2020 (8) TMI 591 - AT - Income Tax

Administrative expenses fully allowed after natural justice violation by assessing officer without proper opportunity

M/s. New Bridge Centre Private Limited Versus Deputy Commissioner of Income Tax Circle-5 (1) (1) Bengaluru

M/s. New Bridge Centre Private Limited Versus Deputy Commissioner of Income Tax Circle-5 (1) (1) Bengaluru - TMI Issues Involved:Challenging disallowances of expenses by Ld CIT(A) for AY 2011-12 and 2012-13, Barred appeals, Condonation of delay, Assessment under different heads, Disallowance of administrative expenses, Disallowance of pantry and stationery purchase, Disallowance of building maintenance expenses, Disallowance of miscellaneous expenses.Analysis:1. Condonation of Delay:The assessee filed appeals challenging disallowances by Ld CIT(A) for AY 2011-12 and 2012-13, which were initially barred by limitation. The assessee sought condonation of delay, which was granted based on submissions made.2. Assessment Under Different Heads:The AO assessed income under 'Income from Business' for exploiting commercial property, but Ld CIT(A) disagreed, assessing it under 'Income from other sources.' The AO made disallowances without thorough discussion, leading to appeals by the assessee.3. Disallowance of Administrative Expenses - AY 2011-12:The AO reduced administrative expenses without justification or seeking clarifications from the assessee. The Tribunal emphasized adherence to principles of natural justice, directing the AO to allow the full claim of administrative expenses.4. Disallowance of Pantry and Stationery Purchase - AY 2012-13:Similar to the previous year, the AO disallowed pantry and stationery purchase without proper reasoning. The Tribunal, citing principles of natural justice, directed the AO to allow the deduction related to pantry and stationery purchase.5. Disallowance of Building Maintenance Expenses:The AO disallowed 40% of building maintenance expenses without proper basis or supporting evidence. The Tribunal found the disallowance excessive and reduced it to 10% of the claimed expense, emphasizing the lack of supporting material.6. Disallowance of Miscellaneous Expenses:The AO disallowed a significant amount of miscellaneous expenses without proper analysis of financial statements. The Tribunal found no basis for this disallowance, directing the AO to delete the disallowed amount.7. Conclusion:The Tribunal allowed the appeal for AY 2011-12 and partially allowed the appeal for AY 2012-13, emphasizing adherence to natural justice principles and lack of proper justifications for disallowances made by the AO. The orders were pronounced on 26.06.2020.This detailed analysis of the legal judgment highlights the issues involved, the Tribunal's considerations, and the final decisions made regarding the disallowances of expenses for the respective assessment years.