creditworthiness, genuineness of the fund transfer, master-loan arrangement & reason for accounting the credit in Ozone’s name.
Thus, the Tribunal neither accepted the group-loan explanation nor confirmed the addition. It restored the issue to the AO for evidence-based adjudication.
TDS Challan Required Year-Wise Apportionment
The assessee contended that the TDS deposited on 25.03.2019 related to two different financial years—2017-18 & 2018-19. It produced the challan & a year-wise allocation supported by portal information. It further claimed that it had already disallowed ₹91,84,978, being 30% of expenditure of ₹3,06,16,593.
The Tribunal observed that the lower authorities had not verified whether the assessee had already made the appropriate disallowance. More importantly, the entire TDS payment could not be attributed to a single year & grossed up mechanically to reconstruct the related expenditure. Such reverse computation without year-wise verification was unjustified.
The AO was directed to ascertain the financial year to which each TDS component related, whether tax was deducted & deposited within the permitted time & whether the assessee’s voluntary disallowance was correct. Only the legally sustainable balance, if any, could be disallowed u/s 40(a)(ia).
Quantum & Penalty Both Restored
The Tribunal restored the entire quantum appeal to the AO for fresh adjudication of the TDS disallowance, individual loans & ₹10-crore corporate credit. The assessee was directed to substantiate every claim, while the AO was required to examine the material & provide a reasonable hearing.
Since the quantum additions forming the foundation of the penalty were themselves remanded, the appeal against penalty u/s 271AAC(1) was also restored for fresh decision after disposal of the quantum proceedings.
Both appeals were accordingly allowed for statistical purposes.
Author’s Comments
The ruling addresses two frequent assessment shortcuts. A common TDS challan cannot be reverse-engineered into expenditure of a single year without identifying the actual payees, payments & periods. Likewise, non-response to notice u/s 133(6) is relevant, but not conclusive evidence that a credit is bogus.
Still, remand is not deletion. The assessee must reconcile Tuscan, Ozone & its books, besides proving the individual lenders’ financial capacity.
The message is simple: TDS needs a calendar, while s.68 needs a complete identity card—not merely an unanswered email.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT BANGALORE
1. ITA No. 1597/Bangalore/2026 for assessment year 2018 – 19 is filed by SASA Stones private Limited [ the assessee/appellant) against the appellate order passed by National faceless appeal Centre (NFAC) Delhi (the learned CIT – A) dated 12 February 2026 wherein the appeal filed by the assessee against the assessment order passed by the national e-Assessment Centre Delhi under section 143 (3) read with section 143 (3A) and 143 (3B) of the income tax act, 1961 (the act) dated the 13 March 2021 determining the total income of the assessee at ₹ 152,803,614 against the total income shown as per the return of income filed on 30 March 2019 of ₹ 42,251,100, was dismissed.
2. The Assessee has raised the following grounds of appeal:
ITA No. 1597/Bang/2026:
1. The orders of the authorities below is so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned CIT-A/NFAC erred in assuming that all payments of TDS made on 25.03.2019 relates to A.Y. 2018-19 only and working reversely and enhancing the disallowance u/s.40a(ia) amounting to Rs. 31,57,460/-,
3. The learned CIT-A/NFAC falled to appreciate the details failed in respect of disallowance u/s. 40a(ia) even after the appellant submitted that various payments made on 25.03.2019 relates to A.Y. 2019-20 except for a sum of Rs. 6,49,038/- out of Rs. 7,11,572/-in respect of Section 194-I for which the disallowance was made in the computation of income.
4. The learned CIT-A/NFAC erred in coming to the conclusion that there was no reply to the notice issued u/s. 133(6) to M/s. TUSCAN Consultants and Developers Private Limited which was issued on 21.01.2021 to file a reply on 21.01.2021 which is highly impossible.
5. The learned CIT-A/NFAC failed to appreciate the confirmation given by the creditor M/s. TUSCAN Consultants and Developers Private Limited in the proper perspective since the same was paid on behalf of M/s, OZONE Infra Developers Private Limited.
6. The learned CIT-A/NFAC erred in coming to the conclusion that the Appellant had not filed any details in respect of loan received from Mr. Pradeep GA & Mr. Vikranth G A even though the appellant failed the details before the learned assessing officer.
7. Without prejudice to the right to see waiver with Hon’ble CCIT / DGIT the appellant denies liability to be charged interest U/s 234B & 234C of the Act under facts in the circumstances of the appellant’s case.
8. For the above and other grounds that may be urged at the time of hearing of the appeal your appellant humbly prays that the appeal may be allowed and Justice rendered and appellant may awarded caused the prosecuting the appeal and also order for the refund of the institution fees as part of the cost.
3. The second appeal is filed in ITA No. 1598 Bangalore 2026 by the assessee against the penalty order passed under section 271AA for the impugned assessment year only.
ITA No. 1598/Bang/2026:
1. The orders of the authorities below in levying penalty u/s. 271AAC(1) against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned CIT-A/NFAC failed to appreciate the levy of penalty on addition made u/s. 68 in respect of Loan received from M/s. TUSCAN Consultants & Developers Pvt. Ltd. Was on behalf of M/s, OZONE Infra Developers Pvt. Ltd. Which the learned CIT Appeals FAC failed to appreciate.
3. The learned CIT-A/NFAC failed to appreciate the levy of penalty on addition made u/s. 68 in respect of Loan received from Mr. Pradeep G A and Mr. Vikranth G A even after the Appellant filed the details return of income in respect of the person from whom the loan was received.
4. The Appellant is in appeal before the Hon’ble ITAT against the additions made u/s. 68 amounting to Rs. 10,70,39,649/- on which the penalty u/s. 271AAC(1) was levied.
5. For the above and other grounds that may be urged at the time of hearing of the appeal your appellant humbly prays that the appeal may be allowed and Justice rendered and appellant may awarded caused the prosecuting the appeal and also order for the refund of the institution fees as part of the cost
4. Briefly, the facts are that the assessee filed its return of income on 30 March 2019 declaring total income of ₹ 42,251,100. The return was selected for scrutiny to verify defaults in tax deduction at source and unsecured loans. During assessment proceedings, the Assessing Officer noted that the assessee had deposited tax deducted at source under various sections on 25 March 2019, after the prescribed due date of 31 October 2018. Consequently, disallowance under section 40(a)(ia) of the Act was considered. The Assessing Officer grossed up the relevant TDS amounts at 1%, 10%, and 2%, as applicable, and computed the corresponding expenditure at ₹ 41,141,460. Since the assessee had already disallowed 30% of ₹ 30,660,593, a net disallowance of ₹ 3,157,460 was made. The Assessing Officer also noticed a difference of ₹ 355,405 in the computation of income relating to amounts written off and made an addition for the same. Further, the assessee had received unsecured loans of ₹ 6,037,883 and ₹ 1,001,716 from two persons. The assessee was asked to establish the identity and creditworthiness of the lenders and the genuineness of the transactions. Although the assessee furnished income-tax return acknowledgements of those persons, the Assessing Officer did not accept them and added ₹ 7,039,649 under section 68 of the Act. It was also found that the assessee had obtained a loan of ₹ 10 crores from Tuscan Consultants and Developers Private Limited. A notice under section 133(6) was issued to that entity and duly delivered by email, but no response was received. Accordingly, the Assessing Officer made a further addition of ₹ 10 crores under section 68 of the Act and passed the assessment order.
5. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). During the appellate proceedings, the assessee filed detailed written submissions, which the learned CIT(A) considered and reproduced in the appellate order. However, the learned CIT(A) confirmed the disallowance of ₹ 30,616,593 towards expenditure for non-deduction of tax at source under ground No. 1. The learned CIT(A) also confirmed the addition of ₹ 355,405 arising from the difference in the computation of total income under ground No. 2. Further, the additions under section 68 of the Income-tax Act were sustained, namely ₹ 7,039,649 in respect of two persons and ₹ 10 crores in respect of Tuscan Developers Private Limited. Accordingly, the assessee’s appeal was dismissed.
6. Aggrieved by the appellate order, the assessee preferred the present appeal. The assessee first sought admission of additional evidence relating to confirmations from the two persons in respect of whom additions were made under section 68 of the Income-tax Act. The assessee produced their confirmations, bank account statements showing the cheques issued to it, and copies of their income-tax returns.
7. The assessee submitted that the additional evidence should be admitted in the interest of justice, as it was prevented from producing the same during the assessment proceedings due to COVID-related circumstances.
8. The assessee further submitted that the disallowance made by invoking the provisions relating to non-deduction of tax at source was incorrect. It was contended that the tax deposited on 25 March 2019 related to both financial years 2018–19 and 2017–18. The assessee furnished the challan evidencing payment and a year-wise breakup of the apportionment. It was argued that the income-tax portal also supported the assessee’s position and that the Assessing Officer’s action was contrary to the details filed. The assessee further stated that it had already disallowed ₹ 9,184,978, being 30% of the total expenditure of ₹ 30,616,593, and therefore the lower authorities confirmed the addition without properly examining the details. Regarding the addition under section 68 of the Income-tax Act in respect of Tuscan Consultants and Developers Private Limited, the assessee submitted that the amount was received from a group company under a master loan agreement dated 8 May 2017 among the group companies. Although the loan was advanced by Tuscan Consultants and Developers Private Limited, the assessee accounted for it in the name of Ozone Infra Developers Private Limited. The confirmation from Ozone Infra Developers Private Limited dated 10 April 2026 was also filed before the lower authorities. The assessee contended that the addition was made merely because the amount was recorded in the name of Ozone Infra Developers Private Limited instead of Tuscan Consultants and Developers Private Limited. It was further submitted that Tuscan Consultants and Developers Private Limited could not respond to the notice issued by the Assessing Officer in January 2021 due to the impact of COVID-19. The assessee also filed a copy of the HDFC Bank statement of Tuscan Consultants and Developers Private Limited, which reflected the relevant transfer of funds to the assessee. On these grounds, the assessee submitted that the addition arose only due to the name difference and deserved to be deleted.
9. The learned CIT–DR, Shri N. S. Shashidhara, and Shri Pradeep S., Additional Commissioner of Income Tax, strongly supported the orders of the lower authorities. They submitted that, since the assessee had failed to furnish the necessary details before the lower authorities, there was no infirmity in the impugned orders and the same deserved to be sustained.
10. We have carefully considered the rival submissions and examined the orders of the lower authorities. In our view, the disallowance for non-deduction of tax at source was made without verifying whether the assessee had already made the required disallowance. The tax deducted and deposited on 25 March 2019 related to two separate financial years; therefore, the entire amount could not be attributed to a single year by grossing up the TDS to determine the corresponding expenditure. Such an approach is not justified under the Income-tax Act. As regards the additions under section 68 relating to the two individuals, the assessee has filed additional evidence, including income-tax returns, bank statements, and confirmations, to establish their identity, creditworthiness, and the genuineness of the transactions. Since these documents were not before the lower authorities, they are admitted and the Assessing Officer is directed to verify them and decide the issue afresh. The addition under section 68 for ₹ 10 crores received from Tuscan Developers Private Limited, which the assessee states was accounted for in the name of Ozone Infra Developers Private Limited, also requires similar verification.
11. In view of the above, we restore the appeal to the file of the learned Assessing Officer. The assessee shall substantiate that it complied with the provisions of the Income-tax Act relating to deduction of tax at source and that, wherever tax was not deducted or was deposited beyond the prescribed time, the disallowance already made by it was proper. The learned Assessing Officer shall examine these details and decide the disallowance, if any, afresh. The additions under section 68 of the Act, both in respect of the two individuals and the company, also require detailed verification on the basis of the material submitted by the assessee. Merely because the company did not respond to the notice issued under section 133(6) during the COVID period, the addition could not have been made in the hands of the assessee without verifying the identity and creditworthiness of the creditor and the genuineness of the transaction. The onus remains on the assessee to satisfy the learned Assessing Officer on all these three ingredients.
12. In view of the foregoing, we restore the entire appeal to the file of the learned Assessing Officer, with a direction to the assessee to substantiate its claim on all the three issues discussed above. The learned Assessing Officer shall examine the material placed on record and decide the issues afresh in accordance with law. Accordingly, the assessee’s appeal is allowed for statistical purposes.
13. The second appeal concerns the penalty levied by the learned Assessing Officer and confirmed by the learned CIT(A). Since the issues on merits have been restored to the file of the learned Assessing Officer, the penalty appeal is also restored to him for fresh adjudication after disposal of the quantum appeals.
14. In the result, both appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open court on 31st August, 2026.
