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2022 (5) TMI 930 - AT - Income TaxAllowable business expenses - Addition made as expenses were not incurred wholly and exclusively for the purpose of the business - Labour charges, freight inward expenses, freight outward expenses, loading unloading expenses, stores and spares and packing materials - HELD THAT - We note that the AO has made the disallowance of the expenses for various reasons. One of the reason was that the details were not furnished by the assessee whether the expenses were paid through the banking channel or in cash. We disagree with the finding of the AO for the reason that the assessee has duly furnished the copies of the expenses ledgers and the ledger of all the parties to whom the payments of such expenses were made which are placed on paper book. The party wise ledgers contains the details of the mode of payment which is through banking channel. Similarly, the assessee has also filed the copy of the bank statement which is placed. Likewise there were addresses furnished by the assessee of all the parties to whom the payment was made against the expenses. However, the AO has not verified from any of the party despite having the power under the statute under the provisions of section 131(1)/133(6). Assessee has not furnished the details of the TDS - On perusal of the paper book filed by the assessee, particularly pages 693 to 724, we note that the assessee has furnished details of TDS deducted and the copies of the TDS return acknowledgment. Assessee has not furnished the bills of the parties as well as the copies of the vouchers for payment - On perusal of the paper book, we also note that such details were not furnished by the assessee. However, in our considered view in the absence of such details, there cannot be any disallowance of the expenses. It is for the reason that the AO was provided the addresses of the parties to whom the payment was made, their ledger accounts showing the amount was paid through the banking channel after the deducting the TDS against such exp.nses. If the AO had any doubt on the genuineness of the expenses in the absence of the bills and vouchers, the AO was very much empowered to call for the details from the respective parties. But he has not done so. Moreover, there were other details which were available on record wherein no defect was pointed out by the AO. Thus, in our considered view there cannot be any disallowance of the expenses in the given facts and circumstances in ad hoc manner. Assessee failed to furnish the copy of the bank book and the bank statement - With respect to the cash book, the learned AR before us contended that the copy of the cash book was never demanded by the AO during the assessment proceedings. Accordingly, the assessee has not furnished the same. This contention of the learned AR was not controverted by the learned DR at the time of hearing. Accordingly, we note that the assessee cannot be penalized on account of nonfurnishing the cash book in the given facts and circumstances. Disallowance of testing charges - Assessee has filed the necessary details of such expenses. The details include the ledger copies of the parties and the major bills issued by the parties which are placed on pages 207 to 249 of the paper book. The AO has not pointed out any defect in the details furnished by the assessee. In the event, the AO had any doubt on the genuineness of such expenses, he was empowered under section 133 (6)/131 of the Act to carry out the necessary verification. But he has not done so. Ad hoc disallowance towards bank commission/bank guarantee expenses - We note that the assessee has furnished the copies of the ledger of such expenses. The assessee in support of its expenses has also filed the bank statements which are placed on pages 251 to 438 of the paper book. The details of such expenses were very much available during the remand proceedings before the AO. Therefore the same cannot be disallowed on adhoc basis. Disallowance of brokerage expenses - We note that all the necessary details along with the bills were filed by the assessee which are placed along with the copy of the ledger. But the AO has not doubted on the genuineness of such details filed by the assessee. Thus we are of the view that the impugned expenses incurred by the assessee were genuine. However, the same cannot be allowed in the under consideration for the reason that the assessee failed to deduct the TDS in the year under consideration. Disallowance of depreciation - We note that the assessee has furnished the details of the bills of the major assets which are placed. However, no defect of whatsoever has been pointed out by the AO in these details. Accordingly we are of the view that there cannot be any disallowance of depreciation as alleged by the AO. DR at the time of hearing has not brought anything on record contrary to the finding of the learned CIT (A). In view of the above and after considering the facts in totality, we do not find any reason to interfere in the finding of the learned CIT (A). Accordingly we uphold the same. Hence the ground of appeal of the Revenue is dismissed. CIT (A) has admitted the additional evidences in contravention to the provisions of rule 46A of income tax rule - On perusal of the above provisions, we note that the learned CIT (A) has been empowered to admit the additional evidences. In the present case, the learned CIT (A) has exercised his power granted to him under section 250 of the Act and sub rule 4 of rule 46A of Income Tax Rule and therefore has admitted the additional evidences. Thus, we do not find any merit in the ground of appeal raised by the Revenue. Hence, we dismiss the same. Revenue appeal dismissed.
Issues Involved:
1. Deletion of various disallowances made by the Assessing Officer (AO). 2. Admission of additional evidence by the Commissioner of Income Tax (Appeals) [CIT(A)] in violation of Rule 46A. Issue-Wise Detailed Analysis: 1. Deletion of Various Disallowances Made by the AO: The Revenue challenged the deletion of several disallowances made by the AO on various expenses claimed by the assessee. The AO had disallowed these expenses on the grounds that the assessee failed to furnish adequate details for verification. The expenses in question included labor charges, freight inward and outward expenses, loading and unloading expenses, stores and spares expenses, packing material expenses, testing charges, bank commission and guarantee expenses, brokerage expenses, and depreciation. The CIT(A) found that the assessee had provided necessary bills, ledgers, and supporting documents proving the genuineness of the expenses. The CIT(A) held that the ad-hoc disallowances were not tenable as the payments were duly recorded in the books of accounts. Labor Charges, Freight Inward and Outward Expenses, Loading and Unloading Expenses, Stores and Spares, and Packing Material: The CIT(A) noted that the assessee had submitted copies of ledgers, bank statements, and TDS details, indicating that payments were made through banking channels. The AO did not verify these details from the respective parties despite having the power under sections 131(1) and 133(6) of the Act. The CIT(A) thus directed the AO to delete the ad-hoc disallowances. Testing Charges: The CIT(A) observed that the assessee provided relevant ledger and supporting documents establishing the correctness of the expenses. The AO had not pointed out any defects in these documents, leading the CIT(A) to delete the addition. Bank Commission and Guarantee Expenses: The CIT(A) found that the assessee had submitted bank details during both assessment and appellate proceedings. The AO's ad-hoc disallowance of Rs. 2 lakh was deemed unsustainable, and the CIT(A) directed the deletion of this addition. Brokerage Expenses: The CIT(A) noted that the assessee had already disallowed brokerage expenses in the revised return of income. The AO's further disallowance would result in double addition, which was not justified. Depreciation: The CIT(A) held that the majority of bills for the addition of fixed assets were submitted, and no defects were pointed out by the AO. Thus, the disallowance of depreciation was not warranted, and the CIT(A) directed the deletion of this addition. 2. Admission of Additional Evidence by CIT(A) in Violation of Rule 46A: The Revenue contended that the CIT(A) admitted additional evidence in violation of Rule 46A. The CIT(A) admitted the additional evidence under the powers granted by section 250 of the Act and sub-rule 4 of Rule 46A, which allows the CIT(A) to direct the production of any document or examination of any witness to dispose of the appeal. The Tribunal found no merit in the Revenue's ground, as the CIT(A) was within his rights to admit additional evidence to ensure a fair disposal of the appeal. Conclusion: The Tribunal upheld the CIT(A)'s order, finding no reason to interfere with the deletion of various disallowances made by the AO. The Tribunal also dismissed the Revenue's contention regarding the admission of additional evidence by the CIT(A). Consequently, the appeal filed by the Revenue was dismissed.
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