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2019 (5) TMI 10 - AT - Income TaxDisallowance on account of advances written off - assessee has claimed bad debts which represented the advances written off - deduction has been claimed under the wrong section - advances written off were never booked as income of the assessee in the earlier years - assessee claimed as a deduction u/s 37(1) or 28 - AO rejected the claim by observing that there was no evidence that the advances were given in the course of the business - CIT (A) reversed the order of the AO - HELD THAT - Admittedly In the present case, the advances were given by the assessee to the parties long time ago as evident from the submission of the assessee which was not disputed by the authorities below. Thus in the instant case if the direct pieces of evidence are not available with the assessee, then in such a situation, the circumstantial pieces of evidence are required to be considered while adjudicating the issue on hand. It is an undisputed fact the advances written off by the assessee as discussed above cannot be categorized as bad-debts under the provisions of section 36 (1)(vii) and 36(2). As established law that the advances given in the course of the business are eligible for deduction under section 37(1)/ 28. This fact has already been elaborated in detail in the preceding paragraphs. Thus we are of the view claim of the assessee cannot be just rejected merely on the ground that the deduction has been claimed under the wrong section. Assessee has written off such advances in its books of accounts when it finds that such advances are not recoverable. It is also important to note that there should not be any dictate/ direction from any superior authority for the writing off such advances. The decision of the assessee is in itself sufficient to claim the deduction for such advances by the writing off in the books of accounts subject to the conditions as specified u/s 37(1)/ 28. Thus we disagree with the contention of the learned CIT-A. Thus AO had emphasized on the fact that the assessee failed to produce the necessary details of the parties. Indeed such details of the parties were one of the corroborative factors which would eliminate the doubts, but in the absence of that agreement, the other circumstances ought to have been evaluated, which could lead the adjudicating authority towards a firm conclusion. No disallowance is warranted for advances written off as bad debts. Thus the conclusions drawn by the Commissioner (Appeals) were to be upheld. Hence the ground of appeal of the Revenue is dismissed. Disallowance u/s 43B - delay in payments made to the employer as well as employee s contribution to PF - HELD THAT - The issue regarding the employee s contribution towards the provident fund after the grace period as specified under the relevant Act is not eligible for deduction u/s 43B, in view of the judgment of Hon ble Gujarat High Court in the case of the GSRTC 2014 (1) TMI 502 - GUJARAT HIGH COURT . Regarding the employer s contribution towards the provident fund, we note that the employer deposited the same before the due date of filing the income tax return as specified u/s 139(1) . Thus, we are of the view that the assessee has complied with the provision of section 43B. No reason to interfere in the order of the CIT (A). The ground of appeal of the Revenue is partly allowed. Non-deduction of TDS on the payment made for investigation expenses - paid by bank on behalf of assessee and debited to the loan account - HELD THAT - The primary liability of the assessee was to make the payment to the chartered accountant firm. Thus merely the payment was made by the bank on behalf of the assessee does not mean that the transaction is covered under the provisions of section 194A read with section 2(28A). As such the assessee is liable to deduct the TDS u/s 194J. Thus assessee is not eligible for deduction for the expenses due to non-deduction of TDS under section 194J read with section 40a(ia). As per the 2nd proviso to the section 40a(ia) the expenses on account of non-deduction of TDS will not be disallowed if the recipient has included such receipts in its books of accounts and offered the same to tax. Therefore, in the interest of justice and fair play, we are inclined to set aside the issue to the file of AO for fresh adjudication as per the provisions of law. - the ground of appeal of the Revenue is allowed for statistical purposes. Difference in income declared in return and shown in form 16A - CIT (A) deleted the addition made by the AO by observing that IPOL has deducted the TDS twice on the advance money as well as on the actual bill of the assessee - HELD THAT - We note that assessee has shown job work charges from IOPL in its books which was also confirmed by the party as evident from the details available on the paper book. We also note that the AO without finding out any defect in the reconciliation filed by the assessee has relied on form 16. AO action for the addition was based on the form 16A only which is not correct as per the provision of law. AO should have pointed out the specific defect in the submission of the assessee before making the disallowance. In view of the above, we do not find any infirmity in the order of learned CIT-A. Hence the ground of appeal of the revenue is dismissed.
Issues Involved:
1. Deletion of addition on account of advances written off. 2. Deletion of addition on account of delay in payments made to employer and employee's contribution to provident fund. 3. Deletion of addition on account of investigation expenses paid by the bank. 4. Deletion of addition on account of difference in the amount with reference to the TDS certificate and job work income claimed. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Advances Written Off: The first issue raised by the Revenue was the deletion of the addition made by the AO on account of trading advances written off amounting to ?2,08,47,623. The assessee, engaged in the business of processing and exporting marine products, claimed bad debts representing advances written off. These advances, given to various fishers for procurement of raw materials, were not recoverable due to business losses from a cyclone and earthquake. The AO disallowed the claim, doubting the genuineness of the transactions due to lack of complete addresses and supporting evidence. However, the CIT(A) deleted the addition, relying on precedent cases where similar claims were allowed as business losses under sections 28 and 37 of the Act. The Tribunal upheld the CIT(A)’s decision, considering the circumstantial evidence, nature of the business, and historical financial records. 2. Deletion of Addition on Account of Delay in Payments Made to Employer and Employee's Contribution to Provident Fund: The second issue pertained to the disallowance of ?7,68,148 due to delayed payments of employer and employee contributions to the provident fund. The AO disallowed the deduction as the payments were made after the due date prescribed under the relevant Act. The CIT(A) deleted the addition. The Tribunal partially upheld the CIT(A)'s decision, allowing the employer's contribution paid before the filing of the income tax return but disallowing the employee’s contribution paid after the grace period, in line with the Gujarat High Court's judgment in CIT Vs. GSRTC. 3. Deletion of Addition on Account of Investigation Expenses Paid by the Bank: The third issue involved the disallowance of ?7,23,110 paid for investigation expenses without TDS deduction. The AO disallowed the expense due to non-deduction of TDS. The CIT(A) deleted the addition, treating the payment as interest under section 2(28A) of the Act. The Tribunal, however, held that the primary liability for payment was on the assessee, and thus, TDS under section 194J was applicable. The Tribunal set aside the issue to the AO to verify if the recipient included the receipt in its books and offered it to tax, allowing the expense if confirmed. 4. Deletion of Addition on Account of Difference in the Amount with Reference to the TDS Certificate and Job Work Income Claimed: The fourth issue related to the difference of ?67,10,325 between the income declared in the return and shown in form 16A. The AO added the difference, doubting the assessee's explanation of double TDS deduction by the party on advances and actual bills. The CIT(A) deleted the addition based on reconciliation and contra confirmation from the party. The Tribunal upheld the CIT(A)’s decision, noting that the AO failed to find any defect in the reconciliation provided by the assessee. Separate Judgments: The Tribunal delivered a combined judgment for the cross appeals, addressing each issue comprehensively and upholding the CIT(A)’s decisions based on detailed analysis and circumstantial evidence. The Tribunal’s decisions were influenced by historical financial records, the nature of the business, and legal precedents, ensuring a fair and just resolution of the appeals.
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