2023 (4) TMI 78 - AT - Income Tax

Revenue's Appeal Remitted for Verification, Disallowances Upheld, Fresh Adjudication Required

The Deputy Commissioner of Income Tax, Corporate Circle 3 (1), Chennai Versus M/s. Tamilnadu Generation & Distribution Corporation Limited And M/s. Tamilnadu Generation & Distribution Corporation Limited Versus The Assistant Commissioner of Income Tax, Corporate Circle 3 (1), Chennai

The Revenue's appeal against the deletion of understated income and undisclosed lease rental income was remitted back to the Assessing Officer for ... Understatement of income - undisclosed lease rental income - Addition of prior period expenses - HELD THAT:- As we find that the ld. CIT(A) has not called for remand report upon various detailed submissions of the assessee, before deciding the issues, appears to be in violation of Rule 46A of the Income Tax Rules, 1962. Accordingly, we set aside the order of the CIT(A) on the above issues and remit the matter back to the file of the Assessing officer for fresh adjudication after detailed verification of claims of the assessee in accordance with law by affording sufficient opportunities of being heard to the assessee. Disallowance of guarantee commission - AO has noticed from the schedules annexed to the Profit and Loss account that the assessee-company has claimed guarantee commission to State under the Head 'INEREST AND FINANCE CHARGES' - HELD THAT:- Admittedly, the assessee has proposed for payment of outstanding guarantee commission in 15 equal monthly instalments. Assessee has not produced any evidences towards approval of the Government for the above proposal of the assessee or payment of guarantee commission as proposed by the assessee - in case the assessee has incurred expenses towards payment of guarantee commission as proposed pertaining to the relevant assessment years, the AO is required to allow the expenses. We direct the assessee to produce necessary evidences before the AO and the AO is also directed to consider and decide the issue afresh after verification of the evidences as may be filed by the assessee in accordance with law by affording an opportunity of being heard to the assessee. Disallowance of contribution to recognised provident fund - assessee has debited contributions to recognised provident fund and claimed. Since the amounts payable to statutory authorities have not been paid, the AO disallowed the same and brought to tax, which was confirmed by the ld. CIT(A) - HELD THAT:- We find that the expenses are eligible to be claimed as a revenue expenditure only on the remittance of the same to PFRDI approved CPS fund. In case, the assessee made any remittance and incurred the expenses for the relevant assessment years, the AO is directed to allow the same. Thus, the ground raised by the assessee is allowed for statistical purposes. Disallowance of over statement of expenditure - AO has disallowed the over statement of expenditures for both the assessment years, which was confirmed by the ld. CIT(A) - assessee has submitted that the overstatement of expenses were corrected through rectification journal vouchers in the ensuing financial year and alternatively it was submitted that the amount is disallowed in the assessment year 2015-16, the same may be directed to be allowed in the assessment year 2016-17 - HELD THAT:- We direct the Assessing Officer to examine and decide the issue afresh in accordance with law for both the assessment years by considering the explanations as may be submitted by the assessee. Appeals filed by the Revenue as well as assessee are allowed for statistical purposes. Issues Involved:1. Deletion of understatement of income and undisclosed lease rental income.2. Prior period expenses disallowance.3. Disallowance of guarantee commission.4. Confirmation of disallowance of contribution to recognized provident fund.5. Confirmation of certain prior period expenses.6. Disallowance of overstatement of expenditure.Deletion of Understatement of Income and Undisclosed Lease Rental Income:The Revenue appealed against the deletion of understated income and undisclosed lease rental income for the assessment years 2015-16 and 2016-17. The Accountant General pointed out the understatements, and the Assessing Officer brought the amounts to tax. However, the CIT(A) observed that the income was accounted for in subsequent years and directed the deletion of the additions. The Tribunal found the CIT(A) did not follow Rule 46A and remitted the matter back to the Assessing Officer for detailed verification.Prior Period Expenses Disallowance:The Revenue contended that the CIT(A) did not apply the same rationale for prior period expenses disallowed in earlier years. The CIT(A) directed the Assessing Officer to delete the additions without proper verification, leading to a violation of Rule 46A. The Tribunal set aside the CIT(A) order and remitted the issue for fresh adjudication.Disallowance of Guarantee Commission:The Assessing Officer disallowed guarantee commission claimed by the assessee as it was never intended to be paid and never paid in earlier years. The CIT(A) upheld the disallowance, stating that subsequent events could not be considered for allowability. The Tribunal directed the assessee to provide evidence of payment for consideration by the Assessing Officer.Confirmation of Disallowance of Contribution to Recognized Provident Fund:The Assessing Officer disallowed contributions to recognized provident fund as they were not remitted to statutory authorities. The CIT(A) confirmed the disallowance. The Tribunal directed the Assessing Officer to allow the expenses upon remittance to the fund.Confirmation of Certain Prior Period Expenses:Since similar issues were remitted back to the Assessing Officer for the Revenue, the Tribunal remitted the ground raised by the assessee for fresh consideration.Disallowance of Overstatement of Expenditure:The Assessing Officer disallowed overstatement of expenses based on the Accountant General's observations. The Tribunal directed the Assessing Officer to reexamine the issue for both assessment years, considering the explanations provided by the assessee.In conclusion, all appeals filed by both the Revenue and the assessee were allowed for statistical purposes, and the matter was remitted back to the Assessing Officer for fresh adjudication on various issues.