2024 (11) TMI 1246 - AT - Income Tax

Disallowance on account of payment exceeding the limit specified u/s 40A(3) - HELD THAT - We are of the considered view that payment made in excess of the limit prescribed u/s 40A(3) are to be examined keeping in view the exigencies of the business run by the Assessee. In case such expenses are must for running the business and the Revenue has no doubt about the identity of the payee and the genuineness of the transactions, disallowance on such occasion is not required. In the given case, the Assessee is having the business of event management and the excess as shown by the Counsel of the Assessee may be necessary to run the show, therefore, in this situation, and in our opinion, the addition made by the AO and sustained by the CIT(A) on this account cannot be sustained. Accordingly, the Assessee s appeal on this issue is allowed. Disallowance of deduction claimed u/s VI-A - claim made in returns filed in response to notice u/s 153 A/B/C - HELD THAT - We are of this considered view that the issue decided in the case of CIT vs. Sun Engineering Works 1992 (9) TMI 1 - SUPREME COURT is not applicable on claim made in returns filed in response to notice u/s 153 A/B/C. Accordingly, the findings given by the CIT(A) on this issue cannot be sustained and, thus, the appeal filed by the Assessee on this issue is allowed. Disallowance of credit of TDS - as per CIT(A) credit of TDS is to be given only with regard to the TDS deducted in appellant s name during the year under consideration and further restricted to the business income from the case assessed in appellant s hand - HELD THAT - We are of this considered view that it is only the Assessing Officer who can calculate the refund of TDS to the appellant ( in case applicable) as per the provisions of the Income Tax Act, 1961. Accordingly, we direct the Assessing Officer to calculate the amount of refund to be given to the appellant as per the provisions of the I.T. Act. Accordingly, this ground stands allowed.

Summary

Issues Involved:

1. Non-speaking order by the Commissioner of Income Tax (Appeals).
2. Addition of income and disallowance of deductions under section 40A(3) and Chapter VI-A.
3. Disallowance of credit of Tax Deducted at Source (TDS).
4. Treatment of business expenditure as personal expenditure.
5. Net profit rate assessment.

Detailed Analysis:

1. Non-speaking Order by the Commissioner of Income Tax (Appeals):
The appellant argued that the order of the Commissioner of Income Tax (Appeals) was not a speaking order, claiming it was erroneous, arbitrary, and opposed to law and facts. However, this ground was deemed general in nature and did not require specific adjudication.

2. Addition of Income and Disallowance of Deductions:

- Section 40A(3) Disallowance:
The issue involved disallowance of Rs. 71,950/- due to payments exceeding the limits specified under section 40A(3). The appellant admitted to making cash payments to three individuals but failed to establish the identity and genuineness of the transactions. Despite this, the Tribunal found that the payments were necessary for the appellant's event management business, citing business expediency as a key factor. Consequently, the disallowance was overturned, and the appeal was allowed.

- Chapter VI-A Deductions:
The appellant claimed deductions under sections 80C and 80D in returns filed under section 153A/153C, which were not claimed in original returns. The Tribunal, referencing various case laws, allowed these deductions, stating that fresh claims could be made in returns filed in response to notices under section 153A/B/C, thereby overturning the disallowance.

3. Disallowance of Credit of TDS:
The appellant contested the disallowance of TDS credits, arguing that these deductions were accounted for in their income. The Tribunal directed the Assessing Officer to verify and calculate the refund of TDS as per the provisions of the Income Tax Act. This ground was consistently decided in favor of the appellant across various appeals, allowing the credit of TDS.

4. Treatment of Business Expenditure as Personal Expenditure:
In one appeal, the Commissioner of Income Tax (Appeals) treated Rs. 35,583/- as personal expenditure of the appellant, incurred through a credit card. However, since the appellant did not press this ground, it was dismissed as 'not pressed.'

5. Net Profit Rate Assessment:
The appellant challenged the imposition of a 12% net profit rate, arguing it ignored the actual net profit. As the appellant did not press this issue, it was dismissed as 'not pressed.'

Conclusion:
The Tribunal allowed several appeals in favor of the appellant, particularly regarding the disallowance of deductions and TDS credits, emphasizing the business necessity and the legitimacy of claims made in response to section 153A/B/C notices. The appeals were disposed of with some allowed, some partly allowed, and one dismissed.