2021 (4) TMI 729 - AT - Income Tax

Revenue's Appeal Dismissed: Expenditure Disallowance Deleted, Tribunal Upholds CIT (A) Decision (A)

The Revenue's appeal for AY.2014-15 challenging the CIT (A)'s deletion of expenditure disallowance was dismissed by the Tribunal. The appellant's ... Misc. expenditure disallowance - assessee had failed to prove the same by way of filing cogent supportive evidence before the Assessing Officer - CIT-A deleted the addition - HELD THAT:- We find no merit in Revenue’s instant grievance. There is no dispute qua the clinching fact that the assessee’s books had been duly audited and its Annual Report was also available. And that the Assessing Officer had disallowed assessee’s entire expenses in drug manufacturing business thereby enhancing its profit to the maximum level. The assessee has already explained the reason of non-production of audited books of account to the fact that there was a tenancy dispute culminating in locked up premises in the corresponding span of time. So far as the Revenue’s case that the CIT (A) deleted the impugned disallowance without verification, it has come on record that he had duly sought for a remand report from the Assessing Officer’s side. We therefore find no reason to revive the impugned disallowance going by the Revenue’s pleadings. - Revenue’s appeal is dismissed. Issues:1. Disallowance of expenditure claimed by the appellant.2. Failure to produce substantiating evidences for expenditure.3. Disallowance of loss claimed by the appellant.4. Deletion of disallowance by CIT (A).5. Appeal by Revenue against CIT (A) order.6. Verification of expenses in drug manufacturing business.7. Tenancy dispute leading to non-production of audited books.8. Remand report sought by CIT (A).9. Decision on Revenue's appeal.Analysis:1. The Revenue's appeal for AY.2014-15 challenged the CIT (A)'s order deleting disallowance of expenditure amounting to Rs. 1,92,38,312. The Revenue contended that the appellant failed to provide supporting evidence for the claimed expenditure, leading to the disallowance.2. The appellant expressed inability to produce bills and vouchers due to a tenancy dispute resulting in being locked out of the business premises. The appellant's books were audited under Section 44AB of the Income Tax Act, and the annual report was available. The CIT (A) partially allowed the appeal, disallowing the claim of loss amounting to Rs. 38,507 due to lack of proper justification for expenditure.3. During the appeal, the CIT (DR) argued that the CIT (A) erred in deleting the disallowance despite the lack of evidence provided by the appellant. However, it was noted that the appellant's books were audited, and the Assessing Officer had disallowed all expenses in the drug manufacturing business. The reason for non-production of audited books was attributed to the tenancy dispute resulting in locked premises.4. The CIT (A) had sought a remand report from the Assessing Officer's side before deleting the disallowance. The Revenue's contention that the CIT (A) deleted the disallowance without verification was dismissed. The Tribunal found no merit in the Revenue's grievance and upheld the CIT (A)'s decision to delete the disallowance.5. Consequently, the Revenue's appeal was dismissed, affirming the CIT (A)'s order. The Tribunal concluded that the appellant's explanation for the non-production of audited books due to the tenancy dispute was reasonable, and there was no need to reinstate the disallowance based on the Revenue's arguments.This comprehensive analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decision regarding the disallowance of expenditure and the deletion of the disallowance by the CIT (A) in the context of the appellant's circumstances and the Revenue's appeal.