2021 (3) TMI 992 - AT - Income Tax

Disallowance towards sundry creditors made u/s 41(1) - HELD THAT - Since the assessee has filed various details as stated above in the form of paper book, we direct the Assessing Officer to re-examine the disallowance of sundry credits and decide the issue afresh in accordance with law after affording an opportunity of being heard to the assessee. Disallowance of repairs and maintenance expenditure - HELD THAT - As assessee has submitted that the assessee has obtained the bills and vouchers for the amount of ₹ 7,72,039/- and prayed for deleting the addition. Since the assessee has filed copy of vouchers and bills as stated above in the form of paper book, we direct the Assessing Officer to re-examine the disallowance of expenses under the head repairs and maintenance and decide the issue afresh in accordance with law after affording an opportunity of being heard to the assessee. Disallowance of business promotion expenses - HELD THAT - Admittedly, the assessee has not filed any vouchers for the claim of business promotion expenses. Since the ld. Counsel has prayed that the assessee has incurred the petty expenses towards business promotion, the assessee is directed to produce any piece of evidence of the activity carried out for promotion of its business before the Assessing Officer and after considering the submissions, if satisfied, the Assessing Officer shall decide the issue afresh.

Issues involved:
1. Disallowance of sundry creditors under section 41(1) of the Income Tax Act, 1961.
2. Disallowance of repairs and maintenance expenditure.
3. Disallowance of business promotion expenses.

Issue 1: Disallowance of Sundry Creditors under Section 41(1) of the Income Tax Act:
The appeal was against the order of the ld. Commissioner of Income Tax (Appeals) confirming the disallowance of ?23,44,666 towards sundry creditors under section 41(1) of the Act. The Assessing Officer disallowed ?60,88,570 as no confirmation from creditors was received during assessment. The confirmation letters sent later were not reconciled, leading to the confirmation of the disallowance by the ld. CIT(A). The assessee argued that some creditors sent confirmations directly to the Income Tax Officer and others were not confirmed due to time constraints. The Tribunal directed the Assessing Officer to re-examine the disallowance, considering the submissions and evidence provided by the assessee.

Issue 2: Disallowance of Repairs and Maintenance Expenditure:
Regarding the disallowance of ?9,45,279 for repairs and maintenance expenses, the assessee failed to provide bills/vouchers to substantiate the claim before both the Assessing Officer and the appellate authority. The ld. CIT(A) upheld the disallowance due to the lack of supporting documentation. However, the assessee later submitted copies of vouchers and bills totaling ?7,72,039. The Tribunal directed the Assessing Officer to re-evaluate the disallowance based on the newly provided evidence and afford the assessee an opportunity to present their case.

Issue 3: Disallowance of Business Promotion Expenses:
The disallowance of ?1,25,302 claimed as business promotion expenses was confirmed as the assessee did not provide vouchers to support the claim. The ld. Counsel argued that these were petty expenses, typical for the business's scale, and requested their allowance as business expenditure. The Tribunal directed the assessee to provide evidence of the promotional activities carried out to substantiate the claim. If satisfied, the Assessing Officer was instructed to reevaluate the issue based on the new evidence presented.

In conclusion, the Tribunal allowed the appeal filed by the assessee for statistical purposes, directing the Assessing Officer to re-examine the disallowances of sundry creditors and repairs and maintenance expenses, while requesting evidence for the business promotion expenses claim.

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