2025 (2) TMI 1039 - AT - Income Tax

Addition on account of provision released - HELD THAT - We note that the assessee has created a provision in the AY.2016-17 and the same has been added back to the total income in the computation of total income without claiming the provision as an expenditure. Further during the AY.2017-18 the assessee has released the provision by crediting the same to the P L account by reducing from the provision created in the earlier AY.2016-17. Therefore AO and that of CIT(A) have erred in making an addition. Disallowance of expenditure - As assessee has submitted the entire 17 ledger extracts of all the heads like car expenses auto expenses security expenses data entry repairs water newspaper etc. along with the sample vouchers. Books of accounts of the assessee is audited and the same have been submitted to various statutory authorities. AO and that of CIT(A) have disallowed the expenditure on adhoc basis at 5% without any cogent reason or identifying any defects. In the present facts and circumstances of the case we do not agree with the lower authorities in disallowing the expenditure on adhoc basis and hence we set aside the order of Ld. CIT(A) by directing the AO to delete the same by allowing the grounds of appeal filed by the assessee. Appeal of the assessee is allowed.

Summary

The appeal in this case was filed by the assessee against the order of the Addl/Joint Commissioner of Income Tax (Appeals)-8, Delhi, for the assessment year 2017-18. The key issues raised by the assessee in the appeal were related to the determination of total income, disallowance of certain expenditures, and the treatment of provisions released. The main grounds of appeal included contentions that the assessing officer erred in determining the total income, disallowing certain deductions, and upholding the disallowances made.In the assessment, the assessing officer disallowed deductions claimed by the assessee, including a provision released amount and 5% of other expenditures. The assessing officer added back these amounts to the total income of the assessee. The CIT(A) confirmed the assessing officer's order, leading the assessee to appeal to the Appellate Tribunal.The Appellate Tribunal considered the submissions made by the assessee, which included detailed explanations and supporting documents for the deductions claimed. The Tribunal noted that the provision released by the assessee was a reduction from the provision created in the earlier assessment year and should not have been added back to the total income. Similarly, the Tribunal found that the disallowance of 5% of other expenditures was unjustified as the assessee had provided detailed ledger accounts and sample vouchers to support the claimed expenditures.Based on the evidence and submissions presented, the Tribunal concluded that the assessing officer and the CIT(A) had erred in disallowing the deductions claimed by the assessee. Therefore, the Tribunal set aside the order of the CIT(A) and directed the assessing officer to delete the additions made to the total income. Consequently, the appeal of the assessee was allowed, and the decision was pronounced in court on February 24, 2025, in Chennai.In summary, the Appellate Tribunal ruled in favor of the assessee, overturning the disallowances made by the lower authorities and directing the assessing officer to delete the additions to the total income. The Tribunal emphasized the importance of considering the supporting evidence and documentation provided by the assessee in determining the allowable deductions and expenditures.