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TMI Blog2024 (6) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for admission of additional evidence. Deletion of Addition on Account of Forfeited Amount the issue in dispute is no longer res-integra. Hon ble Delhi High Court in the case Frontier Land Development Pvt. Ltd. [ 2019 (12) TMI 1261 - DELHI HIGH COURT] held that object of business of assessee-company was development of real estate and advance to HDIL was given in ordinary course of business forfeiture of advance could not be categorised as capital expenditure but would be allowed as business expenditure. Deletion of Addition on Account of Various Expenses as during appellate proceedings, the appellant submitted the copy of Profit and Loss Account audited u/s. 44AB of the Act. The reason mentioned in the assessment order is that correctness and genuineness can t be established in absence of details. The relevant details submitted by the appellant are forwarded to AO to submit his comments. However, the AO didn t submit the remand report. Therefore, the details submitted by the appellant on account of expenses claimed under the head Miscellaneous Expenditure, Tour Travel Expenditure, Sale Promotion, Labour Charges and Vehicle Expenses are verified and found in order. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a/c of expenses claimed under the head, Miscellaneous Expenditure, Tour Travel Expenditure, Sale Promotion, Labour Charges and Vehicle Expenses @40% of total expenditure aggregating to ₹1,22,14,178/- on the ground that during appellate proceedings, the assessee submitted copy of Profit and Loss Account audited under Section 44AB of the Act without verifying the correctness and genuineness of expenditure claimed and without calling the remand report from the Assessing Officer? C. Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) has justified in stating that, the relevant details submitted by the assessee were forwarded to Assessing Officer to submit his comments and the Assessing Officer did not submit the remand report without giving any communication details that the learned CIT (A) had shared the details with Assessing Officer and called remand report whereas as per the Appeal Module Common Function Module of ITBA, there is no such communication sent by from the CIT (A), NFAC found in this regard and the claim of the learned CIT (A) that he has called remand report is incorrect and devoid of facts? D. Whether on the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al evidence was admitted and accepted as genuine at first appellate stage without Assessing Officer furnishing his comments and without verification, requirement of Rule 46(3) were not satisfied? In the instant case there was violation of Rule 46A(3) on the part of Learned CIT (A), NFAC as the evidence produced during the appellate proceeding which were not produced before the Assessing Officer, the learned CIT (A) failed to allow a reasonable opportunity to Assessing Officer. (a) To examine the evidence or documents produced by the appellant. (b) To produce any evidence or documents, etc. in rebuttal of the additional evidence, produced by the appellant. 04. The assessee has raised following grounds in cross objection:- 1. Addition under Exceptional item which appearing in Profit and Loss account ₹1,25,00,000/- 2. Addition on account of Other Expenses i.e. miscellaneous Expenses, Tour Travel, Sales Promotion, Labour Expenses, Vehicle Expenses, under the Head Other Expenses-₹48,85,871/-. 05. The brief fact of the case shows that Assessee Company is a dealer in automobile and automobile parts. It filed its return of income on 14th February, 2013, at a total income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance of 40% of the expenditure, he also considered the explanation of the assessee and held that audited accounts submitted by the assessee are forwarded to the learned Assessing Officer for his comments; however, the learned Assessing Officer did not submit the remand report. Therefore, he deleted the addition. 010. With respect to the third disallowance of ₹27,33,792/-under Section 14A of the Act, whereas the dividend earned is only ₹60,00,000/- , he following the decision of several High Courts, held that the disallowance under Section 14A of the Act should not exceed the exempt income. Thus, he restricted the disallowance to the same. He passed the appellate order on 8th September, 2023, by which the learned Assessing Officer is aggrieved. 011. Grievance is as per ground no. A to C and E to G is that the learned CIT (A) accepted the additional evidences furnished by the assessee without complying with the Provisions of Rule 46A of the Income Tax Rules, on the issue of disallowance under Section 14A of the Act, it is the grievance of the learned Assessing Officer that there is no provision to restrict the disallowance to the extent of exempt income and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer. Before the learned CIT (A) seven hearings took place. In paragraph no.6, the learned CIT (A) has mentioned that the assessee furnished some additional evidences. It is not known what are those additional evidences but he admitted the same holding as under:- 6. Before deciding upon the addition made by the AO, it is important to decide whether additional evidence submitted by the appellant should be accepted or not. In this regard, it needs to be emphasized here that, the provisions of Rule 46A have been framed for the purpose of ensuring that a fair and reasonable opportunity is provided to the appellant for submitting additional documents evidences at the appellate stage, which due to some valid reasons, could not be submitted earlier, during the course of assessment proceedings. Thus, during the course of the appellate proceedings, the appellants are entitled to invoke the provisions of Rule 46A in appropriate cases, for ensuring that their taxable income is finally determined in a judicious manner. In this regard reliance is placed on following decisions: (a) In the case of Principal Commissioner of Income-tax Vs. Daljit Singh Sra, reported in [2017] 80 taxmann.co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence, after obtaining a remand report from the assessing officer, if the evidence sought to be adduced by the applicant is crucial to the disposal of the appeal. The Hon'ble ITAT Delhi have also held in the case of Plectra (Jaipur) (P) Ltd. vs. IAC (26 ITD 236) that if the evidence is genuine, reliable, proves the assessee's case, then the assessee should not be denied the opportunity. 7. It is also seen that the additional evidence submitted by the appellant was never submitted during the assessment proceedings, the additional evidences comprises certain facts of the case of different Assessment Years of the appellant on the similar issue and other documents in support of addition relating to disallowance of bad debts which have been considered 015. However there is no reference of Rule 46A of the Income tax Rules 1962 which gives powers to the ld CIT (A) for admission of additional evidence as under :- 6 [ 7 Production of additional evidence before the 8[8a[Joint Commissioner] (Appeals)] 9[and Commissioner (Appeals)]. 46A. (1) The appellant shall not be entitled to produce before the 8 [ 8a [Joint Commissioner] (Appeals)] 9 [or, as the case may be, the Commissioner (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith respect to the ground no.1, regarding deletion of disallowance of ₹1.25 crores, he considered the detailed explanation of the assessee which is reproduced in paragraph no.8.2 of his appellate order. Vide Para 8.3 to 8.7, he followed certain judicial precedents and deleted the disallowance. He deleted the disallowance as under :- 8.3 The facts of the case and submission made by the appellant has been gone through. During the year under appeal, the appellant entered into an agreement with M/s. Satyagiri Shipping co. Ltd. (in short SSCL) to complete the developmental project awarded to SSCL by MSRDC. SSCL was required to deposit a sum of Rs. 5,00,00,000/- as bank guarantee for performance security as per bid agreement executed between SSCL and MSRDC. The appellant and M/s. Gammon India Ltd. arranged the bank guarantee of Rs. 3,75,00,000/- and Rs. 1,25,00,000/- respectively. As SSCL failed to perform its obligation as specified in agreement, MSRDC revoked and withdrew the letter of intent and letter of award given to SSCL and forfeited the bank guarantee provided by the appellant and M/s. Gammon India Ltd. The suit filed by the appellant was dismissed by Hon ble High court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to satisfy requirements of section 37(1) of the Act, which lays down several conditions, such as-the expenditure should not be in the nature described under Section 30 to 36; it should not be in the nature of capital expenditure; it should be incurred in the previous year; it should be in respect of business carried by the assessee; and be expended wholly and exclusively for the purpose of such business. The assessee is a company which is engaged in the business of real estate. The main object of the business of the company is development of real estate. It made a payment of Rs. 3.50 crores as advance to HDIL for purchase of land to construct commercial complex for the development of real estate. Since it did not make payment of the balance amount - for whatever reason, the advance given was forfeited. In this view of the matter, the advance given in the ordinary course of business has been rightly treated as loss incurred by the company. We are unable to find any material on record to suggest to the contrary. In view of the aforesaid factual findings, the treatment given to the forfeiture of advance Rs. 3.50 crores could not be categorised as capital expenditure. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,671/-. During appellate proceedings, the appellant submitted the copy of Profit and Loss Account audited u/s. 44AB of the Act. The reason mentioned in the assessment order is that correctness and genuineness can t be established in absence of details. The relevant details submitted by the appellant are forwarded to AO to submit his comments. However, the AO didn t submit the remand report. Therefore, the details submitted by the appellant on account of expenses claimed under the head Miscellaneous Expenditure, Tour Travel Expenditure, Sale Promotion, Labour Charges and Vehicle Expenses aggregating to Rs. 1,22,14,178/- are verified and found in order. In view of the above, the disallowance of 40% of Rs. 1,22,14,178/- made in the assessment order is unreasonable and hereby deleted. This Ground of appeal is allowed. 019. So far as the above two issues are concerned, we are of the opinion that the learned CIT (A) has deleted the disallowance without following the rule 46A of the Income Tax Rules. 020. With respect to the third addition under Section 14A of the Act of ₹27,33,792/- against the exempt income earned of ₹60,00,000/- , we find no infirmity in the order of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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