2023 (2) TMI 1162 - AT - Income Tax

Tribunal rules in favor of assessee on various issues, disallowances overturned, expenses allowed

Liberty Shoes Ltd., Versus DCIT, Circle Karnal And ACIT, Circle Karnal, Versus Liberty Shoes Ltd.,

Liberty Shoes Ltd., Versus DCIT, Circle Karnal And ACIT, Circle Karnal, Versus Liberty Shoes Ltd., - TMI Issues involved:1. Disallowance u/s 14A2. Foreign Travel Expenses3. Car Expenses4. Admission of additional evidences - Deletion of undisclosed business profits5. Trading Results of Fabrics1. Disallowance u/s 14A:The assessee did not receive any dividend during the year, leading to the conclusion that no disallowance u/s 14A was warranted due to the absence of any dividend received. The Tribunal upheld this decision, stating that in the absence of any dividend income and claim of exempt income, disallowance u/s 14A was not justified.2. Foreign Travel Expenses:The Assessing Officer (AO) disallowed a portion of foreign travel expenses due to lack of documentary evidence supporting the business purpose of the trips. However, the CIT(A) deleted the addition, emphasizing that all necessary details had been provided and that the foreign travels were essential for business expansion. The Tribunal affirmed the CIT(A)'s decision after reviewing the records and confirming that the trips were business-related without any personal elements, thus justifying the deletion of the addition.3. Car Expenses:The AO disallowed car expenses, suspecting personal use, as log books were not submitted for verification. The CIT(A) overturned this disallowance by examining details of personally owned vehicles by the directors, concluding that personal use could not be substantiated without tangible evidence. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal on this ground.4. Admission of Additional Evidences - Deletion of Undisclosed Business Profits:The CIT(A) granted relief based on additional evidences submitted under Rule 46A without involving the AO or calling for a remand report. The Tribunal remanded the issue back to the CIT(A) to allow the AO to provide comments on the additional evidences and to adjudicate the matter in accordance with the law.5. Trading Results of Fabrics:The AO made substantial additions against the declared profit from fabric sales, applying a high GP rate. The CIT(A) disagreed with the GP rate applied by the AO, reducing it to 7% and providing relief to the assessee. After examining the purchase and sale transactions, the Tribunal declined to interfere with the CIT(A)'s decision on the GP rate, partially allowing the appeals of both the assessee and the Revenue for statistical purposes.Overall, the Tribunal addressed various contentious issues related to disallowances, expenses, undisclosed profits, and trading results, ensuring a detailed analysis and appropriate application of legal provisions to reach a fair decision in each case.