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2012 (12) TMI 782 - AT - Income TaxDelayed PF Payments u/s 43B Following the decision of court in case of CIT vs Cranes Ltd, 2007 (10) TMI 386 - BOMBAY HIGH COURT if payment have been made during the financial year or before filing of return amount in question has to be allowed - matter should be remitted back to the file of the AO to verify the claim made by the assessee. Disallowance on gifts and presentation Held that - Although expenditure incurred was wholly and exclusively for carrying out business but expenditure without evidence were not allowable - FAA has power coterminous with AO, but then his duties are same as that of the AO. Any adverse inference has to be confronted to the assessee before deciding an issue against the assessee - matter should be restored back to the file of the AO for fresh adjudication. Disallowance of Commission Held that - Though assessee has claimed that necessary evidences were produced, yet from the order of the AO, it is clear that factum of rendering of service was not established. FAA has doubted the genuineness of the papers, but did not afford an opportunity to the assessee to rebut his conclusions. As FAA should have confronted the assessee with his above findings & as the AO had no occasion to go through the paper, so, in the interest of justice,the matter remitted back to the file of the AO. Disallowance of Bad Debts Held that - Once assessee writes off the bad debts in his Books of Accounts he has to prove nothing - as decided in T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX 2010 (2) TMI 211 - SUPREME COURT it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - Appeal of the assessee stands partly Allowed.
Issues Involved:
1. Disallowance of PF payments under Section 43B. 2. Disallowance of expenditure on gifts and presents. 3. Disallowance of commission expenses. 4. Disallowance of bad debts written off. Detailed Analysis: 1. Disallowance of PF payments under Section 43B: The assessee argued that the PF payments were made within the financial year or before the due date for filing returns. The AO rejected this claim, stating that Section 43B mandates timely payment of PF contributions without deferral. The CIT(A) upheld the AO's decision, noting that the payments were vague and unreliable. The Tribunal, however, remitted the matter back to the AO for verification, stating that if the payments were made within the financial year or before filing the return, they should be allowed. Thus, Ground No. 1 was set aside for re-evaluation. 2. Disallowance of expenditure on gifts and presents: The assessee claimed expenditure on gifts and presentations to various personnel, including bankers, consultants, and department employees. The AO disallowed the expenses, invoking the explanation to Section 37, due to lack of detailed evidence and payments made in subsequent years. The CIT(A) supported the AO, citing unreliable documents. The Tribunal found that the CIT(A) failed to confront the assessee with his findings and remitted the matter back to the AO for fresh adjudication. Therefore, Ground No. 2 was set aside. 3. Disallowance of commission expenses: The AO disallowed the commission expenses due to insufficient details and lack of proof of services rendered. The CIT(A) upheld the disallowance, doubting the genuineness of the documents presented. The Tribunal noted that the assessee was not given an opportunity to rebut the CIT(A)'s conclusions and remitted the matter back to the AO for re-adjudication. Consequently, Ground No. 3 was set aside. 4. Disallowance of bad debts written off: The AO disallowed the bad debts, questioning the genuineness of the debts and the lack of legal action against the dealers. The CIT(A) confirmed the disallowance, stating that the debts were not properly written off in the Books of Accounts. The Tribunal found that the bad debts were indeed written off in the Books of Accounts and cited the Supreme Court's decision in T.R.F. Ltd., which held that post-April 1, 1989, it is sufficient for the bad debt to be written off in the accounts. Thus, the Tribunal decided this issue in favor of the assessee, allowing Ground No. 4. Conclusion: The appeal of the assessee was partly allowed, with the Tribunal remitting Grounds 1, 2, and 3 back to the AO for re-evaluation and deciding Ground 4 in favor of the assessee.
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