2022 (11) TMI 177 - AT - Income Tax

Addition being loan taken against the Birla Sun Life Policy - whether CIT A failed to appreciate that loan taken against the Birla Sun Life Policy is an opening balance which was carried forward from the previous year ? - HELD THAT - For the purpose of verification whether loan has been taken from the relevant assessment year or it has been carried forward from the previous year and it includes interest also as submitted by the AR( Authorised Representative) , this issue is sent back to the file of the AO for the purpose of verification and also as per the arguments of the asseseee. If it is found that difference amount includes interest and carried forward from the previous year the AO shall delete the addition. The assessee shall produce necessary documents for substantiating his case. These grounds are allowed for statistical purposes. Disallowing made of 50% of Salaries Wages - HELD THAT - Considering the submissions and findings of the lower authorities and acceptance made by the ld. AR, we restrict the addition made under this head ( salaries and wages) the disallowance is restricted to the 20% from the total disallowance. Disallowance of insurance expenses - AO disallowed 50% of insurance expenses - AR submitted that in the remand proceedings the AO noticed that it was paid through banking channel, therefore, the disallowance should not be made by the AO - HELD THAT - Considering the rival submissions and perusing the material on record, in the remand proceedings, the AO fairly accepted that the insurance expenses were paid through banking channels, therefore, the payment should not be doubted . Both the authorities below have accepted that the payments have been for the payment of Insurance expenses , therefore, this issue is allowed. Disallowance of Workman and staff - welfare - HELD THAT - We observe that in the remand proceedings, the AO accepted that these are the payments which has been deducted by the contractree from the running bills, therefore, the AO should not have been disallowed the payments expenses. The assessee has not incurred nay expenditures directliy. These deduction are mandatory deductions as per the terms and conditions of the contract, therefore this ground of appeal is allowed. Disallowance under the head of other expenses - HELD THAT - Considering the rival submissions, and findings of the CIT (A) as per his observations the appellant s letter the complete details were submitted by way of annexure but the same facts were not brought in the remand proceedings. The AO after verifying accepted of Rs. 14,85,63,996/-. Considering the prayer of the assessee we think it fit to send back to the AO for denovo examinations. This ground of appeal is allowed for statistical purposes. Addition of Unsecured loan - HELD THAT - As observed that the details of loan viz. opening balance, additions/payments made during the year, mode of loan taken/refunded, confirmations from the parties and closing balance at the year end has not been provided by the ld. AR. for verifications. In fact the opening balance can of loan cannot be added which was not the subject matter of the scrutiny proceedings. Considering the above noted facts, we deem it fit to sending back to the file of AO for de-novo consideration. If AO finds that there is opening balance of loan as on 01.04.2015, the AO will decide the issue as per the above cited judgement Jagatkuamr Satishbhai Patel 2012 (12) TMI 1017 - GUJARAT HIGH COURT And in respect of others he will decide the issue in accordance with law. This ground is allowed for statistical purposes. Benefit of indexation for cost of improvement - Allegation of not granting principal of natural justice for giving opportunity to the assessee as per section 251 of the I.T.Act. by the CIT(A) - HELD THAT - The expenditure for cost of improvements were incurred from the drawings made by the assessee in the respective years. Hence the assessee is eligible for indexation benefit for the cost of improvement expenses increased towards capital assets. Considering the rival submissions, we deem it fit to send back the issue to the file of AO for denovo consideration as per law. Further, we observe that the CIT(A) has not violated the principal of natural justice u/s 251 of the Act. The opportunity was provided and remand report was obtained and the assessee has also submitted rejoinder on 27.3.2019 in which he has himself requested to the CIT(A) , not to invoke sec. 251 of the Act. Therefore, this contention is not accepted.

Summary

Issues Involved:
1. Opportunity of hearing and principles of natural justice.
2. Addition of loan against Birla Sun Life Policy.
3. Disallowance of 50% of salaries and wages.
4. Disallowance of 50% of insurance expenses.
5. Disallowance of 50% of staff welfare expenses.
6. Disallowance of other expenses.
7. Addition of unsecured loans.
8. Enhancement of long-term capital gains without cost of improvement benefit.
9. Enhancement of income without fulfilling mandatory conditions.
10. Charging of interest under sections 234A, 234B, and 234C.

Detailed Analysis:

Opportunity of Hearing and Principles of Natural Justice:
The appellant argued that the CIT(A) erred in passing the appellate order without affording a reasonable opportunity of hearing, violating the principles of natural justice. However, the tribunal found that the CIT(A) had provided an opportunity and obtained a remand report, and the appellant also submitted a rejoinder. Thus, this contention was not accepted.

Addition of Loan Against Birla Sun Life Policy:
The CIT(A) confirmed the addition of Rs. 4,80,069/- made by the AO, which was claimed to be an opening balance from the previous year. The tribunal remanded this issue back to the AO for verification to determine if the loan was carried forward from the previous year and included interest. If verified, the AO is directed to delete the addition.

Disallowance of 50% of Salaries and Wages:
The CIT(A) confirmed the disallowance of 50% of salaries and wages amounting to Rs. 22,54,413/-. The tribunal, considering the submissions and findings, restricted the disallowance to 20%, providing relief of Rs. 13,52,648/- to the appellant.

Disallowance of 50% of Insurance Expenses:
The AO disallowed 50% of insurance expenses amounting to Rs. 63,156/-. The tribunal found that these expenses were paid through banking channels, and thus, the disallowance was not justified. The ground was allowed in favor of the appellant.

Disallowance of 50% of Staff Welfare Expenses:
The AO disallowed Rs. 45,75,693/- under staff welfare expenses. The tribunal observed that these were mandatory deductions made by the contractee from running bills as per the contract terms. Therefore, the disallowance was not justified, and the ground was allowed.

Disallowance of Other Expenses:
The CIT(A) partially disallowed Rs. 10,34,24,550/- under other expenses, accepting Rs. 14,85,63,996/- out of Rs. 25,19,88,546/- claimed. The tribunal remanded this issue back to the AO for further verification, as the appellant undertook to produce all necessary bills and vouchers.

Addition of Unsecured Loans:
The CIT(A) confirmed the addition of Rs. 28,27,25,650/- as unsecured loans, out of which Rs. 27,71,25,428/- was an opening balance. The tribunal noted that the opening balance could not be added in the current year and remanded the issue back to the AO for de-novo consideration, directing the AO to follow the judgment of the Hon'ble Gujarat High Court in a similar case.

Enhancement of Long-Term Capital Gains Without Cost of Improvement Benefit:
The CIT(A) enhanced the long-term capital gains by not giving the benefit of cost of improvement amounting to Rs. 1,40,33,852/-. The tribunal remanded this issue back to the AO for de-novo consideration, allowing the appellant to substantiate the claim for cost of improvement and indexation benefit.

Enhancement of Income Without Fulfilling Mandatory Conditions:
The appellant contended that the CIT(A) enhanced the income without fulfilling the mandatory conditions under section 251 of the Act. The tribunal found that the CIT(A) had provided the necessary opportunity and obtained a remand report, thus dismissing this ground.

Charging of Interest Under Sections 234A, 234B, and 234C:
The appellant denied liability for interest under sections 234A, 234B, and 234C. This ground was noted as consequential in nature, depending on the final determination of income.

Conclusion:
The tribunal provided relief on several grounds, remanding issues back to the AO for verification and de-novo consideration, while upholding certain disallowances and confirming the procedural correctness of the CIT(A)'s actions. The appellant was directed to be given three effective opportunities to substantiate their case.