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2025 (1) TMI 1476 - AT - Income TaxAddition of 20% of the expenses u/s. 37 - reasons given by the ld. AO show that considering the PSU status and turnover of assessee the claimed expenses are very high and raises suspicion on the payment - HELD THAT - Before the ld. CIT(A) assessee submitted additional evidences which were admitted for the reason that during the short span of time it was not possible to collect the invoices and other details from all the branches and units. CIT(A) forwarded all these details to the jurisdictional AO for submission of remand report even after considerable time the ld. AO did not submit remand report. CIT(A) admitted additional evidences verified the same on test check basis and deleted the disallowance. It is not the case of the ld. DR even now that details submitted by the assessee before the ld. CIT (A) which were sent to ld. AO for submission of remand report were not complete and proper. Therefore we do not find any infirmity in the order of the ld. CIT A in deleting the above disallowance. Accordingly ground number 1 of the appeal is dismissed. Addition of 5% of sundry creditors payable towards purchase suppliers and work and for expenses as a cessation of liability under section 41 (1) read with section 28 (iv) - HELD THAT -Natural corollary would be that the amount of addition u/s 41(1) cannot be made on ad hoc basis. The learned assessing officer has applied five percentage of the total liability outstanding in the books of the assessee and held that it has ceased to exist and therefore chargeable to tax under section 41 (1). On reading of the provisions under section 41 (1) of the Act any ad hoc addition is not warranted. It must be the actual liability which has ceased to exist is chargeable to tax in the hands of the assessee. Therefore no infirmity in the order of CIT A in dealing with the additional evidences filed by the assessee which were sent for remand report to the assessing officer but for substantial time no such remand report was submitted and therefore on examination by the learned CIT A he has reached at a conclusion that the liability is stated by the assessee as on 31/3/2017 is in existence and has not ceased and therefore not chargeable to tax under section 41 (1) of the act. Accordingly we dismiss ground number 2 of the appeal of the learned AO. Disallowance of provision - CIT(A) has disallowed only because in absence of specific identity of the debtors it is not possible to close the account of such debtors and therefore the disallowance was made and confirmed - HELD THAT - Had the details of individual accounts available with the assessee there would not have been a separate account opened for such consolidated debtors. From that consolidated account of the debtors part of the sum comprising of 83.59 crores could not be reconciled which was written off. Therefore disallowance of the sum considered as bad debt by the assessee by the learned lower authorities is not correct as it satisfies all the conditions of section 36 (1) (vii) read with section 36 (2) of the act. This claim of the assessee is allowed based on the principles of the allowability of bad debts which are otherwise allowable irrespective of the additional evidence submitted by the assessee. Accordingly the learned assessing officer is directed to delete the disallowance of 83.59 Crores being amount written off in relation to the number of sundry debtors (the customers). Disallowance as bad and doubtful debts from ex-employees - HELD THAT - Apparently from the books of accounts of the assessee its shows that this is provided as bad and doubtful debts. Therefore now the question of claiming the same as a business loss does not arise because assessee has failed to show that the loss has arisen during the year. Merely because it is the claim of the assessee that same should be allowed as a business loss it cannot be allowed unless it satisfies the provisions of section 28-29 of the income tax act. In fact when the books of accounts shows that this is merely a provision for bad and doubtful debts naturally there is no provision in the income tax act applicable to the assessee which shows that it is allowed while computing taxable profits of the assessee. Various judicial precedents relied upon by AR also does not support the case. Accordingly we do not find any infirmity in the order of the learned CIT A in confirming the disallowance being amount provided as bad and doubtful debts from ex-employees to whom materials issued are not returned as well as excess material is drawn by them. Excess balance of in the said bank - HELD THAT - These are the minor differences arising on account of reconciliation. It was pointed out by the audit party. The assessee on its failure to reconcile the same decided to write it off to the profit and loss account but wrongly clubbed into another account head. Therefore if the assessee has come to know about the error in its books of account during the year of non-existence of an asset though disclosed as an existing asset in books of accounts of the assessee writing off the same would be allowable to the assessee as deduction. Therefore as the amount is small and it has arisen out of the bank reconciliation same is allowable to the assessee u/s 28 of the act for computation of profits and gains. Accordingly we direct the learned lower authorities to delete an amount on account of excess balance of in the said bank. Disallowance being amount written off consisting of advances given to various parties - HELD THAT - Except the standard operating procedure the nature of accounting entries being passed no substantial evidence could be placed with respect to the claim. Before us also merely judicial precedents are cited without showing the facts. Therefore we do not have any option but to confirm the order of the learned lower authorities in confirming the disallowance with respect to the suppliers. Second item of the advances to the staff similar conditions apply as far as the claim of the loss raised by the assessee. For this also assessee has failed to give any reason that why such losses are treated as incurred during the year. No further details were provided except showing us the standard operating procedure which does not help the case of the assessee. Accordingly the disallowance by CIT A is also confirmed. Computation of book profit u/s 115JB - HELD THAT - As accepted fact that the learned assessing officer has computed the book profit under section 115JB of the act without any form number 29B filed by the assessee. In absence of any details of any brought forward losses or unabsorbed depreciation as per the books of accounts the learned assessing officer did not grant deduction of least of these two items. When the matter reached before the learned CIT A he directed the learned assessing officer to compute the book profit under section 115JB of the act by giving an opportunity of hearing to the assessee and then compute the same in accordance with the provisions of the law. As the issue has been restored back to the file of the learned assessing officer to compute the book profit correctly it is the duty of the assessee to show that there is any book loss or unabsorbed depreciation available to the assessee to be granted as deduction from the book profit. It is for the assessee to compute and show before the learned assessing officer the brought forward losses and unabsorbed depreciation as per the books of account.
ISSUES PRESENTED and CONSIDERED
The Tribunal considered several issues in the appeal filed by the assessee and the cross-appeal by the Assessing Officer (AO):
ISSUE-WISE DETAILED ANALYSIS 1. Disallowance of Provisions (Rs. 86.66 crores)
2. Disallowance of Contract and Travel Expenditures (20%)
3. Addition of Sundry Creditors as Cessation of Liability (5%)
4. Computation of Book Profit under Section 115JB
5. Levy of Interest under Section 234B
SIGNIFICANT HOLDINGS
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