2023 (8) TMI 370 - AT - Income Tax

Disallowance being advance written off in the revised return - claim not made in original ROI Return of income - HELD THAT - We don t see any force in the decision of Ld. CIT(A) in rejecting the claim of the assessee, simply because the same was not claimed in the original return and was claimed in the revised return filed in compliance to C AG. As gone through the submissions of the assessee and found the decision of assessee well founded on facts and logics. Being, a State PSU question on the sanctity of decisions and accounting can t be raised as the same is being owned by State Govt. and Audited by the C AG of India. More, over even if version of Revenue is accepted for the time being, still same has to be allowed in next F.Y. and it results into a deferment only, but nothing on merits of the claim Disallowance of Leave Encashment - disallowance was made because of non-Acceptance of revised return by the Revenue - We set aside this disallowance and restore the matter back to the file of AO for fresh adjudication on the basis of evidences to be adduced by the assessee. Assessee is directed to cooperate with the AO and advance evidences of actual payment during the year in favour of his claim. In the result this ground of appeal raised by the assessee is allowed for statistical purposes. Disallowance of depreciation towards capital assets - filing revised return and non-acceptance of the same by Revenue - Assessee claimed depreciation on the basis of figures capitalised on the directions of the C AG of India. As we already approved the filing of revise return on the given facts of the case, no disallowance can be made by the AO, if assessee claimed some allowance based on the accounts approved by the C AG of India. In the result AO is directed to delete the addition and Ground Raised by the assessee is allowed. Disallowance made u/s. 40A (3) - wrong reporting in the Tax Audit Report and actually these amount were not claimed as an expense, same is restored back to the file of AO for re-verification by AO, based on evidences advanced by the assessee. Assessee is directed to substantiate its claim with relevant evidences that the same is not claimed as expense, hence not disallowable u/s. 40A(3). Ground of appeal raised by the assessee is allowed for statistical purposes. Addition on account of difference in Original Return and Revise Return - As submitted by the assessee that this difference arisen because of different treatment given by the C AG of India w.r.t. revenue of the assessee - As already hold by us that revise return filed by the assessee is proper on the given facts of the case, revenue has to be considered as declared in the revise return and department cant disturb the same on the basis of original return. This ground of appeal raised by the assessee is allowed.

Issues Involved:

1. Disallowance of advances written off.
2. Disallowance of bad debts written off.
3. Disallowance of leave encashment.
4. Disallowance of depreciation.
5. Disallowance under Section 40A(3).
6. Addition on account of difference in profit.

Summary:

1. Disallowance of Advances Written Off:
The Tribunal addressed the disallowance of Rs. 10,07,37,891/- being advances written off in the revised return. It was noted that these advances, approved by shareholders in the AGM post the original return, were not claimed in the original return. The Tribunal emphasized that accounts and tax audits not approved by the shareholders hold no legal value. The Tribunal found no fault in filing the revised return, referencing the decision of the Hon'ble Allahabad High Court in CIT-I, Lucknow v. U.P. Rajkiya Nirman Nigam Ltd. The Tribunal allowed this ground of appeal.

2. Disallowance of Bad Debts Written Off:
The Tribunal similarly addressed the disallowance of Rs. 1,14,03,962/- for bad debts written off, which were claimed in the revised return. The Tribunal cited the same legal reasoning and case law as with the advances written off, concluding that the revised return was valid. This ground of appeal was also allowed.

3. Disallowance of Leave Encashment:
The Tribunal discussed the disallowance of Rs. 1,77,449/- for leave encashment, which was claimed in the revised return. The Tribunal set aside this disallowance and remanded the matter back to the AO for fresh adjudication based on evidence provided by the assessee. This ground of appeal was allowed for statistical purposes.

4. Disallowance of Depreciation:
The Tribunal reviewed the disallowance of Rs. 19,067/- towards capital assets depreciation, which was based on figures capitalized on the directions of the C & AG of India. The Tribunal, having approved the revised return, directed the AO to delete this disallowance. This ground of appeal was allowed.

5. Disallowance under Section 40A(3):
The Tribunal addressed the disallowance of Rs. 4,62,000/- under Section 40A(3). The assessee claimed there was a wrong reporting in the Tax Audit Report and that these amounts were not claimed as expenses. The Tribunal remanded the issue back to the AO for re-verification based on evidence. This ground of appeal was allowed for statistical purposes.

6. Addition on Account of Difference in Profit:
The Tribunal discussed the addition of Rs. 17,59,687/- due to differences between the original and revised returns. The Tribunal found that the difference arose from the treatment of revenue by the C & AG of India and held that the revised return was proper. This ground of appeal was allowed.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes. The Tribunal set aside the orders of the lower authorities and directed fresh adjudication where necessary. The decision was pronounced in the open court on March 20, 2023.

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