2022 (5) TMI 32 - AT - Income Tax

Disallowance on account of outstanding TDS payable - only reason of the impugned disallowance is that the assessee had not paid it before the end of the financial year - HELD THAT - We find that identical issue arose for consideration before the Tribunal in the case of M/s. Gagrat Co 2020 (2) TMI 457 - ITAT DELHI when the assessee has duly deposited the TDS before filing the return of income for the year under assessment, the same is allowable u/s. 43B of the Act. No doubt, the assessee is following the cash method of accounting and has made cash payment to various parties after deducting TDS, the portion of which has been allowed by the AO as deductible expenditures, U/s 198 of the Act tax deducted at source by the assessee as per Income Tax Act is deemed to be income received by the recipient of the said income and as such TDS deducted by the assessee is deemed to have been received by the recipient of the income and as such it cannot be held that the assessee has not paid the amount of tax deductible at source on or before the due date. So it cannot be held that the aforesaid amount of TDS has not been paid by the assessee while following the cash system of accounting - thus we delete the impugned disallowance and direct the Ld. AO to modify the assessment order accordingly. Disallowance out of expenses - AO made adhoc disallowance of 10% for personal use and for unverifiable bills/vouchers - HELD THAT - We are of the view that adhoc disallowance out of expenses claimed by the assessee without bringing on record any adverse material deserves to be deleted being purely on conjecture and surmises alone - As relying on Thakur Vaidyanath Aiyar Co. 2021 (8) TMI 817 - ITAT DELHI we delete the impugned disallowance and direct the Ld. AO to modify the assessment order accordingly. Assessee appeal allowed.

Summary

Issues:
1. Disallowance of outstanding TDS payable
2. Disallowance of expenses on car maintenance, depreciation, conveyance, telephone, tour and travel for personal use
3. Disallowance of miscellaneous expenses on repair and maintenance, printing & stationery, office expenses, entertainment, diwali expenses, staff expenses due to unverifiable bills/vouchers

Issue 1: Disallowance of outstanding TDS payable:
The assessee claimed TDS payable as an expense, but the AO disallowed it as it was unpaid by the year-end. The CIT(A) upheld the disallowance, but the Tribunal referred to relevant provisions and past judgments. The Tribunal noted that TDS was paid before the due date, making it allowable under Section 43B. Citing precedents, the Tribunal ruled in favor of the assessee, deleting the disallowance.

Issue 2: Disallowance of expenses on car maintenance, depreciation, conveyance, telephone, tour and travel for personal use:
The AO made an ad hoc disallowance of 10% for personal use without specific evidence. The CIT(A) upheld this decision. However, the Tribunal, referring to a similar case, found the disallowance unjustified. The Tribunal emphasized that disallowances without concrete evidence should be deleted. Following the precedent, the Tribunal ruled in favor of the assessee, directing the AO to modify the assessment order accordingly.

Issue 3: Disallowance of miscellaneous expenses on repair and maintenance, printing & stationery, office expenses, entertainment, diwali expenses, staff expenses due to unverifiable bills/vouchers:
Similar to the second issue, the AO made ad hoc disallowances without substantial proof. The CIT(A) supported this decision. However, the Tribunal, in line with the previous case, deemed such disallowances improper. The Tribunal emphasized the importance of concrete evidence before disallowing expenses. Consequently, the Tribunal ruled in favor of the assessee, directing the AO to adjust the assessment order.

In conclusion, the Tribunal allowed the appeal of the assessee, highlighting the importance of concrete evidence before disallowing expenses and emphasizing adherence to relevant provisions and past judgments.