2015 (9) TMI 1731 - AT - Income Tax

Disallowance claim of financial loss under the schedule repair and maintenance expenses - HELD THAT - Revenue strongly reiterates its grounds and assails the above extracted findings by pleading that details of evidence had not been filed in the course of assessment. We notice that the CIT(A) s findings under challenge duly take into account details of loss as in schedule 33 to notes on accounts with all necessary particulars of irregularities in question division-wise break-up work orders bills involved items selected for verification and actual work carried out. It has come on record that this assessee is already subjected to C AG audit. Needless to say the CIT(A) has already concluded that in case there is any amount recovered in future from the concerned contractor it shall be treated as assessee s income in the year of receipt. The Revenue fails to file any evidence to the contrary for rebutting the above stated factual findings. We do not see any reason to interfere in the lower appellate findings. This Revenue s ground is rejected. Disallowance of extra ordinary items being losses due to cyclone flood and fire etc made for want of supportive evidence - sole ground for rejecting the claim in question to lack of evidence - HELD THAT - The lower appellate order mentions very clearly that the assessee had duly filed a letter dated 15-12-2012 comprising of all necessary details; division-wise on expenses towards flood related damages. The Revenue does not produce on record copy of the above stated letter so as to dispel the above said specific findings. The CIT(A) further relies on an identical order dealing with the very claim. The same has also gone unrebutted in course of hearing before us. We decide this ground as well against the Revenue

Summary

Issues Involved:
1. Dismissal of the assessee's appeal for non-prosecution.
2. Deletion of section 37(1) addition of Rs. 176.28 lacs on account of disallowance of financial loss.
3. Deletion of addition of Rs. 124.8 lacs on account of disallowance of extraordinary items due to cyclone, flood, and fire.

Issue-Wise Detailed Analysis:

1. Dismissal of the Assessee's Appeal for Non-Prosecution:
The case was called twice, but the assessee did not appear. The assessee had also not appeared on earlier occasions despite being served a notice. Consequently, the appeal ITA 2860/Ahd/2011 filed by the assessee was dismissed for non-prosecution, referencing CIT vs. Multiplan India (Pvt.) Ltd., 38 ITD 320 (Delhi). The assessee was proceeded ex-parte in the Revenue's appeal ITA 3111/Ahd/2011.

2. Deletion of Section 37(1) Addition of Rs. 176.28 Lacs:
The Revenue challenged the CIT(A)'s order deleting the addition of Rs. 176.28 lacs made under section 37(1) on account of disallowance of financial loss. The CIT(A) noted that the financial loss was due to irregularities in the maintenance work and was disclosed in the balance sheet. The accounts were audited by statutory auditors and the Comptroller and Auditor General of India (CAG), who did not make any adverse remarks. The CIT(A) concluded that the expenses were for legal business purposes and not for any illegal activities, and thus, the explanation below section 37(1) was not applicable. The CIT(A) directed that if any amount was recovered in the future, it should be taxed as income in the year of receipt. The Revenue failed to provide evidence to rebut these findings, and thus, the appellate order was upheld, rejecting the Revenue's ground.

3. Deletion of Addition of Rs. 124.8 Lacs on Account of Extraordinary Items:
The Revenue contested the deletion of the addition of Rs. 124.8 lacs made for want of supportive evidence regarding losses due to cyclone, flood, and fire. The CIT(A) noted that the assessee had submitted detailed division-wise expenses related to flood damages and that the accounts were audited by CAG. The CIT(A) also referenced a similar favorable decision in the case of Gujarat Energy Transmission Corporation Ltd., a sister concern, where the expenditure was less than the subsidy received from the government, and the excess was offered for taxation. The Revenue did not provide evidence to counter these findings. The appellate order was upheld, and the Revenue's ground was rejected.

Conclusion:
The assessee's appeal ITA 2860/Ahd/2011 was dismissed for non-prosecution, and the Revenue's appeal ITA 3111/Ahd/2011 was dismissed, upholding the CIT(A)'s orders on both contested issues. The order was pronounced in open court on 18-09-2015.