Tribunal upholds CIT(A)'s decision on toll plaza expenses, NHAI payment, and salary/wages.

The Tribunal upheld the CIT(A)'s decision to delete additions made by the AO regarding toll plaza expenses, amount payable to NHAI, and salary and wages. The Tribunal dismissed the Revenue's appeals and the assessee's cross objections, finding no infirmity in the CIT(A)'s detailed findings based on proper examination of facts. The CIT(A) did not rely on any additional evidence in violation of Rule 46A.

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Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) regarding expenses incurred for operating the toll plaza.
2. Deletion of addition made by AO regarding the amount payable to National Highway Authority of India (NHAI).
3. Deletion of addition made by AO on account of salary and wages.

Issue-Wise Detailed Analysis:

1. Deletion of Addition Regarding Toll Plaza Expenses:
The AO made an addition of Rs. 62,70,485/- by disallowing operational expenses for the toll plaza business, arguing that the rise in expenses was not substantiated by the assessee. The AO compared the expenses with the previous year and concluded that the increase was unjustified. The CIT(A) deleted this addition, stating that the AO had not demonstrated that the expenses were not incurred for business purposes or lacked supporting bills and vouchers. The CIT(A) noted that the assessee provided valid reasons for the increased expenses, such as managing toll operations in Southern India, which posed logistical challenges and language barriers. The CIT(A) emphasized that the AO's disallowance was based on conjectures and surmises without any adverse material to prove the excessiveness of the payments.

2. Deletion of Addition Regarding Amount Payable to NHAI:
The AO added Rs. 1,27,07,644/- to the total income of the assessee, arguing that the amount shown as payable to NHAI was not substantiated with evidence and was actually paid in April 2014. The CIT(A) deleted this addition, explaining that the assessee followed the mercantile system of accounting, where expenses are accounted for when they accrue, not when they are paid. The CIT(A) highlighted that the toll collection for the last week of March 2014 was accounted for in the same accounting year, and the corresponding expenditure was a liability accrued and due to be paid as per the contract with NHAI.

3. Deletion of Addition Regarding Salary and Wages:
The AO disallowed Rs. 2,21,02,473/- (20% of the total salary and wages) on the grounds that the assessee claimed excessive salary payments without sufficient evidence. The CIT(A) deleted this disallowance, noting that the assessee provided a comparative analysis of salary and wages for the current and previous years, showing only a marginal increase. The CIT(A) observed that the AO did not bring any material evidence to prove that the expenses were excessive or not genuine. The CIT(A) also pointed out that the books of accounts were audited, and the AO did not invoke section 145(3) to reject them. The CIT(A) concluded that the disallowance was based on conjectures and surmises without any material evidence.

Conclusion:
The Tribunal upheld the CIT(A)'s findings and dismissed the Revenue's appeals in both I.T.A. No.249/Lkw/2018 and I.T.A. No.672/Lkw/2018, along with the assessee's cross objections. The Tribunal found no infirmity in the CIT(A)'s detailed and exhaustive findings, which were based on proper examination of facts and circumstances. The Tribunal also noted that the CIT(A) did not rely on any additional evidence in violation of Rule 46A while providing relief to the assessee. The order was pronounced in the open court on 06/09/2019.

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