Kailas Chand Agrawal Vs DCIT (ITAT Raipur)
Our careful consideration of assessment records and the records of appellate proceedings it transpired that, neither of the lower tax authorities had pointed any such voucher, the genuineness of the expenditure therein claimed to have been incurred by the assessee wholly and exclusively for the purpose of its business did not inspire any confidence, nor it was the case of the revenue that any part of the expenditure in question was either found to be bogus or fictitious, nor was found to have not been incurred by the assessee wholly and exclusively for the purpose of his business. Indeed, it showcased an exercise of running around the circle by both the lower tax authorities while dealing with the present case.
We neither could come across any provision in the present Income Tax Statute nor it has been brought to our notice by either parties to dispute, which subscribes vis-à-vis authorises the tax authorities to arrive at this logic of subscribing ad-hoc disallowances. Evidently, there has been no clear findings as to number of vouchers requiring denial of allowances with the amount of expenditure and nature of defects therein or therewith, moreover department could not bring out any deprecative material on record to substantiate its conclusion as logical. We couldn’t also see remotely there is any mention of rationale in arriving at the percentile of disallowance in the present case, consequently we find substantial force in the claim of the assessee that devoid of any specific infirmity qua the assessee’s claim for deduction of the aforementioned expenditure by the lower tax authorities, and for the reason, the ad-hoc disallowance carried out in a most arbitrary manner could by no means be held to be justified.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal is filed by the assessee against the first appellate order of Commissioner of Income Tax – Appeals, Bilaspur [for short “CIT(A)”] passed u/s 250 vide order dt 07/03/2016, which in turn sprung from the assessment order [for short “AO”] dt 18/03/2013 passed by the Ld Assessing Officer [for short “Ld AO”] u/s 143(3) of the Income-tax Act, 1961 [for short “the Act”] for assessment year [for short “AY”] 2010-2011.
2. The dispute under this tax litigations is twofold, firstly it challenges the legality of ad-hoc disallowance of business expenses and secondly claims rescue from the application of 40(a)(ia) on the evidential documents of identification and copy of ITR.
3. Before advancing the matter on facts for adjudication, we reproduce grounds challenged by the appellant as under;
“1. That under the facts and the law, the learned commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs8,30,975/- made by the learned Assessing Officer u/s 40(a)(ia) for non-deduction of tax u/s 194A from NBFC, namely M/s Magma Leasing Finance Limited and M/s SREI Infrastructure
Limited, rejecting the explanations”
“Prayed that the deductees are national repute NBFCs and are paying taxes and no amount is outstanding at the end of the year”
“Prayed to delete the disallowance of Rs8,30,975/–“
“2.That under facts and the laws, the learned CIT(Appeals) further erred in maintaining the adhoc disallowance of Rs2,00,000/- on lumpsum basis made by the learned Assessing Officer, out of various expenses claimed by the assessee”
“Prayed to delete the disallowance of Rs2,00,000/–“
(Emphasis supplied)
4. Pithily the facts of the case are;
4.1 The appellant assessee is an individual and proprietor two concerns in the name & style viz; Shri Balaji Road Carrier, engaged in transport & logistic business and Shri Balaji Petroleum, engaged in trading of petroleum products. For AY 20102011, a return of income was e-filed on 25/09/2010 declaring total income of ₹17,20,230/-, which was summarily processed u/s 143(1) of the Act and subsequently selected for scrutiny through CASS.
4.2 The assessment u/s 143(3) of the Act was framed assessing the total income at ₹27,54,450/- on account of following three disallowance;
a. Part of total expenses for sum of ₹2,00,000/- on ad-hoc basis reciting the reasoning of self-made cash vouchers and the presence of element of otherwise business usages etc.
b. Interest on delayed payment of TDS to the ex-chequer for sum of ₹3,241/- and
c. Interest / finance charges ₹8,30,975/- u/s 40(a)(ia) paid to certain Non-Banking-Financial-Corporation [for short “NBFC”] without deduction of tax at sources [for short “TDS”] u/s 194A of the Act.
4.3 Aggrieved assessee carried the matter in an appeal before the first appellate forum, wherein Ld CIT(A) not finding any infirmity in the view taken by the Ld AO, upheld the disallowance carried out in its entirety.
4.4 The appellant being aggrieved with the order of the CIT(A), has carried the matter in appeal before us with the grounds of appeal set herein before at Para 3.
5. We have heard the rival contention of both the parties; perused material placed on record and duly considered the facts of the case in the light of settled legal position and the case laws relied upon by the appellant assessee as well the respondent revenue.
6. We shall now first deal with ground number 1 relating to disallowance u/s 40(a)(ia) of the Act;
6.1. During the course of hearing of this appeal, the Ld AR candidly placed on records that, in the absence of certificates from a Chartered Accountant and NBFC in terms of first proviso to section 201(1), has taken us through paper book comprised of;
a. Tax audit reports obtained u/s 44AB of the Act in relation to both the businesses,
b. A certificate of lower deduction issued to one of the NBFC viz; SREI Equipment Finance Pvt Ltd & the copy of PAN thereof,
c. A letter of confirmation from Magma Fincorp Ltd against the payment of interest & a copy of ITR filed by it.
6.2.Admittedly, it is a matter of fact borne from the records that, following amount of interest / finance charges were debited without TDS u/s 194A and was subjected to 40(a)(ia) disallowances by the Ld AO, against which no certificates in “Annexure-A to form 26A”, from a Chartered Accountant as contemplated in first proviso to section 201(1) of the Act r.w.s. 31ACB; were placed neither before the Ld AO during the course assessment proceeding nor before the Ld CIT(A);
