2012 (10) TMI 204 - AT - Income Tax

Expenditure of Rs.12, 00, 000/- under the head Provisions on Standard Assets Section 36(1)(viia) - Held that - Deductions made on account of provision on standard asset and was disallowed and added to the returned income of the assessee as the assessee was unable to give any explanation and documentary evidence in support of his claim. Payments made to petrol pump of Rs.28, 33, 460/- For purchase of petrol used in such hired vehicles- Held that - addition of Rs.28, 33, 460/- made by the AO was disallowed and added to the returned income of the assessee as the payment made was not liable to TDS. Admission of addition evidence - Rule 46A - held that - The Ld. CIT(A) without application under Rule 46A and without recording any reason for admitting the documents and explanation filed before him and without affording reasonable opportunity to examine such evidence or documents filed before him by the AO had decided the issue in favour of the assessee which is clear violation of principle of natural justice. It is not a case under Rule 46A(4) that the ld. CIT(A) had directed the assessee for production of any document to enable him to dispose of the appeal. - Matter remanded back to AO for denovo decision.

Summary

Issues:
1. Disallowance of expenditure under "Provisions on Standard Assets."
2. Disallowance of deduction for payments made to petrol pump for hired vehicles.

Issue 1: Disallowance of expenditure under "Provisions on Standard Assets."
The assessee claimed a deduction of Rs.12,00,000 under "Provisions on Standard Assets," but failed to provide any explanation despite multiple opportunities. The AO disallowed the deduction, which was added to the assessee's income. However, the CIT(A) deleted the addition, stating that the expense was notionally debited to maintain standard assets as per RBI guidelines. The CIT(A) highlighted that the provision falls within the limits of section 36(1)(viia) and is a statutory claim. The CIT(A) also noted the retrospective amendment by the Finance Act, 2007, to include co-operative banks for this deduction. The Tribunal set aside the issue to the AO for a fresh decision, considering the evidence submitted before the CIT(A).

Issue 2: Disallowance of deduction for payments made to petrol pump for hired vehicles
The assessee claimed Rs.26,33,460 for hiring vehicles without deducting TDS. The AO disallowed this amount under section 40(a)(ia) as TDS was not deducted. However, the CIT(A) deleted the addition, explaining that the expenses were for staff vehicles provided under a bank policy, not subject to TDS. The CIT(A) found that the payments did not exceed the TDS limit and were not covered under section 194C. The Tribunal held that the CIT(A) did not follow the principles of natural justice by deciding without giving the AO an opportunity to examine the evidence. The issue was remanded to the AO for a fresh decision after considering the documents submitted before the CIT(A).

In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes, setting aside both issues to the AO for a fresh assessment with proper opportunity for the assessee to be heard and evidence to be considered.