2016 (7) TMI 695 - AT - Income Tax

Disallowance on account of excess provisions written back - Held that - We find that the FAA had upheld the disallowance, made by the AO, that he had held that the assessee had not filed the returns of income, P&L A/c. s for the earlier years. Considering the fact that these basic documents were available to AO as well as FAA, we are of the opinion that before taking an adverse view they should have verified the facts from the available records or should have directed the assessee to file the same. Considering the peculiar facts and circumstances of the case, we are of the opinion that the issue needs further verification. So, in the interest of justice we are restoring back the matter to the file of the AO to decide the issue afresh after going through the returns of income, P&L accounts, balance sheet of the earlier years. Assessee is directed to provide these basic documents to the AO - Decided in favour of assessee by way of remand. Disallowance on account of the late payment of PF - Held that - We find that in the case of Ghatge Patil Transports (2014 (10) TMI 402 - BOMBAY HIGH COURT ), the Court had held that if the payments were made before the due date of filing of return of income, no disallowance can be made as per the provisions of section 36(1). Respectfully, following the above judgment of the Hon ble Bombay High Court, we decide Ground in favour of the assessee. Disallowance of travelling and conveyance expenditure - Held that - We find that the assessee had filed additional evidence before the FAA who had forwarded it to the AO for comments, that the AO had not filed the remand report till the FAA passed his order. In our opinion, issue needs further verification. So, in the interest of justice, we are restoring the matter to the file of the AO. He is directed to afford a reasonable opportunity of hearing to the assessee - Decided in favour of assessee by way of remand.

Summary

Issues:
1. Disallowance of excess provisions written back by the assessee.
2. Disallowance of late payment of PF.
3. Disallowance of expenses claimed under traveling and conveyance expenditure.

Issue 1: Disallowance of Excess Provisions Written Back by the Assessee:
The Assessee, engaged in business consultancy services, filed its return declaring a total income. The AO completed the assessment, assessing the total income. The issue was regarding confirming the disallowance of an amount on account of excess provisions written back by the assessee. The AO added the amount to the total income, stating that the liability had crystallized during the year, and the provisions made in the past were excessive. The FAA upheld the AO's decision as the assessee failed to provide documentary evidence to justify the claim. The ITAT decided to restore the matter to the AO for further verification, directing the assessee to provide basic documents for a fresh decision. The third ground was decided in favor of the assessee, in part.

Issue 2: Disallowance of Late Payment of PF:
The AO disallowed an amount on account of late payment of PF by the assessee, considering it as income as per the provisions of the Act. The FAA upheld the disallowance, stating that payments made after the grace period were not eligible for deduction. The ITAT, referring to relevant court judgments, decided in favor of the assessee, stating that if payments were made before the due date of filing the return of income, no disallowance could be made as per the provisions of the Act.

Issue 3: Disallowance of Expenses Claimed under Traveling and Conveyance Expenditure:
The AO disallowed a portion of expenses claimed under traveling and conveyance expenditure as the assessee failed to provide details such as bills, vouchers, and nature of foreign travel. The FAA partially allowed the claim after considering available material and restricting the addition to a specific amount. The ITAT found that the issue required further verification and decided to restore the matter to the AO for proper examination, directing the AO to provide a reasonable opportunity of hearing to the assessee. The last ground was partially allowed, and the appeal of the assessee was partly allowed in the result.