2019 (5) TMI 17 - AT - Income Tax

Disallowance of reimbursement of expenses u/s. 40(a)(i) - cryptic order of CIT- A HELD THAT - order of CIT (A), it is seen that the order is very cryptic. On page no. 22 of the paper book for Assessment Year 2012-13, the invoice is available in respect of Hong Kong Dollars 31,123 equivalent to ₹ 2,08,350/-. Similarly on page no. 29 of the paper book is the copy of another invoice for Great Britain Pound (GBP) 1,360.95 equivalent to ₹ 1,14,180/-, total amount of these two invoices in Rupees terms comes to ₹ 3,22,530/-. We fail to understand what is the objection of CIT (A) and what is the basis of his decision Additions made to the income returned solely relying on the information contained in Form No.26AS - Held that - Assessee has filed reconciliation statement with Form 26AS along with the explanations for differences and the same is available in paper book for Assessment Year 2012-13. As per the certificate given by the assessee in the paper book, all the documents contained in the paper book were before AO and CIT(A) both. Hence this reconciliation statement was available before CIT(A) also. The CIT(A) has not pointed out any specific mistake in the reconciliation statement and he has simply stated that the assessee should have reconciled year-wise and ascertained the correct reason as to why such difference was there. In our considered opinion, ld. CIT(A) should have passed a speaking and reasoned order. Disallowance u/s. 40(a)(ia) out of Car Hire charges - HELD THAT - Disallowance u/s. 40(a) (ia) out of Car Hire charges was decided by CIT (A) in a cryptic manner. In view of the above factual position, we are of the considered opinion that the entire issue in all the three years should go back to the file of CIT(A) for fresh decision by way of a speaking and reasoned order after providing adequate opportunity of being heard to both sides. Hence we set aside the order of CIT (A) in all the three years and restore the matter back to his file for fresh decision by way of a speaking and reasoned order - Appeals filed by the assessee are allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance of Reimbursement of Expenses U/s 40(a)(i).
2. Additions based on Form No. 26AS.
3. Disallowance of Car Hire Charges U/s 40(a)(ia).

Detailed Analysis:

1. Disallowance of Reimbursement of Expenses U/s 40(a)(i):

The assessee contended that the reimbursement of expenses amounting to ?3,22,529/- to its Associated Enterprises (AE) should not be subject to tax deduction at source under section 195 of the Act. The CIT(A) upheld the disallowance, stating that the appellant failed to establish that the expenses were reimbursable by the AE and hence the provisions of Sec. 40(a)(i) were correctly invoked. The Tribunal found the CIT(A)'s order to be very cryptic and noted that the invoices for the expenses were available in the paper book but the CIT(A) did not provide a clear basis for his decision. Therefore, the Tribunal remanded the issue back to the CIT(A) for a fresh decision with a speaking and reasoned order.

2. Additions based on Form No. 26AS:

The assessee argued against the addition of ?84,33,029/- made solely based on the information in Form No. 26AS, claiming that the amounts as per their books and Form 26AS were duly explained. The CIT(A) dismissed the appeal, stating that the appellant could not reconcile the differences and merely relied on case laws without providing a plausible explanation. The Tribunal noted that the reconciliation statement was available in the paper book and should have been considered by the CIT(A). The Tribunal found the CIT(A)'s order to be cryptic and lacking a detailed examination of the reconciliation statement. Hence, this issue was also remanded back to the CIT(A) for a fresh decision with a speaking and reasoned order.

3. Disallowance of Car Hire Charges U/s 40(a)(ia):

For Assessment Year 2012-13, the assessee contended that the provisions of Section 194-I, not Section 194-C, applied to car hire charges and that tax was deducted accordingly. The CIT(A) upheld the disallowance, stating that the payments exceeded ?1,80,000/- and thus required tax deduction under Section 194C. The Tribunal found the CIT(A)'s decision to be cryptic and lacking detailed reasoning.

For Assessment Years 2013-14 and 2014-15, similar issues regarding the disallowance of car hire charges were raised. The CIT(A) upheld the disallowances in a similarly cryptic manner. The Tribunal noted the need for a detailed examination and remanded these issues back to the CIT(A) for fresh decisions with speaking and reasoned orders.

Conclusion:

The Tribunal found the orders of the CIT(A) for all three assessment years to be very cryptic and lacking detailed reasoning. Therefore, the Tribunal set aside the CIT(A)'s orders and remanded all issues back to the CIT(A) for fresh decisions by way of speaking and reasoned orders after providing adequate opportunities for both sides to be heard. The appeals were allowed for statistical purposes.