ITAT rules for assessee on rent disallowance, deferred expenditure with evidence. Re-examination directed for section 69C addition.

The ITAT ruled in favor of the assessee in all issues. It allowed the disallowance of rent and deferred revenue expenditure, citing sufficient evidence supporting the payments. Additionally, it directed a re-examination of the addition under section 69C, emphasizing the justifiability of the expenses. The decision favored the assessee against the revenue, leading to the appeal being allowed for statistical purposes.

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Issues:
1. Disallowance of Rent
2. Disallowance of Deferred Revenue Expenditure
3. Addition under section 69C

Issue 1 - Disallowance of Rent:
The assessee contested the disallowance of rent amounting to Rs. 2,15,000. The rent was paid for extra amenities under an agreement, which the CIT(A) questioned for lack of clarity on the amenities provided. However, the ITAT found sufficient evidence in the form of agreements, vouchers, TDS deduction, affidavits, and bank statements supporting the rent payment. The ITAT concluded that the CIT(A) erred in not considering the relevant evidence and allowed the rent payment for the specified period. The decision favored the assessee against the revenue.

Issue 2 - Disallowance of Deferred Revenue Expenditure:
The dispute involved the disallowance of deferred revenue expenditure amounting to Rs. 25,880. The Assessing Officer disallowed it citing section 35D limitations. The ITAT referenced a Bombay High Court case, emphasizing that preoperative expenses akin to revenue should be allowed. Consequently, the ITAT disagreed with the CIT(A) and directed the Assessing Officer to permit the deferred revenue expenses. This issue was decided in favor of the assessee against the revenue.

Issue 3 - Addition under section 69C:
Regarding the addition of Rs. 58,635 under section 69C, the assessee argued that negative cash balances in the cash book arose due to expenses incurred by employees on behalf of the company. The ITAT noted discrepancies in the assessment, where the authority failed to consider the circumstances leading to negative balances. The ITAT found the expenditure justifiable and ordered a re-examination by the Assessing Officer, emphasizing the need to review the accounts and materials available. Consequently, the ITAT set aside the CIT(A) decision, ruling in favor of the assessee against the revenue.

In conclusion, the ITAT allowed the appeal filed by the assessee for statistical purposes, with the judgment pronounced on 23rd September 2016.

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