2021 (8) TMI 460 - AT - Income Tax

Disallowance of 20% of the Misc. other expenses - HELD THAT - A perusal of the assessment order itself reveals that the assessee had furnished the requisite documents/evidences relating to the incurring of the expenditure. But the Ld. AO without examining those documents and without pointing out any error in those documents has simply made the ad hoc 20% disallowance, which is not justifiable in the eyes of law. The aforesaid disallowance made by the AO is, therefore, set aside/deleted. This ground is allowed in favour of the assessee. Difference between the income reported by the assessee as compared to TDS information in Form 26AS - HELD THAT - As assessee invited our attention to the relevant part of the assessment order and the relevant documents filed and submitted that the income declared by the assessee is much more than that is decipherable from Form 26AS. Assessee has submitted that the assessee has taken into account all the income as depicted in Form 26AS. The Learned Counsel has submitted that the assessee may be given opportunity to reconcile the figures of income as compared to the information in Form 26AS. DR has not objected to the same. This issue is, accordingly, restored to the file of the Ld. AO with a direction to verify the contention of the assessee from the accounts of the assessee and decide the issue afresh as per law.

Summary

Issues:
1. Proper application of mind and opportunity of hearing by CIT(A)
2. Disallowance of business expenses by AO and confirmation by CIT(A)
3. Addition to income based on wrong decision
4. Addition to income based on 26AS report
5. Double taxation on rental income
6. Condonation of delay in filing appeal

Issue 1: Proper application of mind and opportunity of hearing by CIT(A)
The appellant challenged the CIT(A)'s order, alleging a lack of proper application of mind and failure to provide a fair hearing. The appellant argued that the CIT(A) wrongly accepted an additional ground of appeal based on a Supreme Court judgment but ultimately dismissed it, necessitating a fresh hearing for natural justice. The appellant contended that the AO acted vindictively in disallowing business expenses without rejecting the accounting method followed in previous years. The CIT(A) confirmed the disallowance, leading to a dispute over the jurisdiction of the CIT(A) in such matters.

Issue 2: Disallowance of business expenses by AO and confirmation by CIT(A)
The AO disallowed 20% of miscellaneous and other expenses, citing lack of substantiating documents despite the appellant providing details and evidence. The CIT(A upheld the AO's decision, prompting the appellant to challenge the ad hoc disallowance. Upon review, it was found that the AO made the disallowance without examining the documents or pointing out errors, leading to the disallowance being set aside in favor of the appellant.

Issue 3: Addition to income based on wrong decision
The appellant contested the addition of a specific amount to income, arguing that the decision was wrong, perverse, and made without proper hearing. The appellant sought to have the order quashed or canceled due to being based on surmise, suspicion, and conjecture. The matter raised concerns regarding the correctness and justification of the income addition.

Issue 4: Addition to income based on 26AS report
A discrepancy between the income reported by the appellant and the information in Form 26AS led to an addition to income. The appellant maintained that all income from Form 26AS was accounted for, requesting an opportunity to reconcile the figures. The issue was remanded to the AO for verification and a fresh decision in accordance with the law.

Issue 5: Double taxation on rental income
The inclusion of rental income led to concerns about potential double taxation, which the appellant argued was impermissible under tax laws. The issue highlighted the need to avoid taxing the same income twice, raising questions about the proper treatment of rental income in the assessment.

Issue 6: Condonation of delay in filing appeal
The appeal was initially time-barred but a separate application for condonation of the delay was filed and granted due to the shortness of the delay period and reasons provided. The decision to condone the delay allowed the appeal to be considered despite the initial time limitation.

This judgment from the ITAT Kolkata addressed various issues raised by the appellant regarding the assessment and decisions of the authorities, ultimately resulting in partial relief for the appellant and directions for further review and consideration on certain matters.