2014 (9) TMI 1024 - AT - Income Tax

Disallowance on account of creditors and expenses - Held that - There is no dispute to the fact that the A.O. as well as the ld. CIT(A) has not invoked the provisions of section 145(3) of the Act. Therefore, no addition on account of creditors and expenses can be made and addition so made is directed to be deleted. As regards the unsecured loans of ₹ 2,50,000/-, the same are loans pertaining to the preceding year and no part of the same has been raised during the year, therefore, the ld. CIT(A) is not justified in sustaining the same and the same are directed to be deleted. - Decided in favour of assessee Deduction u/s 80-IB - Held that - None of the authorities below have placed on record, which condition laid down u/s 80IB has not been fulfilled by the assessee. Further, the ld. counsel for the assessee has submitted written submissions stating that the assessee has been allowed deduction u/s 80IB of the Act under the same conditions as in the preceding year and there was no change in the facts & circumstances in the preceding year. AO himself has mentioned with regard to claim of deduction under section 80IB being the 5th year of the business of the assessee and claim of deduction @ 100% under section 80IB was allowed. In the facts and circumstances and following the doctrine of consistency, the ld. CIT(A) is not justified in confirming the action of the A.O u/s 80IB of the Act. Thus CIT(A) is not justified in confirming the action of the A.O. inspite of the fact that the onus has been discharged by the assessee - Decided in favour of assessee

Summary

Issues involved:
1. Disallowance of expenses by AO and CIT(A)
2. Addition on account of unexplained loans and creditors
3. Disallowance of deduction claimed under section 80IB of the Act

Analysis:

Issue 1: Disallowance of expenses by AO and CIT(A)
The assessee appealed against the disallowance of expenses amounting to &8377; 580387 on purchases, freight, power, fuel, salary & wages, and other expenses by the Assessing Officer (AO). The CIT(A) confirmed part of the disallowance. The contention was that all expenses were legitimate and incurred during the course of business. The Tribunal held that without invoking section 145(3) of the Act, no addition on account of expenses could be made. Consequently, the addition was directed to be deleted. Regarding unsecured loans, the Tribunal found that the loans were from the preceding year and not raised during the relevant year, leading to the deletion of the addition sustained by the CIT(A).

Issue 2: Addition on account of unexplained loans and creditors
The AO made an addition on account of unexplained unsecured loans, which was partly confirmed by the CIT(A). The Tribunal noted that the onus was on the assessee to file Form 10CCB and DIC certificate, which were submitted. It was observed that none of the authorities pointed out any unfulfilled condition under section 80IB of the Act. The Tribunal emphasized the doctrine of consistency and held that the CIT(A) was not justified in confirming the disallowance of deduction under section 80IB. The addition was directed to be deleted, and the appeal was allowed.

Issue 3: Disallowance of deduction claimed under section 80IB of the Act
The assessee claimed a deduction under section 80IB of the Act, which was disallowed by the CIT(A) on the grounds of non-fulfillment of conditions. The Tribunal found that the conditions were met, as evidenced by the submitted Form 10CCB and DIC certificate. Additionally, the assessee's compliance with deduction provisions in previous years was highlighted. Relying on the principle of consistency, the Tribunal reversed the CIT(A)'s decision and directed the AO to delete the disallowed deduction. The appeal was allowed in favor of the assessee.