2015 (5) TMI 418 - AT - Income Tax

Accrual of Income - Advance of Fees Receipts - CIT(A) deleted the addition - Held that - Gone through the tribunal order in assessee s own case for A.Y. 2007 - 08 and find that the assertion of the assessee is correct. The issue involved in Ground No. 1 here was decided by the tribunal on this basis that the assessee was following cash system of accounting till A.Y. 2006 - 07 and the same was changed to mercantile system from A.Y. 2007 - 08. In that year, the tribunal approved the change in accounting system. In the present year, it is observed by the learned CIT (A) that this addition is on hypothetical basis as there is no change in accounting system in the present year. This finding of learned CIT (A) could not be controverted by the learned DR of the revenue and hence, we find no reason to interfere in the order of learned CIT (A) on this issue - Decided against revenue. Disallowance of of Salary Expenses - CIT(A) deleted the addition - Held that - Similar disallowance was made in A.Y. 2007 - 08 by making similar observations by the A.O. and were deleted in that year by learned CIT (A) with a clear finding that simply because the name of a doctor is missing from the list submitted to DCI/MCI, salary paid cannot be disallowed. This order of learned CIT (A) in that year was confirmed by the tribunal. In the present year also, the basis of disallowance by the A.O. and deletion by CIT (A) is same. In the present year also, Learned DR of the revenue could not point out any specific defect in the order of learned CIT (A) on this issue - Decided against revenue. Non deduction of TDS - OPD charges paid to 2 doctors - Held that - A clear finding is given by CIT (A) that no TDS was to be deducted in these two cases because in the first case, the income was below taxable limit and in the second case, TDS is not required to be deducted from reimbursement of expenses. This finding of learned CIT (A) could not be controverted by learned DR of the revenue - Decided against revenue. Disallowance of traveling expenses - difference in payment of salary - CIT(A) deleted the addition - Held that - Finding is given by CIT (A) that the assessee had explained before the A.O. that there is a mistake in the auditor s report regarding figure of salary to Shri Anurag Singhal. He has also observed that it was requested by the assessee to the A.O. that necessary reconciliation be sought from the auditors. He also observed that the assessee had produced books of account supporting this contention but no independent enquiry was made by the A.O. and no clarification was sought by the A.O. from the auditors. Thereafter, he deleted this addition by observing that since the A.O. has not brought on record any adverse evidence, addition is not justified. We do not find any infirmity in the order of learned CIT (A) on this issue. - Decided against revenue. Disallowance of expenditure as bugus - addition was made by the A.O. on this basis that sufficient supporting are not available - Held that - Finding is given by CIT (A) that the assessee had explained that looking to the nature of expenses, its magnitude and volume and the nature of charitable activities in which the assessee is engaged, some vouchers may not be available. Learned CIT (A) has given a categorical finding that for expenses such as Mess, Generator, Staff Welfare and travelling etc., self made vouchers are also sufficient if the volume is small of such self made vouchers. Thereafter, he deleted this addition by observing that since no claim of bogus expenditure has been found by the A.O., addition is not justified. We do not find any infirmity in the order of learned CIT (A) on this issue - Decided against revenue. Addition as expenses are of capital nature - CIT(A) deleted addition - Held that - Finding is given by CIT (A) that the assessee had explained that looking to the nature of expenses, its magnitude and volume and the nature of charitable activities in which the assessee is engaged, some vouchers may not be available. Learned CIT (A) has given a categorical finding that for expenses such as Mess, Generator, Staff Welfare and travelling etc., self made vouchers are also sufficient if the volume is small of such self made vouchers. Thereafter, he deleted this addition by observing that since no claim of bogus expenditure has been found by the A.O., addition is not justified. We do not find any infirmity in the order of learned CIT (A) on this issue in the facts of the present case because the activities of the assessee are charitable and considering the nature and volume of expenses. Disallowance u/s 40A(3)- CIT(A) deleted disallowance - Held that - Similar disallowance was made in A.Y. 2007 - 08 also by making similar observations by the A.O. and were deleted in that year by learned CIT (A). This order of learned CIT (A) in that year was confirmed by the tribunal. In the present year also, the basis of disallowance by the A.O. and deletion by CIT (A) is same. In the present year also, Learned DR of the revenue could not point out any specific defect in the order of learned CIT (A) on this issue and no difference in facts could be pointed out by him - Decided against revenue. Loss on sale of Maruti - CIT(A) deleted addition - Held that - The same was deleted by earned CIT (A) by observing that since the loss is suffered on a business asset, the same is allowable. Learned DR of the revenue could not point out any specific defect in the order of learned CIT (A) on this issue. - Decided against revenue. Disallowance of Depreciation - CIT(A) allowed claim - Held that - The A.O. asked the assessee to furnish date of completion of building. The A.O. noted that no explanation was furnished and therefore, the A.O. disallowed the depreciation. The same was deleted by earned CIT (A) without giving a finding that the building was completed and put to use. In fact, this is stated by learned CIT (A) on page 21 of his order that for allowing depreciation, ownership and use of asset for business purpose is essential. Thereafter, he observed that none of these have been challenged by the A.O. but this is not correct because the A.O. asked for date of completion but no reply was given by the assessee. Neither before any of the authorities below nor before us, any evidence is brought on record regarding date of completion of building and putting it to use. Hence, Depreciation is not allowable. We, therefore, reverse the order of learned CIT (A) on this issue and restore that of the A.O. - Decided in favour of revenue.

Summary

Issues Involved:

1. Advance of Fees Receipts
2. Salary Expenses
3. Travelling Expenses, Difference in Payment of Salary, Expenditure, and Capital Expenditure
4. Disallowance under Section 40A(3)
5. Surplus/Deficit as per Cash System
6. Capital Expenditure under Section 40A(3)
7. Loss on Sale of Maruti
8. Depreciation
9. Expenses under Section 40A(3)
10. Unexplained Written Off
11. Revenue Expenses in Cash
12. Written Off Bad Debts
13. Salary Paid without TDS
14. Difference in Salary and Form 16
15. Profit on Sale and Purchase of Medicine
16. Variation as per Comparative Analysis of Surplus/Deficit

Detailed Analysis:

1. Advance of Fees Receipts:
The Tribunal found that the assessee was following a cash system of accounting till AY 2006-07 and switched to a mercantile system from AY 2007-08. The addition was deemed hypothetical as there was no change in the accounting system in the present year. The CIT (A)'s decision to delete the addition was upheld.

2. Salary Expenses:
The Tribunal noted that similar disallowances in AY 2007-08 were deleted by CIT (A) and confirmed by the Tribunal. The disallowance was based on the absence of a doctor's name from the list submitted to DCI/MCI. The Tribunal found no reason to take a contrary view and upheld the CIT (A)'s decision.

3. Travelling Expenses, Difference in Payment of Salary, Expenditure, and Capital Expenditure:
- Travelling Expenses: The CIT (A) found that no TDS was required for payments made to Dr. A. K. Goel and Dr. A. K. Gaekwad. The Tribunal upheld this finding.
- Difference in Payment of Salary: The CIT (A) noted a mistake in the auditor's report and no independent inquiry was made by the AO. The Tribunal upheld the CIT (A)'s decision.
- Expenditure: The CIT (A) found that some vouchers might not be available due to the nature of expenses and charitable activities. The Tribunal agreed that self-made vouchers were sufficient and upheld the CIT (A)'s decision.
- Capital Expenditure: The CIT (A) found that the expenses were justified and deleted the addition. The Tribunal upheld this decision.

4. Disallowance under Section 40A(3):
The Tribunal found that similar disallowances in AY 2007-08 were deleted by CIT (A) and confirmed by the Tribunal. The Tribunal upheld the CIT (A)'s decision to delete the disallowance.

5. Surplus/Deficit as per Cash System:
The Tribunal found that the assessee's change in accounting system was approved in AY 2007-08. The addition was hypothetical as there was no change in the present year. The Tribunal upheld the CIT (A)'s decision.

6. Capital Expenditure under Section 40A(3):
Similar disallowances in AY 2007-08 were deleted by CIT (A) and confirmed by the Tribunal. The Tribunal upheld the CIT (A)'s decision.

7. Loss on Sale of Maruti:
The CIT (A) found that the loss was on a business asset and allowable. The Tribunal upheld this decision.

8. Depreciation:
The AO disallowed depreciation due to lack of evidence of building completion and use. The CIT (A) deleted the disallowance without confirming the building's use. The Tribunal reversed the CIT (A)'s decision and restored the AO's order.

9. Expenses under Section 40A(3):
The Tribunal upheld the CIT (A)'s decision to delete the disallowance, finding no difference in facts from AY 2007-08.

10. Unexplained Written Off:
The Tribunal upheld the CIT (A)'s decision to delete the addition, finding no difference in facts from AY 2007-08.

11. Revenue Expenses in Cash:
The Tribunal upheld the CIT (A)'s decision to delete the disallowance, finding no difference in facts from AY 2007-08.

12. Written Off Bad Debts:
The Tribunal upheld the CIT (A)'s decision to delete the disallowance, finding no difference in facts from AY 2007-08.

13. Salary Paid without TDS:
The Tribunal upheld the CIT (A)'s decision to delete the disallowance, finding no difference in facts from AY 2007-08.

14. Difference in Salary and Form 16:
The Tribunal upheld the CIT (A)'s decision to delete the disallowance, finding no difference in facts from AY 2007-08.

15. Profit on Sale and Purchase of Medicine:
The Tribunal upheld the CIT (A)'s decision to delete the addition, finding no difference in facts from AY 2007-08.

16. Variation as per Comparative Analysis of Surplus/Deficit:
The Tribunal upheld the CIT (A)'s decision to delete the addition, finding no difference in facts from AY 2007-08.

Conclusion:
The appeal for AY 2004-05 was partly allowed, while the appeals for AY 2005-06 and 2006-07 were dismissed. The cross objections by the assessee were dismissed.