9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 1487 - AT - Income TaxAddition on account of oil and fuel expenses - addition only on the ground that there was certain differences between the original return and the revised return filed by the assessee wherein the amount of depreciation claimed in revised return of income and original return of income and a similar difference was there in the oil and fuel expenses i.e. as per the revised return of income and as per the original return of income there was an increase in the fuel and oil expenses - HELD THAT - Though the assessee furnished before the AO the bills and vouchers supporting the said expenses and also the reasons for difference in the amount of depreciation however the AO without going into those evidences made an adhoc disallowance out of the total oil and fuel expenses as claimed by the assessee in the profit and loss account by bench marking the same on the basis of previous year s percentage of oil and fuel expenses to the turnover and also considered the increase of 3% in the cost of diesel surcharge. In our opinion the said estimation of disallowance by the AO is based on the presumption and surmises without there being any valid basis. We note that the total turnover of the assessee during the impugned assessment year. We further note that there was escalation in the prices of diesel as on 01.04.2011 from Rs. 37.75 to Rs. 48.63 as on 01.04.2013 which is approximately around 28%. Thus the basis adopted by the AO is devoid of appropriate basis and accordingly sustenance of addition by the ld. CIT(A) is also wrong and cannot be accepted. Disallowance on account of truck running expenses - HELD THAT - We note that the AO has not made any objective examination of the expenses when the assessee has not produced the bills and vouchers as claimed by the AO. We find merit in the contention of the assessee that the increase in toll tax and other road expenses which have enhanced these expenses during the year considerably whereas the disallowance by the AO was totally on incorrect basis by merely comparing with the current year s expenses with the preceding year expenses. AO disallowed on account of finance charges paid for acquisition of self-occupied property - HELD THAT - We find that the interest incurred in the acquisition of flat which is under self-occupation has to be dealt with in accordance with the provisions of Section 24(b) of the Act. Undisputedly the assessee has paid interest on house loan to HDFC bank. Therefore we set aside the order of the ld. CIT(A) and direct the AO to allow the interest paid to HDFC Bank on house loan u/s.24(b) of the Act subject to ceiling as has been prescribed under the Act. Accordingly ground NO.3 is allowed. TDS u/s 194A - Disallowance on account of non-deduction of tax u/s.40(a)(ia) - AO disallowed Interest paid to STF Co. Ltd - HELD THAT - We find merit in the contention of the assessee that the amount was paid on account of interest charges to the listed companies who offered to tax by them and therefore no disallowance is called for u/s.40(a)(ia). In our opinion this issue needs to be verified at the end of the AO as to whether these companies have offered the tax in their income tax returns. Accordingly the issue is restored to the file of the AO. The assessee shall be provided sufficient opportunity of hearing by the AO while deciding the issue. This ground of appeal of the assessee is allowed for statistical purposes. Disallowance on the basis of list of secured loan takens from various banks - there was a difference in the statement of unsecured loan taken from Kotak Mahindra Bank which the assessee could not explain and accordingly the same was added by the AO to the income of the assessee and also confirmed by the CIT(A) - HELD THAT - After considering the rival submissions of the parties and perusing the material available on record we find that the assessee has filed a letter dated 28.03.2016 along with supporting evidences reconciling the said amount. The same requires verification at the end of the AO and accordingly we restore this issue also to the file of the AO with direction to decide the same after providing sufficient opportunity of hearing to the assessee.
The core legal questions considered in this appeal pertain to the validity of various disallowances made by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], specifically relating to:
Issue 1: Disallowance of Oil and Fuel Expenses Legal framework and precedents: The assessment of business expenses requires that such expenses be bona fide and supported by evidence. The AO's power to disallow expenses is subject to the requirement of a valid basis and evidentiary support rather than mere surmises. Court's interpretation and reasoning: The AO disallowed Rs. 1,82,18,524/- on oil and fuel expenses based on an upward deviation from previous year's expenses, benchmarking the current year's expenses against prior year's turnover and allowing only a 3% increase. The CIT(A) confirmed this disallowance. Upon review, the Tribunal noted that the AO's disallowance was premised on a comparison of the original and revised returns and an arbitrary benchmarking exercise without proper examination of the supporting bills and vouchers furnished by the assessee. The Tribunal also observed that the turnover had increased substantially from the previous year (from Rs. 8.94 crores to Rs. 12.62 crores), and there was a significant escalation (approximately 28%) in diesel prices during the relevant period, which justified increased fuel expenses. Key evidence and findings: The assessee provided bills and vouchers supporting the expenses, and the Tribunal found no valid basis for the AO's disallowance which was based on presumptions rather than objective evidence. Application of law to facts: The Tribunal held that the AO's approach was flawed and that the disallowance could not be sustained. The CIT(A)'s confirmation of the disallowance was also set aside. Treatment of competing arguments: The Tribunal rejected the AO's reliance on prior year percentages and the CIT(A)'s cryptic affirmation, favoring the assessee's documented evidence and market realities of diesel price escalation. Conclusion: The disallowance of Rs. 1,82,18,524/- on oil and fuel expenses was deleted. Issue 2: Disallowance of Truck Running Expenses Legal framework and precedents: Business expenses must be substantiated by proper vouchers or invoices. However, disallowance solely on lack of vouchers without objective examination may be arbitrary. Court's interpretation and reasoning: The AO disallowed Rs. 53,40,091/- out of Rs. 80,35,546/- claimed truck running expenses, citing non-production of vouchers and comparing the ratio of truck expenses to turnover with the previous year's figures. The CIT(A) upheld this disallowance. Key evidence and findings: The Tribunal noted that the AO did not conduct an objective examination of the expenses and that the assessee contended that increased toll tax and road expenses justified the higher expenditure. The AO's disallowance was based on mere comparison percentages without considering these factors. Application of law to facts: The Tribunal found merit in the assessee's contention and held that the disallowance was not sustainable. Treatment of competing arguments: The Tribunal rejected the AO's mechanical comparison approach and the CIT(A)'s cryptic confirmation, emphasizing the need for objective scrutiny. Conclusion: The disallowance of Rs. 53,40,091/- on truck running expenses was deleted. Issue 3: Disallowance of Finance Charges on Acquisition of Self-Occupied House Property Legal framework and precedents: Section 24(b) of the Income Tax Act allows deduction of interest on borrowed capital for acquisition of a self-occupied house property, subject to prescribed limits. Court's interpretation and reasoning: The AO disallowed Rs. 3,71,736/- of finance charges relating to interest on a home loan for a flat registered in the assessee's name and held that the interest was not allowable as the possession letter was disbelieved. The CIT(A) upheld the disallowance. Key evidence and findings: The flat was registered on 25.04.2014 and was self-occupied. The assessee submitted possession letters and contended the interest was allowable under Section 24(b). Application of law to facts: The Tribunal held that interest paid on a home loan for a self-occupied property is allowable under Section 24(b) and directed the AO to allow the interest subject to the statutory ceiling. Treatment of competing arguments: The Tribunal rejected the AO's disbelief of possession and the CIT(A)'s cryptic affirmation, emphasizing statutory provisions. Conclusion: The disallowance of Rs. 3,71,736/- was set aside and the interest was allowed under Section 24(b). Issue 4: Disallowance under Section 40(a)(ia) for Non-Deduction of TDS on Finance Charges Legal framework and precedents: Section 40(a)(ia) disallows expenses where tax is deductible at source but not deducted or paid, unless the payee has offered the income to tax. Court's interpretation and reasoning: The AO disallowed Rs. 3,52,603/- on account of interest paid to M/s S.T.F. Co. Ltd without TDS deduction. The assessee claimed that TDS was deducted at 10% under Section 194A and that the payee companies had offered the income to tax. The CIT(A) confirmed the disallowance without detailed reasoning. Key evidence and findings: The Tribunal observed that the payee companies were listed entities and likely to have offered the income to tax. Application of law to facts: The Tribunal restored the issue to the AO for verification of whether the payees had declared the income and directed that the assessee be given an opportunity of hearing. Treatment of competing arguments: The Tribunal found merit in the assessee's contention and directed a detailed enquiry rather than outright disallowance. Conclusion: The issue was restored to the AO for fresh adjudication after verification; the appeal was allowed for statistical purposes. Issue 5: Disallowance on Account of Difference in Secured Loan Statements Legal framework and precedents: Disallowance on unexplained differences in loan statements requires proper reconciliation and opportunity to explain. Court's interpretation and reasoning: The AO disallowed Rs. 10,20,499/- due to unexplained difference in secured loan statements from Kotak Mahindra Bank. The CIT(A) confirmed this disallowance. Key evidence and findings: The assessee submitted a reconciliation letter and supporting evidence explaining the difference. Application of law to facts: The Tribunal restored the issue to the AO for verification of the reconciliation and directed that the assessee be given an opportunity to present evidence. Treatment of competing arguments: The Tribunal emphasized the need for proper verification rather than summary disallowance. Conclusion: The issue was restored to the AO for fresh adjudication; the appeal was allowed for statistical purposes. Issue 6: General Grounds The Tribunal held that the general grounds raised did not require adjudication. Significant holdings: On the disallowance of oil and fuel expenses, the Tribunal held: "The basis adopted by the Assessing Officer is devoid of appropriate basis and accordingly sustenance of addition by the ld. CIT(A) is also wrong and cannot be accepted." On truck running expenses: "The disallowance by the AO was totally on incorrect basis by merely comparing with the current year's expenses with the preceding year expenses... we are inclined to set aside the order of the ld. CIT(A) and direct the Assessing Officer to delete the addition." On finance charges for self-occupied house property: "Interest incurred in the acquisition of flat which is under self-occupation has to be dealt with in accordance with the provisions of Section 24(b) of the Act... we direct the Assessing Officer to allow the interest paid to HDFC Bank on house loan u/s.24(b) of the Act, subject to ceiling as has been prescribed under the Act." On disallowance under Section 40(a)(ia): "The amount was paid on account of interest charges to the listed companies who offered to tax by them and, therefore, no disallowance is called for u/s.40(a)(ia) of the Act... the issue is restored to the file of the AO." On discrepancy in secured loan: "The same requires verification at the end of the Assessing Officer... the AO is directed to consider the reconciliation statement, letter from the bank and other details... and decide the issue accordingly." The Tribunal's final determinations were to allow the appeal on grounds 1, 2 and 3 by deleting or allowing the disallowances, and to restore grounds 4 and 5 to the AO for fresh adjudication after due verification and opportunity of hearing. Ground 6 was held not to require adjudication.
|
