2021 (6) TMI 564 - AT - Income Tax

Addition on account of hiring of vehicle expenses which were added back to the income of the assessee - ad hoc addition of vehicle expenses made by AO - CIT-A deleted addition - HELD THAT - We find that CIT(A) while deleting the addition has inter alia noted that assessee is a public sector undertaking and it has been consistently claiming the vehicle hire charges and the same has been accepted by the Revenue authorities in earlier years and in subsequent years - as further given a finding that the AO had proceeded to disallow the expenses on ad hoc basis without pointing out any specific defects or incidents which could prove that the expenses was not for the purpose of business and that the AO was simply carried away by the quantum of expenditure. CIT(A) has further given a finding that during the course of assessment proceedings sufficient documents were furnished by the assessee to support its claim of expenses and the allegation of the AO of not furnishing the log book and other details of vehicle hire expenses by the assessee is not based on the material on record. Revenue has not pointed to any fallacy in the findings of CIT(A). We therefore find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed

Summary

Issues:
Appeal against order of CIT(A) for Assessment Year 2013-14. Disallowance of vehicle hiring expenses by AO. Deletion of addition by CIT(A) and appeal by Revenue before ITAT.

Analysis:
The appeal before ITAT DELHI was against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2013-14. The assessee, a Government of India undertaking engaged in providing technical consultancy services, filed its return declaring total income. The assessment was framed under section 143(3), resulting in a determined total income. The dispute arose when the AO disallowed a portion of the expenses claimed by the assessee on hiring of vehicles, adding it back to the income. The CIT(A) subsequently deleted this addition, leading to the Revenue's appeal before the ITAT.

During the assessment proceedings, the AO found the assessee's submissions regarding vehicle hiring expenses unsatisfactory. The AO disallowed 20% of the total expenses, adding it back to the income. The CIT(A), however, deleted this addition based on the assessee being a public sector undertaking with a history of claiming such expenses, supported by furnished documents. The CIT(A) criticized the AO for a lack of specific defects or incidents to disallow the expenses, and for making an ad hoc decision based on expenditure amount. The Revenue argued that the CIT(A) should have upheld the AO's decision, but the ITAT found no fault in the CIT(A)'s findings and dismissed the Revenue's appeal.

In conclusion, the ITAT upheld the CIT(A)'s decision to delete the addition of vehicle expenses made by the AO. The ITAT noted the consistent nature of the assessee's claims, supported by documents, and found no basis for interference with the CIT(A)'s order. As a result, the appeal of the Revenue was dismissed by the ITAT.