2023 (2) TMI 858 - AT - Income Tax

Addition u/s 43B - TDS deposited not within the due date of Filing of Income Tax Return - Addition to the Returned Income being the TDS payable as on 31.3.2016 - whether TDS outstanding on the last day of the previous year and deposited in current financial year be allowed as deduction? - HELD THAT - DR could not dispute the fact and cite any other relevant proposition of law to distinguish the findings in favour of the assessee in its own case. It can be appreciated form the record that Assessee has placed a statement of all the TDS paid with copies of their challan showing that assessee has paid the TDS amount before the due date i.e. before the date on which return of Income u/s 139(1) of the Act has to be filed. The grounds are determined in favor of assessee. AO shall delete the addition. Addition on account TDS Income mismatch - As argued there is no mismatch of TDS and corresponding Income as the assessee is following cash system of accounting and the income has been credited to income account when received in subsequent financial year and appropriate reconciliation filed - HELD THAT - Assessee has claimed that it is maintaining cash system of accounting and claims that income has been credited to accounts when received in subsequent financial year. On behalf of the assessee at page no. 2 of the paper book statement of difference and reconciliation of TDS as per 26 AS vs. ITR for A.Y. 2016-17 has been filed. Assesee has also filed details of receipt in subsequent year along with copies of bills raised and the receipt in Bank Account. The same require verification. So the issue is restored to the files of AO who after giving opportunity to the assessee make a verification of statement of difference and reconciliation of income corresponding to Tax credit statement as per 26 AS vs. ITR for A.Y. 2016-17 and accordingly the grounds are allowed for statistical purposes. Allowability of travelling expenses - adhoc disallowance of the travelling expenses for want of evidence to establish that the expenses were wholly and exclusively for the business - CIT(A) has also sustained the disallowance to the extent of 10% on assumption that the expenses could have been for purposes other than the business - HELD THAT - The Bench is of view that such adhoc allowances without any inquiry and evidence is not sustainable. Such disallowances earlier made in assessee s case for the year 2014-15 and 2013-14 were deleted as there was no case of revenue that the expenses were disproportionate to the income earned or professional activities carried by the assessee. Accordingly, this ground is sustained. AO shall delete the impugned disallowance.

Summary

Issues Involved:
1. Disallowance of TDS payable as an expense.
2. Disallowance of TDS and income mismatch.
3. Adhoc disallowance of travelling expenses.

Issue 1: Disallowance of TDS payable as an expense:
The appeal was against an order disallowing Rs. 87,800 as TDS payable. The Assessing Officer (AO) disallowed this amount due to the cash system of accounting followed by the assessee. The CIT(A) upheld this disallowance citing provisions of section 43B of the Income Tax Act, stating that TDS payable but not paid in the current financial year is not an allowable expense. The appellant argued that TDS was paid before the due date, citing previous favorable judgments. The Tribunal found in favor of the assessee, directing the AO to delete the disallowed amount.

Issue 2: Disallowance of TDS and income mismatch:
The AO disallowed Rs. 10,18,500 as income against undisclosed TDS of Rs. 1,01,850. The CIT(A) observed that the appellant failed to provide sufficient details. The appellant claimed to follow a cash system of accounting and submitted reconciliation statements. The Tribunal directed the AO to verify the details provided by the assessee, allowing the grounds for statistical purposes pending verification.

Issue 3: Adhoc disallowance of travelling expenses:
An adhoc disallowance of travelling expenses was made by the AO and sustained by the CIT(A) at 10%. The Tribunal found such disallowances without proper inquiry and evidence unsustainable. Previous disallowances in the assessee's case were deleted due to lack of evidence of disproportionate expenses. The Tribunal directed the AO to delete the disallowance, ruling in favor of the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee based on the favorable determination of grounds related to TDS disallowance, income mismatch verification, and travelling expenses disallowance. The Tribunal directed the AO to delete the disallowed amounts and disallowances, respectively, in accordance with the findings.