2019 (4) TMI 1118 - AT - Income Tax

Disallowance of the diesel costs incurred on machines for want of log book of 5% - HELD THAT - Assessee could not produce any necessary evidences in this regard. CIT(Appeals) observed as is evident from the assessment order that the assessee was asked to produce log books, oil, diesel consumption books, running hour book and mileage register for each of the machineries, vouchers and bills etc. The assessee could not produce/file any of such details asked by the AO. CIT(Appeals) after considering the submissions of the assessee, assessment order held that reasonable disallowance of only 5% of the entire claim made by the Assessing Officer was justified. TDS u/s 194A - Disallowance of interest u/s.40(a)(ia) - disallowance of interest expenses due to non-payment of TDS after end of year - appellant had contended and claimed that the AO did not refer to the provisions of section 43B - HELD THAT - AO had disallowed the interest u/s.40(a)(ia) r.w.s.194A of the Act for non deduction of TDS and non-payment of TDS within the prescribed time. Whereas the appellant had contended and claimed that the AO did not refer to the provisions of section 43B . In fact the submission of the appellant, itself is in ambiguity and nothing can be arrived at from the said submission. As the contention of the AO has not been refuted by the appellant during the appellate proceeding and also no details and evidences in this regard were furnished, no reason to interfere with the order of the AO. Addition u/s 14A - Disallowance of interest being the expenses incurred on exempt income - HELD THAT - No infirmity in the assessment order passed by the Assessing Officer disallowing the proportionate expenditure of ₹ 4,87,464/- u/s.14A read with Rule 8D of the Rules and therefore no interference in this action is called for. The disallowance so made is hereby confirmed. Assessee appeal dismissed.

Summary

Issues Involved:
1. Disallowance of 5% of the diesel costs.
2. Disallowance of interest expenses under section 40(a)(ia) of the Income Tax Act.
3. Disallowance of expenditure on exempt income under section 14A of the Income Tax Act.

Detailed Analysis:

1. Disallowance of 5% of the Diesel Costs:
The assessee company, engaged in the business of excavation, claimed expenses on machinery amounting to ?41,33,021/-. The Assessing Officer (AO) requested various documents, including log books and vouchers, which were not provided by the assessee. Consequently, the AO disallowed 5% of the total expenses due to the absence of necessary documentation, amounting to ?2,06,661/-. The CIT(Appeals) upheld this disallowance, stating that the assessee failed to produce required evidence. The Tribunal found the CIT(Appeals)'s decision reasonable and upheld the disallowance, noting the assessee's lack of vigilance in contesting the findings.

2. Disallowance of Interest Expenses under Section 40(a)(ia):
The AO disallowed interest expenses totaling ?6,36,018/- due to non-compliance with TDS provisions. The assessee argued that taxes paid before filing the income tax return should be allowable under section 43B. However, the CIT(Appeals) confirmed the AO's disallowance, emphasizing that the disallowance was made under section 40(a)(ia) for non-deduction and non-payment of TDS within the prescribed time. The Tribunal upheld the CIT(Appeals)'s decision, noting that the assessee did not provide any evidence to refute the AO's findings.

3. Disallowance of Expenditure on Exempt Income under Section 14A:
The AO found that the assessee had invested ?60,00,000/- in shares to earn exempt income while claiming interest deductions on loans. The AO disallowed ?4,87,464/- under section 14A read with Rule 8D, as the assessee failed to demonstrate that no expenditure was incurred for earning the exempt income. The CIT(Appeals) upheld this disallowance, citing the assessee's inability to segregate the funds and the appropriateness of applying Rule 8D. The Tribunal agreed with the CIT(Appeals), noting the assessee's non-vigilant attitude and confirming the disallowance.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the disallowances made by the AO and confirmed by the CIT(Appeals) on all three grounds. The order was pronounced on April 16, 2019.