2021 (2) TMI 1079 - AT - Income Tax

Disallowance of fuel expenses - Assessee argued AO nowhere provide any opportunity before raising the addition, therefore, the addition is not justifiable - CIT(A) disallowed the claim of the assessee on the basis of this fact that the assessee failed to produce the documents before the AO - HELD THAT - It is not the good reason to decline the claim because the assessee has under taking before us to the effect that all the documents were produced before the AO as well as CIT(A). However, the CIT(A) sought the remand report and the remand report speaks only about the submission of ledger but nowhere speak that the submission of bills which are on record. Any how the voucher/bills were produced before the AO. An another reason to decline the claim is that in the preceding year the fuel expenses were not allowed. It is not a good ground to decline the claim of the assessee. At least produced documents should be examined. No doubt the assessee submitted the undertaking before us in which the assessee claimed that the ledger as well as the vouchers/bills of petrol were produced before the AO. The books of account were not rejected. It seems that the evidence given by assessee was not properly considered. No reasons were given to decline the claim. Taking into account have been available on record. We are of the view that the claim of the assessee has wrongly been declined which is infact liable to be examined. Accordingly, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to decide the issue after giving an opportunity of being heard to the assessee. Disallowance of Repair and Maintenance Expenses - HELD THAT - The assessee started its business in the preceding year in which fuel expenses has also been shown. Anyhow subsequently, the assessee expanded its business by repairing and maintenance of the water park. The AO nowhere concluded about this fact that the expenditure was capital in nature or revenue in nature. On seeing the facts and circumstances of the case, we find that in the case of amusement park, constantly repair and maintenance is required. The assessee submitted the ledger as well as bills on record - At the time of arguments, the Ld. DR draw the attention towards this fact that the specific bills of vehicle were not found proper, hence, the claim was rightly rejected. Considering all claim of the assessee is liable to be verified at the end of the AO who certify the claim of the assessee in accordance with law. Needless to say that an opportunity to be heard is liable to be given in accordance with law. Accordingly, this issue is allowed for statistical purposes. Disallowance of Directors Remuneration - As argued that the Directors of Shri Arunkumar Muchhala had conceived the idea of Suraj Water Park and had run it so successfully - HELD THAT - It is not justifiable that in one year the claim of the assessee has been allowed and in an another year the claim of the assessee has been disallowed. There should be some reason to decline the claim of the assessee. Moreover, we find that the assessee has shown these incomes in their return of income and offered the tax. Taking into account all the facts and circumstances and by honoring the decision of Hon'ble ITAT in the assessee's own case 2017 (1) TMI 934 - ITAT MUMBAI , we allowed the claim of the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue. Disallowance of Depreciation - As argued assessee has submitted the details of addition of fixed assets and all necessary documents were filed before the AO but the AO did not allow the depreciation in accordance with law - HELD THAT - As revenue has refuted the said contention. Since basic contention of the assessee is that the claim of the assessee was not examined in view of the details of addition to the fix assets and no opportunity of being heard was given to the assessee, therefore, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to examine the claim of the assessee in the light of the evidence adduced by the assessee. Needless to say that an opportunity of being heard is liable to be given to the assessee in accordance with law. Accordingly, this issue is this issue is allowed for statistical purposes. Disallowance of cash deposit - assessee was receiving the cash by selling the tickets in cash for the entry in the park as well as for the different activity going on in the park. The assessee was depositing the cash on the same day and if not possible then on an another day. In such type of business certainly no amount was paid by cheque etc. However, in some cases payments can be accepted through credit card/debit card - HELD THAT - The assessee has given a complete list of entry fees for the verification of the claim. In another assessment year such claim of assessee was not disallowance which was not bothered to touch by the lower authority. The claim of the assessee was declined on the basis of surmises and conjectures which is not justifiable. In other years, the claim of the assessee was allowed. The AO nowhere brought into any other evidence to which it can be assumed that the cash was not belonging to the assessee or the same was unexplained. Taking into account all the facts and circumstances, we are of the view that the finding of the CIT(A) is not justifiable to decline the claim of Assessee, hence, we set aside the finding of CIT(A) in this regard, we ordered accordingly and allowed the claim of the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue. Nature of expenditure - compensation to the Forest Department on account of the decision of Hon'ble Supreme Court - Revenue or capital expenditure - AO treated the said amount as capital in nature - HELD THAT - The facts speak that at the time of purchase title of the assessee was clear and thereafter the assessee invested for the development of amusement park. The assessee also took the necessary permission from Municipal Corporation Thane in the year 2002. The defects came into notice on account of subsequent act of Forest Department. The compensation was paid in the A.Y. 2013-14 when the amusement park was running with its full swing. If the same was not paid then no doubt the business became closed. The paid amount has been shown as business expenditure. The AO admitted this fact that the amount paid was not for acquiring the new asset. Accordingly, in view of the decision of Hon'ble Supreme Court in the case of CIT Vs. Empire Jute Co. 1980 (5) TMI 1 - SUPREME COURT . The said expenses are liable to be treated to be paid for business expenses. Moreover disturbance on account of administrative act if any and payment accordingly is liable to be treated as revenue expenses in view of the decision in the case of Bikaner Gypsum Ltd. Vs. CIT 1990 (10) TMI 2 - SUPREME COURT . Accordingly, when the amount seems to be paid prima-facie for the business expediency, therefore, we are of the view that the said amount is liable to be treated as revenue in nature. Accordingly, we set aside the finding of the CIT(A) on this issue and allow the claim of assessee. Disallowance of claim of TDS - HELD THAT - The claim of the assessee is that the TDS was deducted at source from the income of the assessee and credit of the same was not given at the time of the assessment. The contention of the assessee is that no opportunity of being heard was given to the assessee, therefore, opportunity of being heard is required to be given in the interest of justice. If the opportunity of being heard is not given to the assessee and its TDS claim was not set off, therefore, in the said circumstances, we are of the view that the finding of the CIT(A) is not justifiable, therefore, we set aside the same and restore the issue before the AO to decide the matter of controversy afresh by giving an opportunity of being heard to the assessee in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Disallowance of fuel expenses.
3. Disallowance of repair and maintenance expenses.
4. Disallowance of directors' remuneration.
5. Disallowance of depreciation.
6. Disallowance of cash deposit.
7. Disallowance of payment to the Forest Department.
8. Disallowance of TDS credit.

Issue-wise Detailed Analysis:

Issue No. 1: Violation of Principles of Natural Justice
- This issue was deemed general in nature and did not require specific adjudication.

Issue No. 2: Disallowance of Fuel Expenses
- The assessee argued that the Assessing Officer (AO) did not provide any opportunity before raising the addition of ?9,26,624/-. The AO failed to consider the vouchers and purchase bills presented by the assessee. The CIT(A) disallowed the claim based on the remand report, which only mentioned the submission of the ledger but not the bills. The Tribunal found that the evidence provided by the assessee was not properly considered. The books of account were audited, and the expenses were supported by sufficient evidence. The Tribunal set aside the CIT(A)’s finding and restored the issue to the AO for re-examination, allowing the issue for statistical purposes.

Issue No. 3: Disallowance of Repair and Maintenance Expenses
- The assessee challenged the disallowance of ?50,87,434/- for repair and maintenance expenses. The AO considered these expenses as capital in nature, but the assessee argued they were revenue expenditures necessary for the amusement park's operation. The Tribunal noted that constant repair and maintenance are required for an amusement park and that the AO did not conclusively determine whether the expenses were capital or revenue in nature. The Tribunal set aside the CIT(A)’s finding and restored the issue to the AO for verification, allowing the issue for statistical purposes.

Issue No. 4: Disallowance of Directors' Remuneration
- The assessee contested the disallowance of ?6,60,000/- paid to directors, citing a previous ITAT decision in their favor for a different assessment year. The Tribunal found it unjustifiable to allow the remuneration in one year and disallow it in another without reason. The directors had declared the remuneration in their returns and paid taxes accordingly. The Tribunal honored the previous ITAT decision and allowed the claim, deciding the issue in favor of the assessee.

Issue No. 5: Disallowance of Depreciation
- The assessee argued that the AO did not allow depreciation of ?3,67,182/- despite submitting details of fixed assets and necessary documents. The Tribunal found that the claim was not properly examined and set aside the CIT(A)’s finding, restoring the issue to the AO for re-examination, allowing the issue for statistical purposes.

Issue No. 6: Disallowance of Cash Deposit
- The assessee challenged the disallowance of ?1,31,29,405/- in cash deposits, arguing that the cash was received from customers at the amusement park and deposited in the bank. The Tribunal found that the claim was declined based on assumptions without evidence and noted that similar claims were allowed in other years. The Tribunal set aside the CIT(A)’s finding and allowed the claim, deciding the issue in favor of the assessee.

Issue No. 7: Disallowance of Payment to the Forest Department
- The assessee argued that the payment of ?4,05,46,020/- to the Forest Department was a business expenditure due to a Supreme Court decision. The AO treated it as a capital expenditure. The Tribunal found that the payment was made to continue the business and no new asset was acquired. It was a business exigency, and the Tribunal treated the payment as revenue expenditure, setting aside the CIT(A)’s finding and deciding the issue in favor of the assessee.

Issue No. 8: Disallowance of TDS Credit
- The assessee contested the disallowance of ?1,88,082/- in TDS credit, arguing that no opportunity for a hearing was given. The Tribunal found that the claim was not properly examined and set aside the CIT(A)’s finding, restoring the issue to the AO for re-examination, allowing the issue for statistical purposes.

Conclusion:
The appeals filed by the assessee were partly allowed for statistical purposes, with multiple issues being remanded back to the AO for re-examination. The Tribunal emphasized proper consideration of evidence and adherence to principles of natural justice.