2017 (7) TMI 569 - AT - Income Tax

Disallowing of Peak load violation charges paid to PSEB - nature of expenditure - Held that - There could be no grievance of the assessee vis- -vis non-entertainment of claim by the lower authorities. As regards disallowance of the same, we find that the CIT (Appeals) had held the same to be penal in nature. On being confronted by the Bench to adduce evidence to prove that the claim was not penal in nature, the learned counsel for the assessee expressed his inability to do so. In view of the same, we hold that there is no infirmity in the order of the learned CIT (Appeals) in disallowing the claim of peak load violation charges paid. Reduction of excess depreciation credited to the Profit and Loss Account - Held that - We find merit in this contention of the assessee that claim not made in the return of income can be made during assessment proceedings. The claim of the assessee be entertained. Having entertained the claim we find that the Ld. Counsel for the assessee has shown us the inclusion of the impugned sum in the Profit and Loss Account and has further tried to demonstrate through its computation of income that the same was not reduced. But we find that the facts do not appear to be evident and clear. We, therefore consider it fit to restore the issue to the file of the Ld. CIT (Appeals) to adjudicate the issue in accordance with law. We may add that the assessee be granted due opportunity of hearing and also be allowed to adduce all evidences in support of its contentions. The ground of appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
1. Disallowance of expenses for un-vouched items.
2. Disallowance of peak load violation charges and excess depreciation.

Issue 1: Disallowance of Expenses:
The appellant challenged the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of ?20,000 for un-vouched expenses. The appellant contended that the disallowance lacked specificity. However, the Tribunal dismissed this ground as it was not pressed before them.

Issue 2: Disallowance of Peak Load Violation Charges and Excess Depreciation:
The appellant disputed the CIT (Appeals)'s decision to disallow the claim of ?2,57,643 for peak load violation charges paid to PSEB and ?4,75,06,021 for excess depreciation. The CIT (Appeals) disallowed the peak load violation charges as penal in nature and rejected the depreciation claim due to lack of detailed bifurcation. The Tribunal noted that the CIT (Appeals) had entertained the peak load charges claim but later disallowed it. The appellant failed to provide evidence to refute the penal nature of the claim. Regarding excess depreciation, the appellant argued that it was a transfer entry and not taxable income. Citing relevant case laws, the appellant contended that the claim should have been entertained during assessment proceedings. The DR supported the CIT (Appeals)'s decision, emphasizing the appellant's failure to explain the delay in claiming the amounts. The Tribunal acknowledged the appellant's right to make claims during assessment proceedings and referred to case laws supporting this principle. Consequently, the Tribunal allowed the appellant's claim for excess depreciation and remanded the issue back to the CIT (Appeals) for further examination, granting the appellant an opportunity to present evidence.

In conclusion, the Tribunal partially allowed the appeal concerning the disallowance of excess depreciation, emphasizing the appellant's right to claim deductions during assessment proceedings. The case highlights the importance of providing detailed evidence and following legal procedures in tax matters to ensure fair treatment and accurate assessment of taxable income.