2025 (2) TMI 1039 - AT - Income Tax

Provision reversal cannot be taxed as income when not originally claimed as deduction, adhoc expense disallowance overturned

The Tambaram Co-operative Urban Bank Limited JJ Versus ACIT Non-Corporate Circle-22 (1) Tambaram.

The Tambaram Co-operative Urban Bank Limited JJ Versus ACIT Non-Corporate Circle-22 (1) Tambaram. - TMI The appeal in this case was filed by the assessee against the order of the Addl/Joint Commissioner of Income Tax (Appeals)-8, Delhi, for the assessment year 2017-18. The key issues raised by the assessee in the appeal were related to the determination of total income, disallowance of certain expenditures, and the treatment of provisions released. The main grounds of appeal included contentions that the assessing officer erred in determining the total income, disallowing certain deductions, and upholding the disallowances made.In the assessment, the assessing officer disallowed deductions claimed by the assessee, including a provision released amount and 5% of other expenditures. The assessing officer added back these amounts to the total income of the assessee. The CIT(A) confirmed the assessing officer's order, leading the assessee to appeal to the Appellate Tribunal.The Appellate Tribunal considered the submissions made by the assessee, which included detailed explanations and supporting documents for the deductions claimed. The Tribunal noted that the provision released by the assessee was a reduction from the provision created in the earlier assessment year and should not have been added back to the total income. Similarly, the Tribunal found that the disallowance of 5% of other expenditures was unjustified as the assessee had provided detailed ledger accounts and sample vouchers to support the claimed expenditures.Based on the evidence and submissions presented, the Tribunal concluded that the assessing officer and the CIT(A) had erred in disallowing the deductions claimed by the assessee. Therefore, the Tribunal set aside the order of the CIT(A) and directed the assessing officer to delete the additions made to the total income. Consequently, the appeal of the assessee was allowed, and the decision was pronounced in court on February 24, 2025, in Chennai.In summary, the Appellate Tribunal ruled in favor of the assessee, overturning the disallowances made by the lower authorities and directing the assessing officer to delete the additions to the total income. The Tribunal emphasized the importance of considering the supporting evidence and documentation provided by the assessee in determining the allowable deductions and expenditures.