Interest on delayed statutory dues is compensatory and allowable as a business deduction under Section 37(1). Furthermore, cash payments to individuals do not violate Section 40A(3) if no single payment to an entity exceeds the prescribed daily threshold.

ORDER

PER MANISH AGARWAL, AM :

The present appeal is filed by Revenue against the order dated 25.09.2024 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. NFAC/2017-18/10079633 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of the assessment order dated 05.03.2021 passed u/s 143(3) read with sections 143(3A) & 143(3B) of the Act pertaining to Assessment Year 2018-19.

2. Brief facts of the case are that assessee company e-filed its return of income on 26.10.2018, declaring total Income at INR 40,24,910/ which stood processed u/s 143(1) of the Act on 17.05.2019. Subsequently, case was selected for scrutiny under CASS for the issues viz, (i) refund; (ii) unsecured loans; and (iii) Contract receipts or fees and notice u/s 143(2) of the Act was issued on 22.09.2019 which was duly served/delivered on the assessee. Thereafter notices u/s 142(1) of the Act were issued alongwith questionnaire from time to time which were duly replied by the assessee. Assessee declared income from business of contractor for M/s NTPC Limited and mainly execute Repairing & Maintenance of Boiler pressure Parts/ Non pressure Parts, Rotary Equipment, Milling Systems, Fuel Firing Systems, Structural Works, and other associated jobs related to power plant, petrochemicals, Fertilizers & Steel Plant equipment etc. The assessment was completed by making disallowance of INR 1,01,687/- out of Penalty Exp. of INR 15,000/-, Interest on TDS INR 431/-, Interest on EPF of INR 19,592/-and Interest to service tax of INR 66,664/- as the assessee has not furnished details nor justified these expenses. Apart from this disallowance, further disallowance of INR 6,16,673/- on account of rent; INR 4,35,5772/- on account of transport expenses; INR 16,85,660/- on account of bonus; INR 122,79,898/- on account of job work expense; INR 8,18,791/- on account of vehicle expense; INR 1,64,37,001/- on account of wages expense; INR 4,80,000/- on account of unexplained loans; and INR 7,39,493/- on account of PF expenses were made and accordingly total income of the assessee was assessed at INR 3,76,19,685/- vide assessment order dated 05.03.2021 passed u/s 143(3) r.w. sections 143(3A) & 143(3B) of the Act.

3. Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 25.09.2024, partly allowed the appeal of the assessee.

4. Aggrieved by the order of Ld. CIT(A), Revenue is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo.

5. Ld. Sr. DR for the Revenue placed reliance on the order of AO and in terms of its submissions, has filed the copy of the Central Scrutiny Report submitted by the AO to Ld. Pr. CIT for proposing to file the appeal before the Tribunal and as such no further submission was made by Ld. Sr. DR in support of the Grounds of appeal taken by the revenue which is considered and placed on record.

6. Per contra, with respect to Ground of appeal No.1, Ld. AR for the assessee submits that the AO has made disallowance u/s 37(1) on account of penalty of INR 15,000/-; interest on TDS of INR 431/-; interest on payment of PF & ESI of INR 19,592/- and interest on service tax of INR 66,664/-. Ld.AR submits that Ld. CIT(A) has confirmed the disallowance of INR 15,000/- on account of penalty and further confirmed interest on late payment of TDS of INR 431/- and deleted the disallowance of the remaining expenses by placing reliance on the orders of Co-ordinate Benches of Tribunal. Ld. AR therefore, requested for the confirmation of the order of ld. CIT(A).

7. With respect to Ground of a