ITAT Mumbai Remands ₹33.83 Cr Disallowance for De Novo Verification
In a significant ruling concerning the verification of claims under Schedule BP and the mechanical application of normal disallowances to Minimum Alternate Tax (MAT) calculations, the Income Tax Appellate Tribunal (ITAT), Mumbai "G" Bench, has restored a high-value dispute to the file of the Assessing Officer (AO).
The case, titled Syntel Private Limited Vs ACIT, involves a substantial controversy regarding a disallowance of ₹33.83 crore made under Section 37 of the Income Tax Act, 1961, and a corresponding addition to the Book Profits under Section 115JB. The Tribunal’s decision to set aside the order and mandate a de novo adjudication highlights the importance of reconciling entries in the Return of Income (ROI) and the distinct nature of MAT provisions.
Case Background and Factual Matrix
The dispute arose from the assessment proceedings for the Assessment Year 2018-19. The Assessee, a private limited company engaged in providing Information Services and IT Enabled Services (ITES), filed its return of income on November 28, 2018.
During the scrutiny assessment framed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, the Assessing Officer scrutinized the Assessee's claim of ₹33,83,80,681 reported under the head "Any other amount allowable as deduction" within Schedule BP of the return.
The Assessing Officer's Stand
The AO observed that the Assessee had claimed the aforementioned amount as a deduction but allegedly failed to furnish sufficient documentary evidence or explanations to substantiate the claim during the assessment proceedings. Consequently, the AO:
- Disallowed the entire sum of ₹33.83 crore under Section 37 of the Act, treating it as unsubstantiated expenditure.
- Mechanically increased the Book Profits computed under Section 115JB by the same quantum, assuming that a disallowance under normal provisions automatically warrants an adjustment to MAT.
The Assessee challenged this order before the National Faceless Appeal Centre (NFAC), but the CIT(A) upheld the additions, citing a lack of rebuttal from the Assessee regarding the details of the deduction.