2018 (1) TMI 1296 - AT - Income Tax

Disallowance u/s. 43B(d) on account of payment to LIC - Held that - We find that the Tribunal had directed the assessee to file details of interest payment to decide the issue. But till the passing of this order, the assessee has not filed any detail that could prove that the stand taken by the AO was factually incorrect. We do not know how the FAA arrived at the conclusion, that the payment made by the assessee under the head interest expenditure was relatable to loans and not about the restructured loans. We agree with the argument of DR that the order of the FAA was non-speaking and very cryptic. We are unaware of the reasons as to why the assessee did not file details of interest payments to prove his case. Therefore, in our opinion the matter should be investigated and verified further.

Summary

Issues:
1. Disallowance of interest payment of ?35,99,47,470 under section 43B(e) of the Income-tax Act, 1961.
2. Appeal against the order of the Assessing Officer (AO) by the assessee.
3. Discrepancy in the treatment of interest payments between the AO and the First Appellate Authority (FAA).

Analysis:
1. The AO disallowed interest payment of ?35,99,47,470, asserting that the assessee failed to prove actual payment of interest debited to the Profit & Loss account. The AO concluded that the interest was converted into a loan, not paid as claimed. The FAA, after reviewing evidence, held that the interest was paid on funded term loans before the due date, deleting the addition made by the AO.

2. The assessee appealed against the AO's order to the FAA, presenting detailed submissions and financial data to support that interest was paid on term loans before the due date. The FAA, considering Circular No. 7 of 2006, found in favor of the assessee, stating that the case was covered under section 43B(d)(e) of the Act and deleted the addition.

3. The Tribunal noted that the assessee failed to provide details of interest payments to challenge the AO's findings. It criticized the FAA's non-speaking and cryptic order, directing a fresh investigation. The issue was restored to the FAA for a detailed decision, emphasizing the need for the assessee to prove the interest payments' allowance as per the Act. The Tribunal partly allowed the AO's appeal, emphasizing the importance of substantiating interest payments.

In conclusion, the Tribunal partially allowed the AO's appeal, highlighting the necessity for the assessee to substantiate interest payments and emphasizing the importance of detailed orders in tax matters. The case underscores the significance of providing evidence to support claims and the need for thorough examination of financial transactions in tax assessments.