Tribunal Allows Appeal: Delays Excused, Disallowances and Additions Removed Due to COVID-19 Lockdown Guidelines.

The assessee's appeal was allowed by the Tribunal. The Tribunal condoned the 36-day delay in filing the appeal, deleted the disallowance of Rs. 6,42,437/- for non-deduction of TDS under Section 40(a)(ia), removed the addition of Rs. 50,250/- due to account discrepancies, and annulled ad hoc disallowances of traveling and miscellaneous expenses. The Tribunal considered the COVID-19 lockdown as an extraordinary circumstance for the delayed pronouncement of the order, referencing guidelines from the SC and Bombay HC. The order was pronounced on 26/06/2020.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of Rs. 6,42,437/- for non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act.
3. Addition of Rs. 50,250/- due to a discrepancy in the account of M/s Eskay Sales Corporation.
4. Ad hoc disallowance of Rs. 7,575/- out of traveling expenses and Rs. 12,322/- out of miscellaneous expenses.

Detailed Analysis:

1. Condonation of Delay:
The appeal filed by the assessee was delayed by 36 days. The assessee explained that the delay was due to the order being bundled with other records and thus not being traced in time. The delay was condoned as the assessee was found to have a reasonable and sufficient cause for the delay, and the learned D.R. had no objection to this condonation.

2. Disallowance of Rs. 6,42,437/- for Non-Deduction of TDS:
The assessee, engaged in the business of manufacturing leather and cotton items, had made payments towards shipping expenses to non-resident shipping companies. The Assessing Officer disallowed these payments under Section 40(a)(ia) of the Income Tax Act for non-deduction of TDS as per Section 194C. The CIT(A) upheld this disallowance. However, the assessee relied on CBDT Circular No. 723 dated 19/09/1995, which clarifies that payments to non-resident shipping companies are covered under Section 172, not under Sections 194C or 195. The Tribunal, agreeing with the assessee, deleted the disallowance, stating that the provisions of Section 172 apply, and hence, TDS under Sections 194C and 195 is not applicable.

3. Addition of Rs. 50,250/- Due to Discrepancy in Account:
The addition of Rs. 50,250/- was made due to a difference in the opening balance in the account of M/s Eskay Sales Corporation. The assessee contended that this discrepancy had been carried over from previous years and did not pertain to the year under consideration. The Tribunal, considering the facts and the continuity of the discrepancy from earlier years, deleted the addition.

4. Ad Hoc Disallowance of Traveling and Miscellaneous Expenses:
The Assessing Officer disallowed 10% of traveling and miscellaneous expenses on an ad hoc basis, citing that the expenses were supported by self-made debit vouchers and were not fully verifiable. The CIT(A) upheld this disallowance. The Tribunal, however, noted that no specific discrepancies were pointed out in the books of account, which were tax audited. Citing the Calcutta High Court’s decision in Ashok Surana vs. CIT, the Tribunal held that ad hoc disallowances without pointing out specific discrepancies are not permissible. Consequently, the disallowances were deleted.

Pronouncement of Order Beyond 90 Days:
The order was pronounced beyond the 90-day period due to the unprecedented COVID-19 lockdown, which was considered an "extraordinary" circumstance. The Tribunal referenced the decision in the case of JSW Ltd and the guidelines provided by the Hon'ble Supreme Court and Bombay High Court regarding the extension of time limits due to the lockdown. The Tribunal concluded that the period of lockdown should be excluded while computing the 90-day period for pronouncement of the order.

Conclusion:
The appeal of the assessee was allowed, with the Tribunal deleting the disallowances and additions made by the Assessing Officer and upheld by the CIT(A). The order was pronounced in the open court on 26/06/2020.

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