2020 (1) TMI 1341 - AT - Income Tax

Disallowance u/s. 40(a)(ia) - HELD THAT - As is clear from the provisions of Section 40(a)(ia) if the payee had filed the return of income and shown the interest income in the Profit Loss A/c which is clear from the Form-26A filed by the assessee, which was sent by the CIT(A) to the AO for verification and the Assessing Officer thereafter had submitted the report but simultaneously taken the objection that the said certificate of Form 26A was not filed before the AO The objections of AO before the CIT(A) and before the Ld. DR is technical in nature and once the content of Form-26A were not disputed, then the assessee is entitled to the benefit of proviso to Section 40(a)(ia) of the Act, for that purpose we may fruitfully rely upon the decision of the Hon'ble Supreme Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd. 2016 (8) TMI 1281 - SC ORDER . Accordingly, Ground Nos. 1 2 raised by Revenue are dismissed. Rejection of book results u/s. 145 - bills/vouchers found to be inaccurate/bogus/excessive - HELD THAT - Once the books of account have rejected by the Assessing Officer and confirmed by the CIT(A), then, it was incumbent upon both the lower authorities i.e., AO as well as the CIT(A) to physically verify the bills/vouchers of the expenditure and specify the expenditure which in the estimation of both the authorities were excessive or was not related to the business of the assessee or was bogus. Needful was not done by the Ld. CIT(A) and he had reduced the disallowance from ₹ 1 Crore to ₹ 5 Lakhs - we are of the opinion that this issue is required to be remanded back to the file of Ld. CIT(A) with a direction to verify the bills/vouchers and give a categorical finding as to the nature of expenditure incurred by the assessee, which were found to be excessive/bogus etc. While examining the bills/vouchers, pertaining to freight and track running expenses, if the Ld. CIT(A) comes to the conclusion that the expenditure were more than ₹ 1 Crore, then, he will not enhance the disallowance from ₹ 1 Crore to any other amount. In the converse if the Ld. CIT(A) comes to the conclusion that the expenditure (bills/vouchers) pertaining to freight and truck running expenditure were found to be in order, then, no disallowance would be made or the disallowance would be restricted to the actual bills/vouchers found to be inaccurate/bogus/excessive. This exercise would be done by the CIT(A) in accordance with law, after giving due opportunity of hearing to the assessee. It is expected the Ld. CIT(A) shall pass a reasoned and speaking order - Ground No. 3, raised by the Revenue is treated as allowed for statistical purposes. Disallowance from Freight and Truck Repair Maintenance Expenses - HELD THAT - CIT(A) had passed a detailed order, after verifying the case record and thereafter had restricted the disallowance to ₹ 1 Lakh instead of ₹ 25 Lakhs. Since the Ld. CIT(A) had verified the record and nothing had been pointed by the Ld. DR that the record which was verified was not sufficient to come to the conclusion or the finding recorded by the Ld. CIT(A) in para 11 was incorrect or contrary to the facts. In the light of the above, we do not find any reason to interfere with the findings giving by the Ld. CIT(A). Depreciation for the trucks - HELD THAT - Case of the assessee was decided on scrutiny u/s. 143(3) of the Act and no doubt by the AO in the A.Y. 2009-10 in respect of claim of depreciation. The record further shows that the assessee has given the details of the trucks along with Chassis number, which were put to use after being registered with MP State Transport Department. This information was also available on the website of the MP State Transport Department. In our view, for the purpose of claiming the depreciation, the assessee was required to prove that the asset was put to use in the year under consideration. For the purposes of claiming the depreciation for the trucks, it would be sufficient if the trucks were registered with the Transport Authorities before the cut-off date and have a valid petrol/oil receipt showing the consumption of fuel. This had sufficiently been demonstrated by the assessee before the authorities below.

Summary

Issues Involved:
1. Deletion of addition made on account of disallowance under Section 40(a)(ia) of the Income Tax Act, 1961.
2. Applicability of Rule 31ACA of the IT Rules, 1962, and Board's circular No. 10 on 16.12.2013.
3. Shifting of the onus of burden of proof upon the AO in deleting addition made on account of disallowance from Freight & Truck Running expenses.
4. Shifting of the onus of burden of proof upon the AO in deleting addition made on account of disallowance from Freight and Truck Repair & Maintenance expenses.
5. Shifting of the onus of burden of proof upon the AO in deleting addition made on account of disallowance under the head of depreciation.
6. Whether the order of the CIT(A) is perverse to the facts.

Issue-wise Detailed Analysis:

Ground Nos. 1 & 2:
The Revenue challenged the deletion of an addition of ?33,25,633/- under Section 40(a)(ia) of the Income Tax Act, 1961. The CIT(A) had allowed this deletion based on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd., which held that the second proviso to Section 40(a)(ia) should be given retrospective effect. The CIT(A) found that the assessee had furnished Form 26A and Annexure A, certifying that the payee had included the said amount in their income and paid due taxes. The Tribunal upheld the CIT(A)'s decision, stating that once the content of Form 26A was not disputed, the assessee was entitled to the benefit of the proviso to Section 40(a)(ia). Thus, Ground Nos. 1 & 2 raised by the Revenue were dismissed.

Ground No. 3:
The Revenue contended that the CIT(A) erred in deleting the addition of ?95,00,000/- out of ?1,00,00,000/- disallowed from Freight & Truck Running expenses. The CIT(A) had upheld the rejection of books of account but noted that the Assessing Officer did not specifically ask the assessee to produce bills/vouchers for verification. The CIT(A) reduced the disallowance to ?5,00,000/- instead of ?1,00,00,000/-. The Tribunal found that once the books of account were rejected, the CIT(A) should have verified the bills/vouchers to determine the nature of the expenditure. The Tribunal remanded the issue back to the CIT(A) for verification of bills/vouchers and to pass a reasoned order after giving due opportunity of hearing to the assessee. Hence, Ground No. 3 was allowed for statistical purposes.

Ground No. 4:
This ground pertained to the deletion of an addition of ?24,00,000/- made on account of disallowance from Freight and Truck Repair & Maintenance expenses. The CIT(A) had reduced the disallowance to ?1,00,000/- after verifying the case records and noting that most expenses were incurred through cheques for routine business expenses. The Tribunal upheld the CIT(A)'s decision, finding no reason to interfere with the findings. Accordingly, Ground No. 4 of the Revenue's appeal was dismissed.

Ground No. 5:
The Revenue challenged the deletion of an addition of ?1,00,00,000/- made on account of disallowance under the head of depreciation. The CIT(A) had deleted the disallowance after verifying the ownership of vehicles and noting that the trucks were registered and put to use before the cut-off date. The Tribunal found that the assessee had sufficiently demonstrated the use of the trucks and upheld the CIT(A)'s decision. Thus, Ground No. 5 was dismissed.

Conclusion:
In conclusion, the Tribunal dismissed Ground Nos. 1, 2, 4, and 5 raised by the Revenue and remanded Ground No. 3 back to the CIT(A) for further verification. The appeal of the Revenue was treated as partly allowed for statistical purposes. The order was pronounced in the open court on 09-01-2020.