2019 (10) TMI 1190 - AT - Income Tax

Tribunal decisions on Revenue appeals for assessment years 2011-15: detailed analysis, appeal filing, reassessment, expenses disallowance

The Assistant Commissioner of Income Tax, Central Circle, Salem Versus M/s. Thriveni Earthmovers Pvt Ltd,

The Assistant Commissioner of Income Tax, Central Circle, Salem Versus M/s. Thriveni Earthmovers Pvt Ltd, - TMI Issues Involved:1. Condonation of delay in filing the appeal.2. Validity of reassessment proceedings.3. Disallowance of expenses claimed as bogus.4. Disallowance under Section 14A read with Rule 8D.5. Disallowance of Corporate Social Responsibility (CSR) expenses.6. Disallowance of legal expenses.7. Addition based on discrepancies in Form 26AS.8. Disallowance of subcontractor payments.9. Disallowance of purchases as bogus.10. Disallowance of quality allowances and claims.11. Disallowance of 100% depreciation on temporary structures.Detailed Analysis:1. Condonation of Delay:The Tribunal condoned the delay of two days in filing the appeals by the Revenue, as the delay was neither willful nor wanton, and the Authorized Representative did not raise any serious objection.2. Validity of Reassessment Proceedings:The reassessment was initiated based on information from the Deputy Commissioner of Income Tax, Central Circle XXI, Kolkata, indicating that the assessee was a beneficiary of accommodation entries provided by M/s. Sakshi Trade Link Pvt Ltd. The Tribunal upheld the validity of the reassessment, stating that the information constituted 'new tangible' information enabling the Assessing Officer to form a reason to believe that income had escaped assessment. The Tribunal referenced several judgments, including the Hon'ble Supreme Court's decision in Phool Chand Bajrang Lal and Another vs. ITO, which supported the notion that fresh information exposing the falsity of statements made during the original assessment constitutes grounds for reassessment.3. Disallowance of Expenses Claimed as Bogus:The Tribunal upheld the CIT(A)'s decision to delete the addition of payments made to M/s. Sakshi Trade Link Pvt Ltd, as the Assessing Officer did not provide the assessee with an opportunity to cross-examine the director whose statement was used as the basis for the addition. The Tribunal emphasized that no addition can be made based on an unconfronted oral statement of a third party.4. Disallowance under Section 14A read with Rule 8D:For assessment years 2012-13 and 2013-14, the Tribunal directed the Assessing Officer to compute the disallowance by considering only the value of investments that yielded exempt income. The Tribunal upheld the deletion of interest disallowance under Rule 8D(ii), as the assessee had sufficient own funds to cover the investments.5. Disallowance of CSR Expenses:The Tribunal upheld the CIT(A)'s decision to restrict the CSR disallowance to 10% of the expenditure incurred in cash, referencing the Jurisdictional High Court's decisions that expenditures incurred for promoting social welfare and providing facilities to the local community are allowable as business deductions.6. Disallowance of Legal Expenses:The Tribunal upheld the CIT(A)'s decision to allow the legal expenses incurred in connection with a PIL filed against illegal mining in Odisha, as the expenditure was incurred to protect the business interests of the assessee. The Tribunal referenced the Hon'ble Supreme Court's decisions in Dalmia Jain & Co. Ltd. and Sree Meenkshi Mills Ltd., which support the allowance of legal expenses incurred to protect the business.7. Addition Based on Discrepancies in Form 26AS:The Tribunal remanded the issue back to the Assessing Officer for a denovo assessment, as the CIT(A) had not discussed the fact situation regarding the discrepancies between the receipts reflected in Form 26AS and the amount credited to the Profit and Loss account.8. Disallowance of Subcontractor Payments:The Tribunal upheld the CIT(A)'s decision to delete the disallowance of subcontractor payments, as the assessee had discharged its initial onus by providing primary details and the Assessing Officer had not provided any evidence to show that the amounts paid were recycled back to the assessee.9. Disallowance of Purchases as Bogus:The Tribunal upheld the CIT(A)'s decision to delete the disallowance of purchases from Kolkata parties, as the assessee had provided sufficient details to support the purchases, and the Assessing Officer had not brought any evidence to show that the amounts paid were recycled back to the assessee.10. Disallowance of Quality Allowances and Claims:The Tribunal upheld the CIT(A)'s decision to allow the quality allowances and claims, as the Assessing Officer had not questioned the genuineness of the expenditure and the payments were made out of commercial expediency. The Tribunal referenced the Hon'ble Supreme Court's decisions in Eastern Investments Ltd. and CIT vs. Walchand and Co. Pvt Ltd, which support the allowance of expenditures incurred for business purposes.11. Disallowance of 100% Depreciation on Temporary Structures:The Tribunal upheld the CIT(A)'s decision to allow the claim as revenue expenditure, following the decisions of the Hon'ble Supreme Court in Laskhmiji Sugar Mills Co. P. Ltd vs. CIT and other relevant judgments.Conclusion:The appeals filed by the Revenue were partly allowed for statistical purposes for assessment years 2012-13, 2013-14, and 2014-15, while the appeal for assessment year 2011-12 was partly allowed. The Tribunal's decisions were based on a thorough analysis of the facts and legal principles governing the issues on hand.