TaxTMI 
TaxTMI 
2025 (3) TMI 2226
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....ding disallowance of Rs. 40,25,474/- u/s 37(1) in respect of annual membership and subscription expenses on the conjectures and surmises on the ground that the appellant has failed to discharge its burden of proof or to provide sufficient evidence linking claimed expenses despite the fact that the Assessee had submitted the conclusive documentary evidence in its written submission along with supporting paper books and additional submissions filed during the course of appeal proceedings in support of the said expenses being incurred in the ordinary course of business and being allowable u/s 37(1). 2. In the circumstances and facts of our case, the Ld. Commissioner of Income Tax (Appeals), Addl./ JCIT(A), Agra has erred in upholding the disallowance of Rs. 40,25,474/- u/s 37(1) pertaining to annual membership and subscription expenses being "Expenditure incurred at clubs being entrance fees and subscriptions" reported under Clause no 21 of the Tax Audit report which reads as "Please furnish the details of amounts debited to the profit and loss account, being in the nature of capital, personal, advertisement expenditure." 3. In the circumstances and facts of our case....
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....ted in the TAR (Form 3CD), where the auditor reported Rs. 40,62,649/- as expenses to be disallowed, while the assessee had added Rs 37,175/-only in this regard. The resultant discrepancy of Rs. 40,25,474/- was added back to the appellant's income. 3.2 Before the ld.CIT(A), it was contented that the adjustment made by the CPC, Bangalore is based on the discrepancies highlighted in the TAR (Form 3CD), a statutory document under Section 44AB of the Act although the figures reported in the TAR were erroneous due to mistakes. The assessee further contended that these adjustments were made without adequately considering its explanations and submissions. The ld.CIT(A) however, rejected the contention observing inter alia that the TAR holds significant legal and professional weight. Any contradiction between the figures in the TAR and those in the income-tax return requires the appellant to provide irrefutable evidence of error or omission. The assessee's reliance on the correction request with subsequent submission was found insufficient to overturn the presumption of correctness attached to the audit report. The certificate did not provide a detailed explanation of the nature and impa....
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....l contentions, the contents of the appellate order as also the detailed submissions made by the assessee. In this regard, the provisions of section 143(1) providing for adjustment of returned income read as below: "(1)Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:- (a) the total income or loss shall be computed after making the following adjustments, namely:- (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure [or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under [section 10AA or under any of the provisions of Chapter VI-A under the heading "C.-Deductions in respect of certain i....
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....e return" shall mean a claim, on the basis of an entry, in the return,- (i)of an item, which is inconsistent with another entry of the same or some other item in such return; (ii)in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii)in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; (b)the acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a)". 5.1 It appears that the CPC has applied the provisions contained in clause (iv) above which provides for disallowance of expenditure [or increase in income] indicated in the audit report but not taken into account in computing the total income in the return. Perusal of the communication from CPC reveals that the amount was disallowed while processing the return u/s 143(1) on account of 'Inconsistency in Total amount of disallowance u/s section 37' amounti....
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....IT vs Lubrizol India 37 Taxmann.com 294 (Bom), DCIT vs Deloitte Group in ITA No. 3017,277,276,2200/Mum/2016 (ITAT-Mum), ITA No. 1107, 1114/Mum/2014 in Hinduja Global Solutions, MKJ Tradex Ltd ITA No. 1044/Kol/2026,CIT vs Groz Beckert Asia Ltd 31 Taxmann.com 155(P&H) etc. 5.6 He further failed to make any observation of the similar expenses claimed by the assessee in AY 2016-17 and duly allowed u/s 143(1) by the Revenue. The assessee submitted comparative figures of similar expenditure claimed in the AYs 2016-17 and 2017-18.It is stated that in AY 2016-17 the amount was Rs 18.79 lakh which was 1.16% of the total revenue of Rs 16.25 cr while in the AY 2017-18 it is Rs 40.37 lakh vis-a-vis revenue of Rs 19.79 cr i.e. 2.05 per cent. No disallowance was made in the previous year u/s 143(1). 6. Considering the above facts, we are of the view that the ld.CIT(A) has failed to justify the addition made by the CPC, ignoring all contentions of the assessee. In this regard, reference could be made to the decision of the coordinate Bench of ITAT, Chandigarh in the case of Deputy Commissioner Of Income Tax, vs Homeland City Project Ltd in ITA No. 559/Chd/2024 dt 17.12.2024 in which in an i....