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2023 (8) TMI 22 - AT - Income TaxAdmission of additional evidence by CIT(A) - HELD THAT - CIT(A) before admitting the additional evidences awarded an opportunity to the revenue by calling remand report on such additional evidences. Therefore, in such circumstances it cannot be said that the learned CIT(A) committed any error. CIT A committed no error nor the admission of additional evidence can be stated to be in breach of the requirement of Rule 46A of the Rules - See KAMLABEN SURESHCHANDRA BHATTI 2014 (3) TMI 151 - GUJARAT HIGH COURT Coming to the case on hand, the assessee before the CIT(A) submitted that at the time of the assessment proceeding, its business was closed and the person who was looking after the accounting and taxation related work also had left. Therefore, the assessee was facing difficulties in locating the necessary details required by the AO. Accordingly, the same were not produced before the AO during the assessment proceedings. The CIT(A) in view of the above explanation furnished by the assessee accepted the additional evidences and before acting on such documents provided the AO an opportunity to verify the same. Thus, the learned CIT(A) safeguarded the interest of revenue while admitting the additional evidences furnished by the assessee. Addition u/s 68 - AO has treated the current liabilities shown by the assessee as unexplained cash credit - CIT(A) deleted the addition - HELD THAT - CIT-A has given very reasoned findings which were not controverted by the learned DR at the time of hearing. It was pointed out by the learned CIT-A that there were various expenses incurred by the assessee during the year under consideration which were subject to disallowance on adhoc basis. AO has also disallowed the liabilities appearing as on the balance sheet date which was arising out of the expenses incurred by the assessee in the year under consideration which were also subject to disallowance on adhoc basis. Thus, if any other disallowance is made on account of the liabilities arising out of such expenses, would lead to the double addition which is not desirable under the provisions of law. Likewise, CIT-A found that the assessee has already made the suo-moto disallowance of the sales tax liability and likewise some of the sales tax liability was pertaining to the earlier year which can t be subject matter of disallowance in the under consideration. Also there was interest liability pertaining to the year under consideration which was disallowed in the year under consideration under the provisions of section 43B and some of the liability representing the outstanding interest was pertaining to the earlier year which cannot be made subject to disallowance in the year under consideration under the provisions of section 43B - CIT A has given very detailed finding which was not controverted by the learned DR at the time of hearing. Therefore no reason to interfere in the finding of the learned CIT-A. Ground of the Revenue are hereby dismissed. Nature of receipt - Receipt on account of termination of bottling license - capital receipt not taxable u/s 28 or u/s 45 of the Act - HELD THAT - What is the substance in the present case is this that there was loss of source of income to the assessee on account of the main settlement agreement - the word cease to subsist has been used in the main settlement agreement. Perhaps, these words have been used in the main settlement agreement for the reason that the original contract entered between the assessee and the company was ended by efflux of time but still the same was continued. Thus, it appears that though the agreement has come to an end but it was subsisting as on the date of main settlement agreement on account of the conduct of the assessee and the company. Once the agreement has already been terminated but subsisting because of the conduct of the parties, maybe for this reason the word cease to subsist was used in the agreement. But we have to see the substance of the main settlement agreement instead of making reference to the relevant clause. It is beyond doubt that the source of income of the assessee as a result of main settlement agreement has come to end which can be verified from the financial statements filed by the assessee for the year ending 31 st March 2009 and 2010, placed on record. Thus, direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is hereby dismissed. Disallowances of total expenses to the extent of 15% and purchases to the extent 10% as against the disallowances made by the AO for 30% and 20% respectively - HELD THAT - In the event the assessee fails to justify, the AO has to see the claim of the assessee based on the circumstantial evidence, history of the case, comparable cases so as to find out whether the claim of the assessee is genuine or excessive before making any disallowance. But we find that the AO has not done such exercise but made the ad-hoc disallowance in the absence of supporting documents. In our considered view, such ad-hoc disallowance is not permitted under the provisions of law unless it is based on scientific basis. Yet, the claim of the assessee cannot be allowed in to-to in the absence of documentary evidence. We find that the ld. CIT- A has upheld the order of the AO in part after giving partial relief to the assessee based on reasoning as discussed above which has not been controverted by the ld. DR of the Revenue. Hence, the ground of appeal of the Revenue is hereby dismissed. Late deposits of employee s contribution towards PF fund - HELD THAT - As assessee before us conceded that the issue on hand has been covered against the assessee by the order of GSRTC 2014 (1) TMI 502 - GUJARAT HIGH COURT - Therefore, respectfully following the order of Hon ble Gujarat (supra), the ground of appeal of the Revenue is hereby allowed.
Issues Involved:
1. Admissibility of additional evidences under rule 46A. 2. Deletion of additions made under section 68 of the Income Tax Act. 3. Taxability of compensation received for termination of bottling license under sections 28(iv)/28(va) or section 45. 4. Restriction of disallowance of expenses and purchases. 5. Deletion of addition on account of late deposits of employee's contribution towards PF fund. Detailed Analysis: 1. Admissibility of Additional Evidences under Rule 46A: The Revenue contended that the CIT-A erred in admitting additional evidences filed by the assessee, which were not presented during the assessment proceedings. The assessee argued that due to the closure of business and departure of key staff, it was unable to furnish required details on time. The CIT-A admitted the additional evidences after providing the AO an opportunity to verify them. The Tribunal upheld the CIT-A's decision, citing the Gujarat High Court's judgment in CIT vs. Kamlaben Sureshchandra Bhatti, which allows admitting additional evidences if the AO is given an opportunity to comment on them. 2. Deletion of Additions Made under Section 68: The AO added Rs. 82,19,444/- as unexplained cash credits under section 68 due to the absence of necessary details. The CIT-A deleted these additions, noting that the AO had already disallowed 20% of purchases and 30% of expenses on an ad-hoc basis. The CIT-A reasoned that further addition of liabilities arising from these purchases and expenses would result in double addition. The Tribunal upheld the CIT-A's decision, emphasizing that the AO's disallowance on an ad-hoc basis and subsequent addition of liabilities would lead to double taxation, which is not permissible. 3. Taxability of Compensation for Termination of Bottling License: The assessee received compensation of Rs. 5 crore and Rs. 1.5 crore for termination of bottling agreements. The AO treated these compensations as revenue receipts taxable under sections 28(iv)/28(va) or section 45. The CIT-A, however, treated them as capital receipts, not chargeable to tax, as they resulted in the cessation of the assessee's business. The Tribunal upheld the CIT-A's decision, referencing the Supreme Court's judgment in Oberoi Hotels Pvt Ltd vs. CIT, which classified compensation for loss of source of income as capital receipts. 4. Restriction of Disallowance of Expenses and Purchases: The AO disallowed 30% of expenses and 20% of purchases due to lack of supporting documents. The CIT-A reduced these disallowances to 15% and 10%, respectively, considering the business closure and the reasonableness of the expenses. The Tribunal upheld the CIT-A's decision, noting that ad-hoc disallowances should be based on a scientific basis and the CIT-A's partial relief was reasonable. 5. Deletion of Addition on Account of Late Deposits of Employee's Contribution towards PF Fund: The CIT-A deleted the addition of Rs. 27,398/- for late deposits of employee's PF contributions. The Tribunal, however, reversed this decision, following the Gujarat High Court's ruling in CIT vs. GSRTC, which mandates that such contributions must be deposited within the due date to be allowed as deductions. Conclusion: The Tribunal upheld the CIT-A's decisions on the admissibility of additional evidences, deletion of additions under section 68, and classification of compensation as capital receipts. It also agreed with the CIT-A's restriction of disallowances on expenses and purchases. However, it reversed the CIT-A's deletion of the addition for late deposits of employee's PF contributions, aligning with the Gujarat High Court's precedent. The appeal of the Revenue was thus partly allowed.
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