2022 (12) TMI 529 - AT - Income Tax

Disallowances u/s 43B - VAT and Entry Tax - addition on the ground that in the revised return the assessee has added back the same - HELD THAT - As the observation made by the CIT(A) that the Assessing Officer ignored the details of revised return and in fact the revised return includes the disallowed amount of entry tax and VAT. AO totally ignored the fact that when the said amount was already disallowed there cannot be disallowance of the same because the revised return had replaced the original return prior to assessment and even prior to issue of notice under Section 143(2) of the Act. Thus, there is no need to interfere with the finding of the CIT(A). Ground No. 2 is dismissed. Disallowance being short term provisions appearing in the balance sheet on the basis of fresh evidence - HELD THAT - CIT(A) had observed that if the Assessing Officer had looked at the further details of the balance sheet it would have revealed that the said provision amount comprises of unpaid interest, provision for expenses and warranty which was also reflected in books of accounts available before the Assessing Officer. Therefore, there is no need to interfere with the findings of the CIT(A). Ground No. 3 is dismissed Disallowances of spare part expenditure - Expenditure claimed for the first time - HELD THAT - CIT(A) has given a categorical finding that the assessee is an authorized dealer of Ford Vehicles having gross revenue of nearly Rs. 100 crores. Discount on vehicles and purchases were duly entered in the books of account by the Assessee. We agree with the finding of the CIT(A) that merely on the ground that first time discount expenses on spare part cannot be a valid reason for disallowing the same. Ground No. 4 is dismissed. Disallowances out of interest as the assessee had paid huge interest whereas it had not charged any interest on advances made by it - CIT(A) has erred in holding that the AO has made notional addition of interest income, whereas, the language Of the assessment order is that, there is disallowance out of interest expenditure - HELD THAT - As addition was on notional income and the Assessing Officer could not point out that the assesses was entitled to receive such interest. There is no need to interfere with the finding of the CIT(A). Ground No. 5 is dismissed. Disallowances u/s. 40(a) - qualification made by the auditor in the audit report, on the ground that TDS has been deducted - no evidence in this regard was given to the AO and no proof of the same is filed during the appellate stage even the appellate is not taking the plea that it had deducted and paid TDS (as can be seen from the submission of the assesse reproduced in the appellate order - HELD THAT - As the assessee submitted before the CIT(A) that due TDS has been deducted and paid subsequently on such amounts. In fact, the assessee has given the copy of ledger account as well during the assessment proceedings. Therefore, the CIT(A) has rightly deleted this addition. Ground Nos. 6 and 7 are dismissed.

Issues:
1. Admissibility of new evidence without remand report
2. Disallowances under Section 43B related to VAT and Entry Tax
3. Disallowance of short-term provisions
4. Disallowance of spare part expenditure
5. Disallowance of interest on advances
6. Disallowance under Section 40(a)
7. Disallowance under Section 14A

Analysis:

1. The appeal raised concerns about the admissibility of new evidence without a remand report. The tribunal noted that the assessee had provided details during the assessment proceedings, which were already on record. As no additional evidence was submitted before the CIT(A), the tribunal dismissed this ground.

2. Regarding disallowances under Section 43B for VAT and Entry Tax, the tribunal upheld the CIT(A)'s decision. The revised return included the disallowed amounts, replacing the original return before assessment. As the disallowed amounts were already addressed in the revised return, the tribunal found no basis for further disallowance.

3. The disallowance of short-term provisions was challenged, but the tribunal agreed with the CIT(A) that the provision amount comprised unpaid interest, expenses, and warranty, which were reflected in the books of accounts available to the Assessing Officer. Therefore, the tribunal dismissed this ground of appeal.

4. The tribunal rejected the appeal against the disallowance of spare part expenditure. It was found that the discount expenses on spare parts, claimed for the first time, were duly entered in the books of account by the assessee. The tribunal concurred with the CIT(A)'s finding that this was not a valid reason for disallowance.

5. Disallowance of interest on advances was also contested, but the tribunal upheld the CIT(A)'s decision. The Assessing Officer made an addition based on notional income, without demonstrating the entitlement of the assessee to receive such interest. Therefore, the tribunal dismissed this ground of appeal.

6. The disallowance under Section 40(a) was challenged, but the tribunal found that the assessee had submitted evidence of TDS deduction and payment subsequent to the assessment proceedings. As the CIT(A) rightly deleted this addition, the tribunal dismissed this ground as well.

7. Finally, the disallowance under Section 14A was not elaborated upon in the judgment. The tribunal ultimately dismissed the appeal of the Revenue, upholding the decisions made by the CIT(A) on various grounds.

This detailed analysis of the judgment provides insights into each issue raised in the appeal and the tribunal's reasoning behind dismissing or upholding the challenges presented.

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