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TMI Blog2024 (3) TMI 1394X X X X Extracts X X X X X X X X Extracts X X X X ..... nding fee for violation of provision under the Motor Vehicles Act, 1988 and Rules thereunder has held that such expenditure is allowable as business expenditure under section 37(1) of the Act. As in this case assessee has not been asked to produce the Traffic Challans before making the addition, with a view to render substantial justice, we deem it fit to remand the matter to the file of the A.O. to verify the documents produced by the Assessee and decide the issue afresh. Disallowance on account of Deposit from customers - HELD THAT:- Similar issue regarding disallowance of deposit from customers has been considered by the Tribunal in Assessee s own case in Assessment Year 2010-11 [ 2023 (6) TMI 393 - ITAT DELHI] held that onus is on the revenue to bring on record tangible evidence to show that liability has ceased to exist, especially when it is continued to be shown in the books of accounts of the assessee. Thus, considering from all possible angles, neither provisions of section 41(1) of the Act apply [Assessing Officer fails] nor provisions of section 41(2) and 43(6) of the Act [CITA fails]. This ground by the assessee is allowed. Addition on account of inventory loss and leak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common order. 3. The Assessment Year 2011-12 comprises of all the Grounds/issues to adjudicated, therefore, the Grounds of Appeal of the Assessee taken in ITA No. 5925/Del/2018 (AY 2011-12) are as under:- 1. Ground no. 1 That on the facts and circumstances of the case and in the law, the order passed by Ld. AO/ Ld. CIT(A) partly allowing the appeal filed by the Appellant, without appreciating the facts of the case and judicial precedents, is bad in law and is liable to be quashed to the extent it is prejudicial to the Appellant. 2. Ground no. 2-Disallowance on account of reversal of Provisions towards bad debts 2.1 That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the disallowance made by the Ld. AO in relation to the Appellant's claim on account of reversal of Provision towards Bad Debts amounting to Rs. 22,53,006. 2.2 That on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to consider the submissions made during the course of appellate proceedings wherein the Appellant had stated that the amount represent reversal of provision created in earlier years and were offered to tax in the year when provision were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y following earlier year's order is bad in law and is liable to be quashed; 4.2 That on the facts and circumstances of the case, without prejudice to aforesaid grounds, the Ld. CIT(A)'s action in disallowing container deposits under Section 41(1) is not in accordance with the provisions of the Act since no deduction was ever claimed by Appellant in the past on account of such container deposits. 4.3 That on the facts and circumstances of the case, the Ld. CIT(A) erred in law by not appreciating that liability for payment of security deposits continue to exist and no sums were written back to the Profit and Loss A/c, so as to invoke Section 41(1) of the Act being a sine-qua-non for taxability of any sum which is in complete disregard of judicial precedents including those of Apex Court and jurisdictional High Court; 4.4 That on the facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred in assuming that the closing balance of security deposits from customers outstanding as on March 31, 2003 amounting to Rs. 165,98,59,900 represent income of the Appellant. Such an action is grossly unjustified as it is without appreciating the business model of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,98,146/- made on account of Staff Welfare Expenses as no details beyond mere numerical figures of the head-wise expenses related to the same (such as supporting vouchers, details of the site expenses etc. were produced during assessment proceedings) and even during the appellate proceedings only unsubstantiated justification and statistical chart showing the expenditure under various sub-heads of Staff Welfare Expenses were produced by the assessee company. 4. The appellate crave leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time before or at the time of hearing of the appeal. ITA No. 6296/Del/2018 (A.Y 2013-14) (Revenue) 1. Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs.1,02,94,404/- made by the AO in respect of delayed payment of Employee's contribution to the Provident Fund, ESI and other welfare funds, not appreciating that the Employee's contribution to PF ESI is governed by the provisions of section 2(24) read with section 36(1)(va) and by section 43B of the Income Tax Act, 1961('the Act') 2. Whether on the facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 7,89,58,311/- on account of deposit from customers. Further, the Ld. CIT(A) deleted the additions of Rs. 10,67,24,494/- made on account of inventory loss and leakages, Rs. 8,68,12,412/- made on account of repair and maintenance and further deleted the addition of Rs. 8,06,98,146/- made on account of Staff Welfare Expenses. Aggrieved by the above deletions, the Ld. CIT(A) filed the Appeal in ITA No. 5903/Del/2018 and as against the sustaining the additions, the assessee preferred the Appeal in ITA No. 5925/Del/2018 on the grounds mentioned above. 7. First we will take the Assessee s Appeals. The Ground No. 1 of the assessee appeals for A.Y 2011-12, 2012-13 and 2013-14 are general in the nature of which require no adjudication. 8. Ground No. 2 for A.Y 2011-12, is regarding reversal of provision for bad and doubtful debts amounting to Rs. 22,53,006/-. The Ld. A.O. while making the above addition for A.Y 2011-12 held as under:- 1. Addition on account of Reversal of Provisions towards Bad Debts As per the computation of Income, assessee company has reduced a sum of Rs. 22,53,006/- on account of Reversal of Provision towards Bad Debts. Accordingly, the assessee vide order sheet entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- 4.3.3.2. The appellant has stated that the amount of Rs.22,53,006/-were already offered to tax in the year when the same were provided for, any reversal out of the same should be excluded from the total income to avoid potential double taxation of the amount (a) once in the year of creation of provision in which case the same would be debited to P L A/C, and (b) on reversal / write-back of such provision in which case the same would be credited to P L A/c. The appellant has submitted that the claim of the appellant was denied by the AO stating that scanty details were furnished. Further, the appellant has argued that the reversal of provision has been misinterpreted by the AO as bad debts written off and held that simply addition sums / provisions were offered to tax in earlier years, when it stood unascertained, subsequently, if these sums were found unavoidable further deduction in future year is not eligible. The appellant has submitted that it is a trite law that no provision for an unascertained liability is eligible as a deduction in the computation of income if debited to P and L A/C, and extending the same rationale, any reversal out of such provision in a subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in dispute. The ld. CIT(A) has admitted that the issue in hand is a case of reversal of provision of which income has already been offered in the earlier year. Therefore, we fail to understand why the addition has been sustained by the ld. CIT(A). 20. In A.Ys 2008 09 and 2009 10 also, similar issue arose but no disallowance was made in this regard as the ld. CIT(A) has deleted the disallowance and no appeal has been filed by the revenue against the decision of the ld. CIT(A). Considering the past history and considering the totality of the facts, we do not find any merit in the addition. We, therefore, direct the Assessing Officer to delete the disallowance of Rs. 8,34,21,291/ . This ground is allowed. 13. By following the ratio laid down in Assessee s own case for A. Y 2010-11 (supra), we direct the A.O. to delete the disallowance of Rs. 22,53,006/- made in A.Y 2011-12, accordingly the Ground No. 2 of the assessee Appeal in ITA No. 5925/Del/2018 is allowed. 14. Ground No. 3 in Assessee s Appeal for A.Y 2011-12, Ground No. 2 in A.Y 2012-13 and A.Y 2013-14 are regarding disallowance of Traffic Challans amounting to Rs. 2,25,51,980/-,1,30,34,740/-, 1,51,16,561/- respectively. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce not allowable and an amount of Rs. 2,25,51,980/- is added to the income of the assessee. Since, I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) are being initiated separately. (Addition of Rs. 2,25,51,980/-) 16. The Ld. CIT(A) while confirming the said addition for A.Y 2011-12 held as under:- 4.4.3.2. The submissions of the appellant have been considered and are not found to be tenable. The case laws cited have also been considered but are distinguishable in facts. The AO has rightly held that the expenditure incurred by the appellant company for the purpose of making payment of traffic Police Challans for No entry, red light, no parking etc. are clearly expenditure which are incurred for infringement of law and has correctly added back the amount of Rs.2,25,51,980/- to the income of the appellant. I find no reason to interfere with the AO's order on this issue, appeal on this ground is dismissed. 17. The Ld. Counsel for the assessee submitted that the issue of disallowance of traffic challnas has been dealt and decided by the Co-ordinate Bench of the Tribunal for the Assessment Year 2009-10 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compounding fee for violation of provision under the Motor Vehicles Act, 1988 and Rules thereunder has held that such expenditure is allowable as business expenditure under section 37(1) of the Act. Thus, following the decision of the Coordinate Bench (supra), we delete the disallowance. Ground no. 4 is allowed. 27. Respectfully, following the decision of the coordinate bench, the Assessing Officer is directed to delete the disallowance of Rs. 2,18,81,852/ . This ground is accordingly allowed. 20. By following the order of the Tribunal for Assessment Year 2009-10 and 2010-11, we direct the A.O. to delete the disallowance made on account of Traffic Challan amounting to Rs. 2,25,51,980/- in A.Y 2011-12 and Rs. 1,51,16,561/- for A.Y 2013-14 accordingly the Ground No. 3 in ITA No. 5925/Del/2018 (A.Y 2011-12) and Ground No. 2 in ITA No.6506/Del/2018 for (A.Y 2013-14) of the Assessees are allowed . 21. In so far as the similar ground raised by the Assessee for AY 2012-13, the Assessee has filed an application for admission of additional documents under Rule 29 of the Income Tax (Appellate Tribunal) Rules, by producing Ledger of Traffic Challans. The Ld. Counsel submitted that the Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposit are increasing and the same has been increased from 158 crores to 207 Crores in the assessment year during the year under reference. Since the assessee company failed to furnish any confirmation even the list of such deposits has not been furnished if appears that this amount is lying from so many years and there is no claimant of this amount. In the assessment year 2003-04 this amount was at Rs. 165,98,59,900/- and that amount is also more than 8 years. Therefore considering all the facts of the case there being no claimant of this huge amount. the amount payable in the assessment year 2003-04 is hereby added in the income of the assessee as liability cease to exist within the meaning of section 41(1) of the LT. Act. Since in the previous year an amount of Rs. 158,09,01,589/- has already been disallowed u/ s 41(1} the remaining | amount of Rs. 7,89,58,311/-is hereby disallowed in this year and added to the income of the assessee company. Since I am satisfied that the assessee has furnished inaccurate particulars of income penalty u/s 271(l)(c) are being initiated separately. (Additions Rs, 7,89,38,311/-) 25. The above said addition has been confirmed by the CIT(A) in follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act applies only if the assets are owned by the power generating undertaking and since the assessee is not a power generating company, the ld. CIT(A) grossly erred in applying provisions of Section 41(2) of the Act. 38. Coming to the applicability of provision of Section 41(1) of the Act which is also not applicable on the facts of the case, as twin conditions have to be satisfied (i) deduction in respect of a trading liability should be claimed in the previous year and (ii) the subsequent year liability must be written back effectively resulting into a benefit. 39. Facts on record show that the assessee has not claimed any trading liability. Containers and bottles are shown under the head Current Assets and deposits are shown as Liabilities . There is no evidence brought on record to show that liability has ceased to exist. In our considered view, the cessation of liability can only occur either by operation of law or debtors unequivocally declaring his intention to not honour his liability when payment is demanded by the creditor. 40. For this proposition we draw support from the decision of the Hon'ble Supreme Court in the case of Sugauli Sugar Works [P] Ltd 102, tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s. 37(a) of the I.T. Act, 1961 the onus of proof lies on the appellant to prove that these have been incurred wholly and exclusively for the business purposes and since the appellant has failed to substantiate its claim by supporting evidence or documentary evidences regarding the claim made before the Income Tax authorities, the AO relying upon the following case law, the Hon'ble SC in the case of CIT vs Calcutta Agency Ltd. (SC) 19 ITR 191 and in the case of Lashinaratan Cotton mills Co. Ltd. Vs CIT (SC) 73 ITR 634, added back the amount claimed under this head. 4.5.3.2. The appellant has stated that during the year under consideration, the appellant had debited a sum of Rs. 10,67,24,494 on account of inventory losses and leakages in the P L account. The above loss incurred by appellant is on account of mishandling of its products, products having crossed best before date and leakages of the product. The appellant has stated that the products manufactured by appellant have an expiry period and beyond the expiry period, the products if consumed would result in reputational loss to the appellant. Therefore, the appellant calls such expired products available in market fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33.57% 59.053,380 92,917,122 35,935,220 155.44% 0.22% AY 2010-11 38,456,209.427 11,026.305.867, 40.20% 33,863,742 57.34% 0.24% AY 2011-12 45.405.809.185 6.949.599.758 18.07% 106.724.494 13.807.372 14.86% 0 240% AY 2012-13 56,102,094,941 10.696.285,756 23.56% 159.262.979 52,538,485 49.23% 0.28% AY 2013-14 65,971,270,000 9,869.175,059 17.59% 141,776,244 117.486.7351 -10.98% 0.21% A.Y 2014-15 68,979,970,000 3,008,700,000 4.56% 183,862,533 42,086,289 29.69% 0.27% 4.5.3.3. The submissions filed by the appellant and the case laws cited have been considered. It is seen that the claim of expenses under this head is only 0.24% expense, which is plausible considering the nature of business of the appellant company. In view of the submissions filed by the appellant company, the appeal on this ground is allowed. 33. The Ld. Counsel for the assessee submitted that the very same issue in hand in Assessee s own case for Assessment Year 2010-11 has been decided in favour of the assessee by the Tribunal in ITA No. 5810/Del/2018 which has been followed for the Assessment Year 2017-18 by the Co-ordinate Bench of the Tribunal in ITA No. 928/Del/2023, therefore, sought for dismissal of the above Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited Rs. 43,40,62,060/- The assessee company was asked during the course of assessment proceedings to provide the details of these expenses with supporting vouchers, details of the sites where these expenses incurred also the nature of these expenses to justify its claim. However, the assessee company failed to provide the reason for the steep increase and also the site wise details with supporting vouchers but simply filed the details of numerical figures of the head wise expenses and from therein no reason for increase in these expenses can be gathered. Further, no supporting vouchers has been provided to support its claim for the deduction of these expenses as revenue deduction u/s 37(1) of the Act. It is onus on the part of the assessee during the course of the assessment proceedings to justify its claim made in the P L account for the expenses with supporting documents and to the satisfaction of the assessing officer. IN this regard following case laws is relied upon:- The Hon'ble Supreme Court in the case of CIT vs Calcuta Agency Ltd. (SC) 19 ITR 191 and in the case of Lashimaratan Cotton mills Co. Ltd. Vs CIT (SC) 73 ITR 634 has held that in order to claim an expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Expenses. During the year under consideration, the assessee claimed expenditure of Rs. 40,34,90,731/- towards food, training, transportation, insurance, etc. for its employees and the same was claimed as staff welfare expenses. The Ld. A.O. made ad-hoc disallowance of 20% of the said expenditure amounting to Rs. 8,06,98,146/- on the ground that the assessee could not justify its claim for the said expenditure. 44. The Ld. CIT(A) while deleting the said ad-hoc disallowance made by the A.O. on the ground that, the said ad-hoc disallowance made by the A.O. was without any basis and without rejecting the books of accounts of the Assessee. The findings of the CIT(A) are as under:- 4.6.3.1 With regard to Ground nos.5 (a b) pertaining to disallowance of Repair Maintenance, the AO has disallowed Rs.8,68,12,412/- i.e. 20% of the total expenses under this head of Rs.43,40,62,060/-, u/s.37(1) of the I.T. Act, 1961. And with regard to Ground nos.5 (c, d e) pertaining to disallowance of Repair Maintenance, the AO has disallowed Rs.8,06,98,146/- i.e. 20% of the total expenses under this head of Rs.40,34,90,731/-, u/s.37(1) of the I.T. Act, 1961. It is held that in the present case, the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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