2010 (1) TMI 1238 - AT - Income Tax

2017 (5) TMI 218 - AT

Issues Involved:
1. Addition of Rs. 25,65,489/- on account of outstanding leave salary expenses.
2. Addition of Rs. 16,48,000/- on account of unexplained loans and interest.
3. Addition of Rs. 15,33,627/- on account of outstanding salary.
4. Addition of Rs. 95,098/- on account of telephone expenses.
5. Addition of Rs. 90,000/- being interest on loans.
6. Addition for belated payment of employees' contribution to PF u/s.43B of the I.T. Act, 1961.
7. Addition of Rs. 1,55,311/- on account of difference on receipts with reference to TDS Certificates.
8. Deletion of addition of Rs. 50,000/- on account of office expenses.
9. Restricting the disallowance to Rs. 1,26,136/- on account of vehicle expenses.

Detailed Analysis:

Issue No.1: Addition of Rs. 25,65,489/- on account of outstanding leave salary expenses
The Assessing Officer (AO) disallowed the deduction for outstanding leave salary expenses of Rs. 25,65,489/- under section 43B(f) of the I.T. Act, 1961, as the liability was unpaid. The assessee failed to provide adequate details regarding the outstanding payments. The CIT(A) upheld the AO's decision. However, considering the Supreme Court's decision in CIT vs. Alom Extrusions Ltd., which clarified that the omission of the second proviso to section 43B operated retrospectively from 01/04/1988, the Tribunal remanded the matter to the AO for reconsideration, directing the assessee to furnish necessary details.

Issue No.2: Addition of Rs. 16,48,000/- on account of unexplained loans and interest
The AO added Rs. 20,63,000/- under section 68 of the I.T. Act, 1961, for unexplained loans and interest. The CIT(A) deleted the addition for two creditors (Rs. 4,15,000/-) based on provided evidence but upheld the addition for the remaining creditors due to lack of evidence. The Tribunal upheld the CIT(A)'s decision for the two creditors but confirmed the addition for the remaining creditors, as the assessee failed to provide sufficient evidence.

Issue No.3: Addition of Rs. 15,33,627/- on account of outstanding salary
The AO disallowed 20% of the salary expenses, amounting to Rs. 30,67,266/-, due to lack of evidence. The CIT(A) reduced the disallowance to 10%. The Tribunal upheld the CIT(A)'s decision, considering the nature of the business and the necessity of employing guards.

Issue No.4: Addition of Rs. 95,098/- on account of telephone expenses
The AO disallowed 50% of the residential telephone expenses, amounting to Rs. 95,098/-, due to possible personal use. The CIT(A) confirmed the addition. The Tribunal reduced the disallowance to Rs. 50,000/-, considering the business nature and the necessity of telephone use for business purposes.

Issue No.5: Addition of Rs. 90,000/- being interest on loans
The AO added Rs. 90,000/- for interest on a loan given to a partner without charging interest. The CIT(A) upheld the addition. The Tribunal remanded the matter to the AO to verify if interest was charged in the earlier year, following the Karnataka High Court decision in CIT vs. Sridev Enterprises.

Issue No.6: Addition for belated payment of employees' contribution to PF u/s.43B of the I.T. Act, 1961
The AO disallowed Rs. 79,85,372/- for belated PF payments. The CIT(A) confirmed the disallowance for employees' contribution but deleted the employer's contribution if paid before the due date of filing the return. The Tribunal directed the AO to verify the payments and delete the addition if paid before the due date, following the Supreme Court decision in CIT vs. Alom Extrusions Ltd.

Issue No.7: Addition of Rs. 1,55,311/- on account of difference on receipts with reference to TDS Certificates
The AO added Rs. 38,72,606/- for differences in receipts with TDS certificates. The CIT(A) reduced the addition to Rs. 1,55,311/- based on reconciliation. The Tribunal confirmed the addition but directed the AO to give TDS credit in the year the corresponding income is shown.

Issue No.8: Deletion of addition of Rs. 50,000/- on account of office expenses
The AO made an ad-hoc addition of Rs. 50,000/- for office expenses without evidence. The CIT(A) deleted the addition. The Tribunal upheld the CIT(A)'s decision.

Issue No.9: Restricting the disallowance to Rs. 1,26,136/- on account of vehicle expenses
The AO disallowed 20% of vehicle expenses due to personal use. The CIT(A) reduced the disallowance to 10%. The Tribunal upheld the CIT(A)'s decision.

Conclusion:
The appeal of the assessee is partly allowed, and the Departmental appeal is dismissed.

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