2022 (6) TMI 1014 - AT - Income Tax

Disallowing unpaid interest - bank interest charged and debited to Appellant's CC account u/s 43B - as argued the amount of interest debited to the CC account, which is a running account, represents interest recovered by the Bank and hence disallowance u/s 43B is not warranted - HELD THAT - We direct the AO to verify whether the interest on bank liabilities claimed by assessee for the period 01.10.2005 to 31.03.2006 has not been claimed by India Cement Capital Ltd., and it pertains to the period 01.10.2005 to 31.03.2006. Similarly, the AO also can verify the service tax collected by India Cements Capital Ltd., on the assets transferred during the earlier years. In case, the assessee has not claimed this amount as deduction, the same can be disallowed u/s.43B of the Act. This can be verified by the AO. Accordingly both the disallowances u/.43B in regard to this common issue is remanded back to the file of the AO for verification. The appeal of the assessee is allowed for statistical purposes. Disallowance of bad debts written off - assessee contended that entire details including the list of bad debts were given by the assessee during assessment proceedings in regard to these bad debts. He argued that when the receivables were transferred and reflected in the books of assessee, it could not have been written off and claimed by India Cements Capital Ltd - HELD THAT - As we noted that the CIT(A) s order is ex-parte and the claim of assessee needs verification at the level of AO. Hence, the matter is remanded back to the file of the AO.

Summary

Issues:
1. Disallowance of bank interest and service tax liability u/s.43B of the Income Tax Act, 1961.
2. Ex-parte decision by CIT(A) regarding bad debts written off.

Analysis:

Issue 1: Disallowance of bank interest and service tax liability u/s.43B:

The appeals by the assessee arose from orders of the Commissioner of Income Tax (Appeals)-11, Chennai for assessment years 2006-07 and 2007-08. The only issue in this appeal was the disallowance of bank interest and addition made on account of liability to service tax u/s.43B of the Act. The CIT(A) confirmed the disallowance of bank interest and service tax liability, stating that the interest claimed by the assessee was not paid to the bank by the due dates, attracting disallowance u/s.43B. The CIT(A) upheld the disallowance, noting that the amount was liable for taxation as benefit accrued during business operations. The Tribunal directed the Assessing Officer (AO) to verify the facts related to the interest on bank liabilities and service tax collected by India Cements Capital Ltd., remanding the matter for further verification.

Issue 2: Ex-parte decision on bad debts written off:

In another appeal, the assessee challenged the ex-parte decision by the CIT(A) regarding the disallowance of bad debts written off. The CIT(A) confirmed the disallowance without providing an opportunity to the assessee to explain or prove the bad debts written off. The assessee contended that the bad debts were written off after the receivables were transferred and reflected in their books, disputing that the same debts were claimed by India Cements Capital Ltd. The Tribunal observed that the CIT(A)'s order was ex-parte and remanded the matter back to the AO for verification of the facts presented by the assessee.

In conclusion, both appeals filed by the assessee were allowed for statistical purposes, emphasizing the need for proper verification and examination of the disputed issues by the AO. The Tribunal's decision highlighted the importance of due process and thorough examination of facts in tax disputes, ensuring fair treatment and accurate assessment of liabilities.