2000 (3) TMI 179 - AT - Income Tax

Issues Involved:

1. Deletion of disallowance of Rs. 2,66,682 on account of green leaves under section 43B of the Income-tax Act, 1961.
2. Deletion of addition of Rs. 60,000 on account of interest and bank charges by admitting fresh evidence in violation of rule 46A of the Income-tax Rules, 1962.
3. Deletion of disallowance under section 43B of the Act on account of provident fund of Rs. 75,479.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Rs. 2,66,682 on Account of Green Leaves under Section 43B:

The Assessing Officer (AO) disallowed Rs. 2,66,682 as the amount payable on account of cess to the Government of Assam through M/s. Assam Tea Corporation for the purchase of green leaves was not paid till the filing of the return. The AO invoked section 43B of the Income-tax Act, 1961, as the assessee could not produce evidence of payment.

The assessee, during the appeal before the CIT(A), submitted an agreement with M/s. Assam Tea Corporation and a letter from the corporation clarifying that the cess was the liability of the seller (M/s. Assam Tea Corporation Ltd.). The CIT(A) held that the cess was the seller's liability and deleted the addition.

The Department contended that the CIT(A) admitted fresh evidence without giving the AO an opportunity to examine it, violating rule 46A of the Income-tax Rules, 1962. The Tribunal agreed with the Department and set aside the CIT(A)'s order, directing a fresh decision after giving the AO an opportunity to examine the evidence.

2. Deletion of Addition of Rs. 60,000 on Account of Interest and Bank Charges:

The AO added Rs. 60,000, representing the difference in interest rates between loans given to directors at 6% and loans taken from financial institutions at 21%. The CIT(A) deleted this addition, accepting the assessee's submission that the loans to directors were temporary and at a concessional rate to avoid paying house rent allowance, which would have been more expensive.

The Department argued that the CIT(A) admitted fresh evidence (the Board resolution) without giving the AO an opportunity to examine it, violating rule 46A. The Tribunal agreed with the Department and set aside the CIT(A)'s order, directing a fresh decision after giving the AO an opportunity to examine the evidence.

3. Deletion of Disallowance under Section 43B on Account of Provident Fund of Rs. 75,479:

The AO disallowed Rs. 75,479 as the provident fund contributions were not paid within the due dates specified under section 43B. The assessee contended that the payments were made within the allowable period, including the additional 15 days when paid by cheque.

The CIT(A) accepted the assessee's contention and deleted the disallowance. The Department appealed, arguing that the payments were not made within the due date as per the Employees Provident Fund Scheme, 1952. The Tribunal upheld the CIT(A)'s decision, agreeing that the payments were made within the allowable period under section 43B.

Separate Judgments by Judges:

The Judicial Member and the Accountant Member had differing views on the first two issues. The Judicial Member held that the CIT(A) admitted fresh evidence in violation of rule 46A and restored the matter to the CIT(A) for a fresh decision. The Accountant Member disagreed, stating that there was no violation of rule 46A. The Third Member was appointed to resolve the difference and agreed with the Judicial Member that the CIT(A) admitted additional evidence without giving the AO an opportunity to examine it.

Final Order:

The Tribunal, following the majority decision, restored the matter to the CIT(A) to decide the issues afresh after giving the AO an opportunity to examine the evidence. The appeal on the third ground was dismissed, upholding the CIT(A)'s deletion of the provident fund disallowance. The appeal was partly allowed for statistical purposes.

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