2022 (12) TMI 540 - AT - Income Tax

Disallowance towards operational and maintenance expenses - disallowance 20% of the site maintenance and repair charges on the ground that assessee could not substantiate with evidence to his satisfaction by producing relevant bills and vouchers and could not reconcile each item of bills vis a vis each claim of expenses under this head - CIT-A deleted the addition - HELD THAT - It is the settled position of law that for claiming any expenditure as allowable expenditure, the onus is always on the assessee to substantiate with evidence to the satisfaction of the AO by producing relevant bills and vouchers with supporting documents that the expenditures were actually incurred, which were relatable to the business of the assessee. It is also settled position of law that the AO, without pointing any specific instance of non production of bills / vouchers etc can not disallow the expenditure on ad-hoc basis especially when the assessee s accounts were duly audited and the auditors had not pointed out any specific discrepancy in the bills/ vouchers of the assessee. Considering all we deem it proper to restore the issue denovo to the file of AO with a direction to verify each and every bills and voucher and make only specific addition where he finds that the assessee failed to substantiate the expenditure by producing necessary evidence to his satisfaction. In our opinion, the AO can not make any ad-hoc disallowance without pointing out the specific instances i.e AO can disallow the expenditure on actual basis, in case assessee failed to produce the evidence in support of its case. Needless to say the AO shall decide the issue as per fact and law after following the principle of natural justice.Hence, the ground raised by revenue is allowed for statistical purposes. Unexplained work in progress - CIT-A deleted the addition - HELD THAT - Considering submissions of the assessee and also on account of fact that the ld.CIT(A) had passed a non-speaking, cryptic and perfunctory order without dealing with the objection of the Assessing Officer, had allowed the ground of the assessee, therefore, in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one more opportunity to the assessee to substantiate its case by leading evidence to his satisfaction. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. Though, in the written submission, the ld.AR had referred to certain decisions, those decisions are not applicable to the facts of the present case and moreover, none of these decisions were referred during the course of arguments before us. Disallowance towards provision for site restoration costs - AO in this case made the additions on the ground that assessee has not incurred any such expenditure till date and could not submit any bills and vouchers and assessee was conveniently creating a provision for future possible likely or unlikely liability and claiming the same as present year attributable expenditure - CIT-A deleted the addition - HELD THAT - In the present case, CIT(A) had decided the ground without calling for a remand report from the Assessing Officer. At this juncture, it was the submission of the learned AR that if given an opportunity, the assessee is in a position to substantiate with evidence to show that expenses were actually incurred in the year under consideration for site restoration. We deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one more opportunity to the assessee to substantiate its case by leading evidence to his satisfaction. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly.

Summary

Issues Involved:
1. Disallowance of Rs.12,40,36,185/- towards operational and maintenance expenses.
2. Deletion of addition of Rs. 4,54,98,600/- towards unexplained work-in-progress.
3. Deletion of addition of Rs.8,79,00,000/- towards provision for "site restoration costs".

Issue-wise
Detailed Analysis:

1. Disallowance of Rs.12,40,36,185/- towards Operational and Maintenance Expenses:
The Revenue contested the deletion of the disallowance of Rs.12,40,36,185/- towards operational and maintenance expenses. The Assessing Officer (AO) disallowed 20% of these expenses citing improper vouching and non-reconciliation of bills and vouchers. The AO's findings indicated that the assessee failed to submit all required details for verification. The learned CIT(A) deleted the addition, stating that the disallowance was not based on any seized material and that the AO did not provide specific adverse findings. The Tribunal found that the AO made an ad-hoc disallowance without pointing out specific instances of non-production of bills/vouchers. It held that the AO cannot make ad-hoc disallowances without specific evidence and restored the issue to the AO for a detailed verification of each bill and voucher.

2. Deletion of Addition of Rs. 4,54,98,600/- towards Unexplained Work-in-Progress:
The AO disallowed Rs. 4,54,98,600/- towards unexplained work-in-progress, stating that the assessee failed to provide supporting proofs for the capital work-in-progress. The learned CIT(A) deleted the addition, stating that the AO's disallowance was not justified as there was no debit to the Profit & Loss account and no adverse finding regarding the source of funds. The Tribunal found the CIT(A)'s order to be non-speaking and cryptic. It noted that the assessee claimed to have provided sufficient information and documents and was willing to substantiate its case if given another opportunity. The Tribunal restored the issue to the AO for a fresh examination, directing the AO to allow the assessee to substantiate its claim with evidence.

3. Deletion of Addition of Rs.8,79,00,000/- towards Provision for "Site Restoration Costs":
The AO disallowed Rs.8,79,00,000/- towards provision for "site restoration costs," stating that it was a mere provision for a future liability that had not yet been incurred. The learned CIT(A) deleted the addition, citing the Supreme Court decisions in CIT Vs. Bharat Earth Movers Ltd and M/s. Calcutta Co Ltd vs. CIT, which support the recognition of provisions for ascertained liabilities. The Tribunal noted that the CIT(A) admitted additional evidence without calling for a remand report from the AO, which violated Rule 46A of the Income Tax Rules. The Tribunal restored the issue to the AO for a fresh examination, allowing the assessee to substantiate its claim with evidence and directing the AO to decide the issue as per law after giving due opportunity to the assessee.

Conclusion:
The Tribunal allowed the Revenue's appeals for statistical purposes and dismissed the assessee's cross objections as withdrawn. It directed the AO to re-examine the issues of operational and maintenance expenses, unexplained work-in-progress, and provision for site restoration costs, providing the assessee with an opportunity to substantiate its claims with evidence.