Case Law Details
Chennai Metro Rail Limited Vs DCIT (ITAT Chennai)
The appeal was filed before the Income Tax Appellate Tribunal, Chennai, against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 26.06.2025 for Assessment Year 2018-19. The Tribunal first addressed a delay of 100 days in filing the appeal. After considering the reasons provided by the assessee, the Tribunal found the explanation satisfactory, condoned the delay, and admitted the appeal for adjudication.
The assessee is a government company and a Special Purpose Vehicle jointly owned by the Government of India and the Government of Tamil Nadu with equal shareholding, established for implementing the Chennai Metro Rail Project. For Assessment Year 2018-19, the assessee filed its return of income on 30.10.2018 declaring a loss of ₹791,60,31,085 and claiming a refund of ₹8,39,53,709. The return was processed under Section 143(1) and an intimation dated 12.05.2020 resulted in a refund of ₹9,21,25,241 including interest under Section 244A.
Subsequently, assessment proceedings were initiated through notice under Section 143(2) dated 22.09.2019 under the e-assessment mechanism. Notices under Section 142(1) along with questionnaires were issued and responses were submitted by the assessee. During the assessment proceedings, the Assessing Officer proposed certain adjustments. One such adjustment related to disallowance of gratuity amounting to ₹37,58,066 under Section 40A(7). The Assessing Officer observed that the gratuity amount was reported in the Tax Audit Report in Form 3CD but had not been disallowed in the income tax return. The assessee submitted that the amount had already been disallowed under Section 43B in the return and therefore the proposed adjustment would result in double disallowance of the same amount.
The Assessing Officer also noted a difference between receipts reported in Form 26AS amounting to ₹254,01,15,594 and the income reported in the return which was ₹155,03,23,456. Based on this, the Assessing Officer proposed to add the difference of ₹98,97,92,138 to the total income. A notice dated 16.04.2021 under Section 142(1) required the assessee to respond by 20.04.2021. However, due to the COVID-19 pandemic, the assessee could not submit its response within the stipulated time. In the absence of a response, the Assessing Officer added the differential amount to the income in the final assessment order.
The assessee challenged the assessment order dated 26.04.2021 passed under Section 143(3) read with Section 144B before the Commissioner of Income Tax (Appeals). The appellate authority dismissed the appeal on merits on the ground that the assessee did not comply with or respond to notices issued through the ITBA portal.
Aggrieved by this order, the assessee approached the Tribunal. The assessee submitted that the notices issued by the Commissioner (Appeals) through the ITBA portal were not noticed and therefore the assessee could not effectively present its case. The Departmental Representative supported the order of the Commissioner (Appeals).
After hearing both sides and examining the records, the Tribunal observed that the appeal before the Commissioner (Appeals) had been dismissed mainly due to non-compliance with notices issued through the ITBA portal. The Tribunal also noted that the issues involved in the appeal, including the disallowance of gratuity and the addition made due to the difference between receipts in Form 26AS and income reported in the return, required proper examination of facts and supporting evidence. It was also noted that the assessment proceedings had taken place during the period affected by the COVID-19 pandemic.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2018-19 dated 26.06.2025.
2. Registry has noted delay of 100 days in filing appeal. We have gone through the reasons and find the reasons sufficient hence condone the delay and admit the appeal for adjudication.
3. Chennai Metro Rail Limited (CMRL) is a Government Company u/s. 2(45) of the Companies Act, 2013. It is a Special Purpose Vehicle (SPV) jointly owned by the Government of India and the Government of Tamil Nadu, each holding 50% shareholding, for implementing the Chennai Metro Rail Project in Chennai, Tamil Nadu. For Assessment Year (AY) 2018-19, CMRL filed its return of income u/s.139(1) on 30.10.2018, declaring a loss of Rs.791,60,31,085/- and claiming a refund of Rs.8,39,53,709/-. The return was processed by the Assistant Director of Income Tax, Centralized Processing Centre (CPC), Bangalore u/s.143(1) of the Income Tax Act, 1961 through an intimation dated 12.05.2020, and a refund of Rs.9,21,25,241/-(including interest u/s. 244A) was issued. Assessment proceedings for AY 2018-19 were initiated through notice u/s.143(2) dated 22.09.2019 under the e-assessment mechanism. Further notices u/s.142(1) with questionnaires were issued, to which the Assessee responded. During assessment, the Assessing Officer (AO) proposed adjustments, including disallowance of gratuity amounting to Rs.37,58,066 u/s. 40A(7) on the ground that it was reported in the Tax Audit Report (Form 3CD) but not disallowed in the ITR-6. The Assessee contended that the gratuity amount had already been disallowed in the ITR u/s. 43B, and therefore the AO’s action resulted in double disallowance of the same amount. The assessing officer CAO’) also identified a difference between receipts reported in Form 26AS (Rs.254,01,15,594/-) and income reported in the ITR (Rs.155,03,23,456/-) and proposed to add the difference of Rs.98,97,92,138/- to the total income. A notice u/s. 142(1) dated 16.04.2021 required the Assessee to respond by 20.04.2021, but due to Covid-19 pandemic, the Assessee could not submit the response within the stipulated time. In the absence of a response, the AO added the differential amount to income in the final assessment order. The Assessee filed an appeal against the assessment order dated 26.04.2021, passed u/s. 143(3) read with Section 144B of the Income Tax Act, 1961 before the Id.CIT(A).
4. The Id. CIT(A) dismissed the assessee’s appeal on merits on the ground that there was no compliance or response from the assessee to the notices issued through the ITBA portal.
5. Aggrieved by the same, the assessee has preferred an appeal before us. The Id. Authorised Representative (AR) submitted that the notices issued by the Id. CIT(A) through the ITBA portal were not noticed by the assessee and, therefore, the assessee could not effectively represent its case. On the other hand, the Id. Departmental Representative (DR) supported the order passed by the Id. CIT(A).
6. We have heard the rival submissions and perused the material available on record. It is observed that the Id. CIT(A) dismissed the appeal of the assessee on merits primarily on account of non-compliance to the notices issued through the ITBA portal. The contention of the assessee before us is that the notices issued by the Id. CIT(A) through the ITBA portal were not noticed and therefore the assessee could not present its case. Considering the facts and circumstances of the case, we note that the issues involved in the present appeal, inter alia, relating to the disallowance of gratuity and the addition made on account of difference between the receipts as per Form 26AS and the income reported in the return, require proper examination of the factual matrix and supporting evidences. It is also noticed that the assessment proceedings culminating in the impugned order were conducted during the period affected by the COVID-19 pandemic.
7. In the interest of substantial justice and keeping in view the principles of natural justice, we are of the considered view that the assessee should be provided one more opportunity to present its case. Accordingly, we deem it appropriate to set aside the orders of the authorities below on the issues raised in the present appeal and restore the matter to the file of the Assessing Officer for de novo adjudication in accordance with law. The Assessing Officer shall examine the contentions and evidences that may be filed by the assessee and pass a reasoned order after providing adequate opportunity of being heard to the assessee.
8. The assessee is also directed to cooperate in the proceedings and promptly furnish all necessary details and explanations as may be called for by the Assessing Officer.
9. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 10th day of March, 2026 at Chennai.
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