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2022 (6) TMI 944 - AT - Income TaxAddition made in respect of bonus to employees unpaid - Before the ld. CIT(A) the assessee had submitted that the deduction in respect of payment of bonus should have been allowed as it was paid before the filing of the return - HELD THAT - We find that there is no documentary evidence available on record in respect of the claim of payment made by the assessee of Rs.5,20,300/- on 27.09.2015 even though it has been claimed to have been so paid. In the given set of facts, we find it proper to remit this matter to the file of Ld. AO for the limited purpose of verification of fact averted by the assessee. We direct the Ld. AO to consider the claim of the assessee if the verification reveals that the amount has been paid by the assessee before filing of return for which no addition is called for. However, if the verification reveals otherwise, the addition shall remain sustained. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes. Disallowance in respect of expenditure incurred by the assessee for purchase of store items like knives, wrenches etc. which costs less than Rs. 5000/- per piece - HELD THAT - The expenditure should be laid out or expended wholly or exclusively for the purpose of the business. The expression wholly emphasizes the quantification of the expenditure, whereas expression exclusively provides that such expenditure should be only for the purpose of the business. The objection raised by the ld. Assessing Officer is that how these expenditures are related to the business of the assessee. To our mind, ld. Assessing Officer failed to appreciate the nature of the business of the assessee which is cultivation and manufacturing of tea. Also, the ld. CIT(A) has given stereotyped findings by stating the observation of the ld. AO for sustaining the addition, without dealing with the matter on merit. These expenses incurred by the assessee towards general expenses for garden are not covered as described in section 30 to 36, these are not capital in nature or personal expenses of the assessee, it being a widely held company. Ld. Sr. DR placed reliance on orders of authorities below. There is nothing brought on record to suggest that these are not wholly and exclusively for the purpose of the business of the assessee. We, therefore, direct to delete the disallowance made in this respect. Accordingly, this ground of appeal of assessee is allowed. Ad-hoc disallowance from the miscellaneous/general expenses claimed by the assessee by applying an estimate rate of 20% - HELD THAT - These expenditures are general expenses incurred in respect of garden both at the work site and the Kolkata office of the assessee. Ld. Counsel further pointed out that visits to the tea garden of the assessee included officers of various inspection agencies and customers of the assessee. Accordingly, there is no justification for an ad hoc and estimated disallowance by adopting a rate of 20% of the expenses so claimed. These are also covered by the provisions of section 37(1) of the Act. Ld. Sr. DR placed reliance on orders of authorities below. We note that the assessee is in the business of cultivation and manufacturing of tea and these expenses are in relation to business activities of the assessee. The conditions stipulated in section 37(1) of the Act as noted in our finding given for ground no. 2 above, are also applicable in respect of this ground and in the given set of facts, we do not find any reason to sustain the addition. We, thus, direct to delete the addition - This ground of appeal of assessee is allowed. Addition on the basis of entries reflected in Form 26AS - Interest receipts as different shown in P L Account - HELD THAT - We find that the explanation given by the Ld. Counsel of the assessee relating to the ledger account of Elder Pharmaceuticals Ltd. for FY 2012-13 and thereafter needs to be verified by the ld. AO to ascertain the correct fact as to accounting treatment given in respect of interest income. We thus, set aside this issue before the Ld. AO for a limited purpose to make proper examination and verification of the claim of the assessee and decide it in accordance with law. Needless to say that the assessee be given reasonable opportunity of being heard and make any further submission in this respect. Accordingly, this ground of appeal by the assessee is allowed for statistical purpose. Addition u/s. 14A - AO noted that assessee has earned dividend Income - HELD THAT - CIT-A directed the AO to recalculate the disallowance by taking investments which yielded dividend income. Ld. CIT(A) further directed the AO to verify and recompute the disallowance u/s. 14A read with Rule 8D and hence, allowed this ground of appeal before him for statistical purpose. Before us, by referring to the provisions of section 250 of the Act, Ld. Counsel submitted that Ld. CIT(A) ought to have deleted the addition made by the AO as there is no power available to the Ld. CIT(A) to remand the matter to the file of AO. We find that the claim of the assessee that its own funds are far in excess of the investments made and thus we direct the Ld. AO to verify the claim of the assessee and recompute the disallowance u/s. 14A read with Rule 8D in terms of the judicial precedents relied upon by the assessee supra. Accordingly, this ground of appeal of assessee is allowed for statistical purpose. Disallowance towards expenditure in cash in excess of Rs.20,000/- as prescribed u/s. 40A(3) - HELD THAT - As considering the facts on record and explanation furnished by the ld. Counsel which requires verification of the records, we find it proper to set aside this issue to the file of ld. AO for limited purpose of verification and examination of documents furnished by the assessee and decide the matter in terms of law. Accordingly, this ground of appeal is allowed for statistical purpose.
Issues Involved:
1. Addition on account of unpaid bonus. 2. Disallowance of expenditure for purchase of store items. 3. Ad-hoc disallowance of miscellaneous/general expenses. 4. Addition based on entries in Form 26AS. 5. Disallowance under Section 14A of the Income-tax Act. 6. Disallowance of expenditure incurred in cash exceeding Rs. 20,000. Detailed Analysis: 1. Addition on account of unpaid bonus: The first issue pertains to the addition of Rs. 5,20,300/- made by the Assessing Officer (AO) for unpaid bonus. The AO noted a discrepancy between the total bonus liability reported in Form 3CD and the amount added back in the computation of total income. The assessee argued that the unpaid bonus was paid before filing the return of income. However, no documentary evidence was provided to support this claim. The Tribunal remitted the matter back to the AO for verification of the payment before filing the return. If verified, the addition should be deleted; otherwise, it will remain sustained. This ground was allowed for statistical purposes. 2. Disallowance of expenditure for purchase of store items: The second issue involves the disallowance of Rs. 1,01,473/- for the purchase of store items like knives and wrenches, each costing less than Rs. 5000/-. The assessee argued that these were general expenses related to its business activities and should be allowed under Section 37(1) of the Act. The Tribunal found that these expenses were indeed related to the business and were neither capital nor personal in nature. The disallowance was directed to be deleted, and this ground of appeal was allowed. 3. Ad-hoc disallowance of miscellaneous/general expenses: The third issue concerns an ad-hoc disallowance of Rs. 67,191/- from miscellaneous/general expenses by applying an estimated rate of 20%. The assessee argued that these were general expenses related to its business activities, and the books of account were audited without any adverse remarks. The Tribunal noted that these expenses were related to the business and were covered under Section 37(1). The disallowance was directed to be deleted, and this ground of appeal was allowed. 4. Addition based on entries in Form 26AS: The fourth issue relates to the addition of Rs. 3,73,695/- based on entries in Form 26AS. The AO added the difference between the interest income reported in Form 26AS and the audited P&L account. The assessee argued that the entries in Form 26AS cannot be the sole basis for such an addition and provided ledger accounts and TDS certificates for verification. The Tribunal remitted the matter back to the AO for verification of the accounting treatment and directed the AO to decide the matter in accordance with the law. This ground was allowed for statistical purposes. 5. Disallowance under Section 14A of the Income-tax Act: The fifth issue involves the disallowance of Rs. 3,87,497/- under Section 14A read with Rule 8D. The AO noted that the assessee had earned dividend income but had not disallowed any sum relating to this exempt income. The CIT(A) directed the AO to recalculate the disallowance based on investments yielding dividend income. The Tribunal directed the AO to verify the claim that the assessee's own funds were far in excess of the investments and to recompute the disallowance in accordance with judicial precedents. This ground was allowed for statistical purposes. 6. Disallowance of expenditure incurred in cash exceeding Rs. 20,000: The sixth issue pertains to the disallowance of Rs. 79,945/- for payments made in cash exceeding Rs. 20,000/-, which is against Section 40A(3) of the Act. The assessee argued that these payments were made for legitimate business expenses, and provided explanations and documents for verification. The Tribunal found it proper to remit the matter back to the AO for verification of the documents and to decide the matter in accordance with the law. This ground was allowed for statistical purposes. Conclusion: The appeal was partly allowed, with several issues remitted back to the AO for verification and reconsideration. The Tribunal emphasized the need for proper verification and adherence to legal provisions in each case.
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