Revenue's Appeal Dismissed, Partly Allowed, Assessee's Cross-objections Upheld

The Revenue's appeal in ITA No. 6649/Del/2017 was dismissed, while their appeal in ITA No. 6650/Del/2017 was partly allowed. The cross-objections raised by the assessee were allowed in both instances.

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Issues Involved:
1. Disallowance under Section 40(a)(ia) of Rs. 1,82,53,095.
2. Disallowance on account of bogus purchases.
3. Delayed payment of EPF and ESIC.
4. Admission of additional grounds by the assessee.
5. Claim of expenditure in relation to Initial Public Offer (IPO).
6. Deduction of education cess.

Issue-wise Detailed Analysis:

1. Disallowance under Section 40(a)(ia) of Rs. 1,82,53,095:
The Assessing Officer (AO) disallowed the amount under Section 40(a)(ia) due to non-deduction of tax on bank guarantee commission and credit card commission paid to banks. The CIT(A) deleted this addition, relying on the jurisdictional High Court's decision in CIT vs. JDS Apparels Pvt. Ltd., which held that Section 194H does not apply to such transactions. The Tribunal upheld this deletion, noting that the assessee could not deduct TDS on these charges as they were automatically deducted by the bank and only the net amount was received by the assessee. The Tribunal referenced its own prior decision in the assessee's case, affirming that the disallowance under Section 40(a)(ia) cannot be sustained.

2. Disallowance on account of bogus purchases:
The AO made an addition of 12.5% on purchases amounting to Rs. 60,51,691, alleging inflation of purchase prices from accommodation entry providers. The CIT(A) deleted the addition, noting that the AO accepted the value and quantitative records of purchases and sales, and no discrepancies were found in the audited books. The Tribunal upheld the CIT(A)'s decision, emphasizing the detailed documentary evidence provided by the assessee, including bank statements, stock registers, and confirmations from suppliers. The Tribunal also considered the retraction of the statement by the alleged entry operator, Mr. Rajendra Jain.

3. Delayed payment of EPF and ESIC:
The Tribunal allowed the revenue's appeal on this ground, referencing the decision in ITA No. 1312/Del/2020 for A.Y. 2018-19 in the case of Vedvan Consultants Pvt. Ltd., which was applicable to the facts of the case.

4. Admission of additional grounds by the assessee:
The Tribunal admitted the additional grounds raised by the assessee, following the Supreme Court's judgment in National Thermal Power Co. Ltd. vs. CIT, which allows the Tribunal to consider new grounds if they pertain to the correct assessment of tax liability. The Tribunal emphasized that the purpose of assessment proceedings is to correctly assess the tax liability in accordance with the law.

5. Claim of expenditure in relation to Initial Public Offer (IPO):
The assessee claimed that the expenditure incurred in connection with the IPO should be allowed under Section 37(1) as it was used for working capital. The Tribunal, referencing various judicial decisions, including the Supreme Court's ruling in Brooke Bond India Limited vs. CIT, held that 92% of the share issue expenditure, used for working capital, should be treated as revenue expenditure and allowed under Section 37(1). The remaining 8%, used for capital expenditure, was to be treated under Section 35D.

6. Deduction of education cess:
The assessee argued that education cess should be allowed as a deduction, relying on CBDT Circular No. 91/58/66-ITJ(19) and judicial precedents, including the Rajasthan High Court's decision in Chambal Fertilisers and Chemicals Ltd. vs. JCIT. The Tribunal agreed, noting that education cess is not covered under Section 40(a)(ii) and should be allowed as a deduction under Section 37. The Tribunal also referenced the definition of 'tax' under Section 2(43) and the specific inclusion of cess in Explanation 2 to Section 115JB, concluding that education cess is not a tax and is thus deductible.

Conclusion:
- The appeal of the Revenue in ITA No. 6649/Del/2017 is dismissed.
- The appeal of the Revenue in ITA No. 6650/Del/2017 is partly allowed.
- Both the cross-objections of the assessee are allowed.

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