Case Law Details
DCIT Vs M/s Lexicon Auto Ltd. (ITAT KOLKATA)
AO cannot make disallowance on ad hoc basis without pointing out any defect / error in submission of assessee
It is settled law that the disallowance on account of ad hoc basis is not permissible under the provision of the Act. If the AO is not satisfied with the submission of assessee then he has to make the disallowance after making specific reference to such documents / vouchers. AO cannot just make the disallowance on ad hoc basis without pointing out any defect / error in the submission of assessee. In this connection, we also rely in the order of Co-ordinate Bench of ITAT Kolkata in the case of Animesh Sadhu Vs. ACIT in ITA 11 /Kol/20 13 Dated 12.11.2014. The relevant extract is reproduced below.:-
“8. We have considered the rival submissions. A perusal of the assessment order shows that the Assessing Officer has disallowed 20% of the expenses on estimate basis on the ground that no independent verification to be made to find out the authenticity of the expenses. Ld. CIT(Appeals) has reduced the same on the same ground. However, we are of the view that no estimated disallowance scan be made for inability to make independent verification. If any specific expenditure is unverifiable or is un-vouched, then such specific expenditure is disallowable. Her no such specific identification has been done. In these circumstances, we are of the view that the estimated disallowance as confirmed by the ld. CIT(Appeals) is unsustainable. Consequently the same stands deleted. In the result, Grounds No. 2 & 3 of the assessee’s appeal stand allowed.”
It was also observed that the entire amount of repairing charges was deducted by TML and the complete addresses of TML was in the possession of AO during the assessment proceedings, in fact, AO was not satisfied with the submission then he should have been sought clarification from TML by issuing notice u/s 133(6) of the Act but we note that AO failed to do so. Therefore we find no reason to interfere with the finding arrived by the Ld. CIT(A). Under the circumstances, this ground of Revenue’s appeal is dismissed.
Employee/ Employer Contribution to PF deposited within Due Date of furnishing Income Tax Return can’t be Disallowed
The Hon’ble Karnataka High Court, in the case of Essae Teraoka (P.) Ltd. v. Dy. CIT [2014] 366 ITR 408/222 Taxman 170 (Mag.)/43 taxmann.com 33 took the view that the word ‘contribution’ occurring in section 43B of the Act would include employees’ contribution to PF in the light of the definition of the word contribution as per the provisions of section 2(c) of the PF Act. As per the said section, contribution would mean both employer’s contribution and employees’ contribution. Accordingly, it was held that the provisions of section 43B of the Act allowing deduction for payment made before the due date of filing of Income-tax return cannot be ignored. Similarly, the ITAT Hyderabad Tribunal in the case of Tetra Soft (India) (P) Ltd. v. ACIT [2015] 70 SOT 66/6 1 taxmann.com 299 held that when assessee remitted employees’ contribution to PF within due date of filing return of income u/s 139(1) of the Act, amount of employees’ contribution to PF cannot be disallowed. Similar view was upheld by the Chennai bench of the ITAT, in the case of Asstt. CIT v. Farida Shoes (P.) Ltd. [2016] 46 CCH 29. The coordinate bench held that if assessee had not deposited employees’ contribution towards provident fund up to the due date as prescribed under relevant statute, but before due date of filing of return no disallowance could be made in view of the provisions of section 43B of the Act. In the case of CIT v. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. [2013] 35 taxmann.com 616/217 Taxman 64 (Mag.)/[2014] 366 ITR 163 (Raj.), the Hon’ble High Court of Rajasthan, after referring to the apex court decision in the case of CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416 & CIT v. Vinay Cement Ltd. [2007]2 13CTR 268 (SC) held that the deductions should be allowed for the payment of employees’ contribution made before the due date of filing of return. Similarly, in the case of CIT v. State Bank of Bikaner, the Hon’ble Rajasthan High Court held that contribution paid after the due date under the respective Act, but before filing the return of income u/s 139(1) of the Act cannot be disallowed u/s 43B of the Act and or u/s 36(1)(va) of the Act.
Considering the facts and circumstances of this case and also following the judicial precedents as discussed above, we are of the view that there is no distinction between employees’ and employer contribution to PF, and if the total contribution is deposited on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made towards employees’ contribution to provident fund.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-1, Kolkata dated 05.04.2016. Assessment was framed by DCIT, Circle-1, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 29.12.2010 for assessment year 2007-08. The grounds raised by the Revenue per its appeal are as under:-
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.81,51, 702/- based upon the documentary evidence produced for the first time before the CIT, which was never cross examined by the Assessing Officer.
2. Whether on the facts and din the circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.9,93,901/- based upon assessee’s reconciliation which was not reconciled before the AO.
3. Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance of Rs.2,08,115/- relying upon the case law, and overlooking the fact that the assessee company failed to deposit the employee’s contribution to PF / ESI within the due date provided in the IT Act.
4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 6,73,765/- based upon the documentary evidence produced for the first time before the CIT(A), which was never produced before the Assessing Officer.
5. The Revenue shall crave for adding or altering any ground on or before the date of hearing.”
Shri Saurabh Kumar, Ld. Departmental Representative appeared on behalf of Revenue and Shri Arvind Agrawal, Ld. Advocate appeared on behalf of assessee.
2. The facts of the case are that assessee is a limited company and engaged in business of purchase & sale of vehicle manufactured by Tata Motors Ltd. (TML for short) and spare parts including accessories. The assessee is also maintaining shop for the repairing and services of vehicle. The assessee is also having an agreement with TML for procuring the business on hire-purchase basis as well as subsequent collection of installments on behalf of TML.
3. First issue raised by Revenue in ground No.1 is that Ld. CIT(A) erred in deleting the addition made by the Assessing Officer for ₹8 1,51,702/- on the basis of additional evidence which was accepted in contravention to the provision of Rule 46A of the Income Tax Rules, 1962.
4. The assessee was entitled to 1% incentive remuneration from TML on the basis of monthly collection made by it on behalf of said company. The assessee has shown incentive remuneration for ₹5 49,815/- only whereas Form 26AS was reflecting the incentive remuneration of ₹87,01,516/- only. Thus, there was difference of ₹8 1,51,702/- as observed by the AO. On question by the AO about the aforesaid mismatch, the assessee submitted that as per the agreement with TML, there was a penalty clause of 15% of the finance amount to be levied on the assessee in the event of non-recovery of hire charges amount. The assessee also submitted that besides 15% penalty there was a clause for the penalty @ 100% of finance amount if the party fails to pay single installment to TML and if the party fails to register the vehicle showing hypothecation clause of TML.
5. In view of the above, assessee submitted that an amount of ₹81,51,702/- has been deducted by TML therefore the same was not shown as income in its income tax return. The assessee in support of its claim also field the copy of reconciliation statement between income shown by assessee vis-а-vis amount shown in Form 26AS. However, the AO disregarded the contention of assessee on the ground that
i) The amount recovered the finance amount from the customer is not
ii) The assessee also failed to furnish the party-wise details which have defaulted in the payment of installment financed by TML.
iii) No detail has been submitted by assessee regarding the subsequent recovery from the customers.
iv) There is no detail filed by the assessee with regard to the parties from whom the vehicles financed by TML were recovered.
In view of above, AO made the disallowance of ₹8 1,51,702/- and added to the total income of assessee.
6. Aggrieved, assessee preferred an appeal before Ld CIT(A). The assessee before Ld. CIT(A) submitted that the amount of ₹8 1,51,702/- was duly debited by TML by way of showing the debit note. Thus, the liability was crystallized in the year under consideration. Therefore, the incentive remuneration net of amount deducted by TML was shown in the books of account. The assessee in support of its claim also filed the copy of ledger along with copy of journal voucher with details break up and statement issued by TML.
Accordingly, the Ld. CIT(A) after considering the submissions of assessee deleted the addition made by AO by observing as under:-
“After careful consideration, it is found that the AO has disallowed the entire amount of Rs.8151 702/- which was claimed as deduction towards dealers liability on the ground that the liability to collect / recover the amount from customers was not ascertainable; party-wise details of amount defaulted and subsequent recovery from customer was not verifiable and that the actual liability was not ascertainable and could not the said to be crystallized during the previous year.In this regard, it is found that the AO has not confronted any specific instances or quantified the amount of alleged “subsequent recovery from customers” and the addition was merely base upon surmises and rejection of appellants submission made during the assessment s proceedings. In view of the totality of the facts of the case and considering that the impugned amount of Rs.8151 702/- representing dealers liability was based upon debit notes issued by M/s Tata Motors Ltd. as per terms of the agreement, which leads to the inference that s claimed by the appellant the liability has actually crystallized during the relevant assessment year. Therefore, the addition of the entire amount of Rs.8151 702/- made by the AO is found to be not justified. The AO is directed to delete the addition. This ground is allowed.”
The Revenue, being aggrieved, is in appeal before us.
7. Ld. DR for the Revenue before us submitted that the relief has been granted by Ld. CIT(A) on the basis of additional evidence which were admitted in contravention to the provision of Rule 46A of the IT Rules, 1962 and he vehemently relied on the order of AO.
On the other hand, Ld. AR before us field the paper book which is running from pages 1 to 54 and stated that copy of incentive remuneration statement was duly filed before AO which is placed on page 1 of the paper book and also filed copy of agreement with TML which is also placed on pages 5 to 7 of the paper book. Ld. AR drew our attention on page 8 of the paper book where the necessary details of the amount recovered by TML was furnished through the letter dated 27.12.2010. In view of above, Ld. AR submitted that no additional evidence has been admitted by Ld. CIT(A) as alleged by Ld. DR in his arguments placed before the Bench us. He relied on the order of Ld. CIT(A).
8. We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, difference was observed by AO between the amount of income shown by assessee vis-а-vis the income shown in the Form 26AS. Thus, the amount of difference was added to the total income of assessee. However, Ld. CIT(A) deleted the addition made by the AO after having reliance on the reconciliation statement furnished by assessee during appellate proceedings. Now, the grievance of Revenue is that additional evidence in the form of reconciliation statement has been admitted by Ld. CIT(A). However, we note that necessary clarification about the mismatch in the amount of income shown by assessee was duly supplied before AO as evident from the assessment order, which is reproduced hereunder:-
“2. a As per TDS certificates filed by the assessee, it is seen that the assessee derived income in the form of commissions incentive remuneration workshop job charges etc from M/s Tat Motors Limited during the previous year. During the course of hearing, Ld. A/R has filed a reconciliation of the income as per TDS certificates issued by M/s Tata Motors Lt. vis-а-vis income credited in the P&L A/c which is as under:”
We also find that assessee has duly clarified to AO during assessment proceedings vide letter dated 27.12.2010 placed at page 8 of the paper book which reads under:-
“December 27, 2010
From,
Lexocpm Auto Ltd.
40B, Princep Street
Kolkata- 700072
To
The Deputy Commissioner of Income Tax
Circle-1
Aaykar Bhawan
P- 7, Chowringhee Square
Kolkata
Dear Sir,
PAN No: AAACL4684
Assessment Year : 2008-2009
Sub: Scrutiny Assessment Proceedings – Matter regarding
With reference to the aforesaid Assessment Year and in compliance to your requisition the details called for were furnished from time to time.
In further compliance to your requisition we beg to submit as under:
1. XXXXXXXXX
2. XXXXXXXXX
3. XXXXXXXXX
4. We have furnished the ledger copy of the account of Incentive Remuneration recd. Amounting to Rs.549814.60 which is the difference of the credit and debit of the said ledger. You have called for an explanation and a brief write up regarding the debit of Rs.3404435, Rs.30603 78/- and 1286889/- on account of Tata Motors Ltd (DLR liability) HP Remuneration. As desired a short note in this regard is enclosed. We trust you will find the same in order.
Thanking You,
Yours faithfully,
Sd/-Illegible
Enclo: As above.
From the finding of AO we note that the addition was made by AO on account of non furnishing and information such as given below:
i) The amount recovered the finance amount from the customer is not
ii) The assessee also failed to furnish the party-wise details which have defaulted in the payment of installment financed by TML.
iii) No detail has been submitted by assessee regarding the subsequent recovery from the customers.
iv) There is no detail filed by the assessee with regard to the parties from whom the vehicles financed by TML were recovered.
In view of above we note that no additional detail was submitted by assessee before appellate proceedings. Assessee before Ld. CIT(A) submitted the reconciliation statement justifying the difference as observed in the income by the AO which was also filed before the AO during assessment proceedings. We also note that there was no detailed furnished with regard to subsequent recovery of the cars & installment etc. from the parties on account of non-payment of installments on the basis of which the addition was made by the AO. . Thus, it can be concluded that Ld. CIT(A) has not granted relief to assessee on the basis of any additional evidence which were accepted by him in contravention to the provision of Rule 46A of IT Rules, 1962. The reconciliation statement was duly filed before AO while framing the assessment proceeding. However the AO has not pointed out any defect in the reconciliation statement furnished by the assessee. We also note that the AO was empowered to verify the amount of penalty imposed by TML on assessee by showing notice u/s. 133(6) of the Act but he failed to exercise the power.
On specific query from the Bench to Ld. DR referred to refer the additional evidence admitted by Ld. CIT(A), Ld. DR failed to point out to such documents. Therefore we hold that no additional evidence has been submitted by assessee at the time of appellate proceedings as alleged by Revenue in the grounds of appeal. In the background of the above discussions and precedent, we do not find any infirmity in the order of Ld. CIT(A) and accordingly we uphold the same.
9. Next issue raised by Revenue in ground No.2 is that Ld. CIT(A) erred in deleting the addition made by the AO for ₹9,93,901/- on the basis of additional
10. During the course of assessment proceedings, AO observed that assessee has claimed the credit of TDS amount for ₹22,303/- without showing corresponding income of ₹9,93,901/- only. On being confronted, assessee submitted that corresponding income of ₹9,93,901/- has been duly offered to tax in the immediate preceding assessment year (2007-08). However, AO disregarded the contention of assessee on the ground that no reconciliation statement has been filed by assessee to substantiate its claim. Therefore, the addition of ₹9,93,901/- was added to the total income of assessee.
11. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the impugned income duly offered to tax in the immediate preceding assessment year but the amount of TDS was claimed in the year under consideration as it was reflecting in Form 26AS of the current year. The assessee in support of its claim filed the copy of Form 26AS for the year under consideration. Ld. CIT(A) after considering the submissions of assessee deleted the addition made by AO by observing as under:-
“I have carefully considered the material before me. I find that the AO made the addition on the basis that the Appellant failed to file the reconciliation statement. The AR of the Appellant submitted in the Appellate proceedings that corresponding income relating to the said TDS related to FY 2006-07. There is force in respect to the submission of the Appellant that corresponding income of Rs.993901/- was shown in the FY 2006-0 7 and corresponding TDS amount is claimed during this year. Therefore, the addition made by the AO of Rs.993901/- is found to be not justified. The AO is directed to delete the addition made of Rs.9,93,901/-. This ground is allowed.”
The Revenue, being aggrieved, is in appeal before us.
12. 7. Ld. DR for the Revenue before us submitted that the relief has been granted by Ld. CIT(A) on the basis of additional evidence which were admitted in contravention to the provision of Rule 46A of the IT Rules, 1962 and he vehemently relied on the order of AO.
On the other hand, Ld. AR for the assessee before us submitted that the copy of reconciliation statement was duly filed before AO and he drew our attention on page 10 of the paper book where necessary clarification was placed which was filed before AO at the time of assessment proceedings. Ld. AR argued that no additional evidence has been submitted as alleged by Revenue, and he relied on the order of Ld. CIT(A).
13. We have heard the rival contentions of the parties and perused the material available on record. In the instant case, the addition has been made on the basis that no reconciliation statement was filed by assessee during the course of assessment proceedings. As per the assessee, the amount was duly offered to tax in the immediate preceding assessment year. This fact was brought to the notice of AO during assessment proceedings vide letter dated NIL which is placed at page 10 of the paper book and the relevant contents of the letter is reproduced below:-
“1. Your kind attention is drawn to the Reconciliation statement enclosed and the Gross amount credited as per TDS certificate amounting to Rs.18103677/- includes a sum of Rs.993901/- relating to the financial year ending 31.03.2007. The relevant income has been considered by us in Assessment Year 200 7-2008 but the corresponding claim of TDS has been made during the year under Assessment as certificate were recd. During the year under Assessment.
2. The balance income as per TDS certificate comes to Rs. 17109776/- whereas the Gross income under different heads as per out books of accounts is 1743996/- and after considering payment and/or debit in the relevant account the net income as per Audited accounts is Rs.5267153/- which is appearing in Schedule -1 3 and Schedule – 14 of the Audited accounts enclosed herewith.
3. Your kind attention is drawn to Annexure –C, Annexure –C1, Annexure – C2, Annexure-C3, Annexure-C-4 and Annexure – C5 together with Annexure – 13 and Annexure- 14 of Audited accounts which are self explanatory.
4. The TDS are being deducted only by M/s Tata Motors Ltd and all the relevant TDS certificates have been filed in your office.
5.M/s Tata Motors Ltd used to deduct TDS on the gross amount of billing and the income in the accounts are reflected after considering various debit notes issued by the said company from time to time.”
From the above, we note that no additional evidence as alleged by Revenue was admitted by Ld. CIT(A). Thus, we do not find any infirmity in the order of Ld. CIT(A). Accordingly, we uphold the same. Consequently, ground raised by Revenue is dismissed.
14. Next issue raised by Revenue in ground No.3 is that Ld. CIT(A) erred in deleting the addition made by AO for ₹2,08, 115/- on account of late deposit of employees contribution to PF/ ESI.
15. The Assessing Officer, during the course of assessment proceedings observed that the assessee failed to deposit the employees contribution to PF / ESI within due date as specified under the relevant Act. Therefore, the Assessing Officer disallowed the same u/s 36(1)(va) and treated the income of assessee u/s. 2(24)(x) of the Act. Thus, AO added a sum of ₹2,08, 115/- to the total income of assessee.
16. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO by observing as under:-
“I have carefully considered the material before me and cited case laws. I find t hat the Appellant made the payment to employee contribution to PF & ESI before the due date of filing of the Income Tax Return u/s. 139(1) of the IT Act. The A/R of the Appellant relied upon the case law of the Hon ‘ble Supreme Court CIT v. Vinay Cement and further relied upon the jurisdiction high Court in the case of CIT v Shree Vijay Shree Limited in ITA No.245 of 2011 wherein the Hon ‘ble High Court held that employees contribution to provident fund paid before the due date of filing of return is to be allowed as expenditure u/s. 36(1)(va) of the IT Act. In view of the above and facts of the case, I am of the view the addition made by the AO of Rs.208225/- on account of Employees contribution to PF & ESI is not justified and I direct the AO to delete the addition. This ground is allowed.”
The Revenue, being aggrieved, is in appeal before us.
17. Before us both parties relied on the order of Authorities Below as favourable to
18. We have heard the rival contentions of both the parties and perused the material available on record. The A.O. made additions towards belated payment of employees’ contributions to PF. According to the A.O., employees’ contribution to provident fund is deductible under the provisions of section 36(1)(va) of the Act, if the same is paid on or before the due date specified under the provident fund Act. The A.O. further was of the opinion that in view of the clear provisions of section 2(24)(x) r.w.s. 36(1)(va) of the Act, any recovery from employees towards provident fund contribution is deemed to be income of the assessee, if the employer failed to pay the same to the provident fund account of the employee within due date specified under the provisions of PF Act. It is the contention of the assessee that second proviso to section 43B of the Act provides that no deduction shall be allowed unless such sum has actually been paid on or before due date as specified in explanation to 36(1)(va) of the Act which was omitted by the Finance Act, 2003 w.e.f. 1.4.2004 and accordingly, there was no special provision regarding employees’ contribution to PF. It is further contended that as per the amended provisions of section 43B of the Act, any sum payable by the assessee as an employer by way of contribution to PF shall be allowed, if the same is paid on or before the due date of filing of return of income u/s 139(1) of the Act.
The only issue to be resolved is whether the assessee would be entitled to claim deduction for the employees’ contribution made to PF after the due date prescribed under the PF Act, but before the due date prescribed for filing of income-tax return in the light of the provisions contained in section 36(1)(va) of the Act and section 43B(b) of the Act. It is the contention of the assessee that there is no distinction between employer and employee contribution after omission of second proviso of section 43B of the Act by Finance Act, 2003 w.e.f. 1.4.2004.
In this regard we find that the allowability of employees contribution to provident fund is governed by the provisions of section 36(1)(va) of the Act which reads as under :
Other deductions.
236. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28—
(va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee’s account in the relevant fund or funds on or before the due date.
Explanation.—For the purposes of this clause, “due date” means the date by which the assessee is required as an employer to credit an employee’s contribution to the employee’s account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise;]
From the above provisions it is clear that the deduction will be allowed to the assessee when the sum is credited to the employee’s account under the provident fund Act.
Section 43B of the Act provides for certain deductions to be allowed only on actual payment basis which reads as under :
[Certain deductions to be only on actual payment.
2543B. 26Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of—
27[(a) any sum payable by the assessee by way of tax28, duty, cess or fee, by whatever name called, under any law for the time being in force, or]
(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 29[or]
The provisions of sub clause (b) of section 43B of the Act covers any sum payable by the assessee as an employer by way of contribution to any Provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees. The proviso to section provides that any sum paid by the assessee on or before the due date of furnishing return of income u/s 13 9(1) of the Act, then no disallowance can be made under the provisions of section 43B of the Act. A careful consideration of section 43B of the Act makes it clear that an extension is granted to the assessee to make the payment of PF contributions or any other fund till the due date of furnishing return of income u/s 139(1) of the Act.
From the above facts we notice that the legislature has given different treatment for the allowability of employees and employers contribution to the provident fund account. But we further note that the Courts have not differentiated the employees & employers contribution to provident fund as far as allowability of the same is concerned under the provisions of section 43B of the Act.
The Hon’ble Karnataka High Court, in the case of Essae Teraoka (P.) Ltd. v. Dy. CIT [2014] 366 ITR 408/222 Taxman 170 (Mag.)/43 taxmann.com 33 took the view that the word ‘contribution’ occurring in section 43B of the Act would include employees’ contribution to PF in the light of the definition of the word contribution as per the provisions of section 2(c) of the PF Act. As per the said section, contribution would mean both employer’s contribution and employees’ contribution. Accordingly, it was held that the provisions of section 43B of the Act allowing deduction for payment made before the due date of filing of Income-tax return cannot be ignored. Similarly, the ITAT Hyderabad Tribunal in the case of Tetra Soft (India) (P) Ltd. v. ACIT [2015] 70 SOT 66/6 1 taxmann.com 299 held that when assessee remitted employees’ contribution to PF within due date of filing return of income u/s 139(1) of the Act, amount of employees’ contribution to PF cannot be disallowed. Similar view was upheld by the Chennai bench of the ITAT, in the case of Asstt. CIT v. Farida Shoes (P.) Ltd. [2016] 46 CCH 29. The coordinate bench held that if assessee had not deposited employees’ contribution towards provident fund up to the due date as prescribed under relevant statute, but before due date of filing of return no disallowance could be made in view of the provisions of section 43B of the Act. In the case of CIT v. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. [2013] 35 taxmann.com 616/217 Taxman 64 (Mag.)/[2014] 366 ITR 163 (Raj.), the Hon’ble High Court of Rajasthan, after referring to the apex court decision in the case of CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416 & CIT v. Vinay Cement Ltd. [2007]2 13CTR 268 (SC) held that the deductions should be allowed for the payment of employees’ contribution made before the due date of filing of return. Similarly, in the case of CIT v. State Bank of Bikaner, the Hon’ble Rajasthan High Court held that contribution paid after the due date under the respective Act, but before filing the return of income u/s 139(1) of the Act cannot be disallowed u/s 43B of the Act and or u/s 36(1)(va) of the Act.
Considering the facts and circumstances of this case and also following the judicial precedents as discussed above, we are of the view that there is no distinction between employees’ and employer contribution to PF, and if the total contribution is deposited on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made towards employees’ contribution to provident fund. Hence, we are inclined not to interfere in the order of ld. CIT(A). Therefore, the ground of appeal filed by the Revenue is dismissed.
19. Next issue raised by Revenue in ground No.4 is that Ld. CIT(A) erred in deleting the addition made by AO for ₹6,73,765/- on the basis of additional evidence.
20. The assessee during the year has claimed an expense of ₹26,95,063/- for the repairing of vehicle. But the assessee failed to furnish the necessary details in support of its claim. Therefore, AO disallowed the same to the tune of 1/4thof the total expenditure and added to the total income of assessee.
21. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) that the expense for ₹26,95,063/- has been adjusted by TML. The assessee in support of its claim filed the ledger copy showing the expense incurred on account of repairing charges. Ld. CIT(A) after considering submission of assessee deleted the addition made by AO by observing as under:-
“I have carefully considered the material before me. I find that no detail in respect of such expenses has furnished. The AR of the Appellant submitted in his submission that the amount debited in the said ledger repayment payment made to various parties workshop with whom the job work was done by us and all expenses are supported with proper bills and vouchers. The estimated disallowance made by the AO is unjustified and needs to be deleted in full. There is force in the submissions of the AR of the Appellant that all expenses are fully vouched and the AO made the addition without any base and on estimate basis. Therefore, the addition made by the AO of Rs.6, 73,765/- is unwarranted and I direct the AO to delete the addition of Rs.673765/-. This ground is allowed.”
Being aggrieved by this order of Ld. CIT(A) Revenue has come up an appeal before us.
22. Ld. DR submitted that relief was granted by Ld. CIT(A) on the basis of additional evidence which was admitted by him (Ld. CIT(A)) in contravention to the provision of Rule 46A of IT Rules, 1962. Accordingly, Ld. DR prayed before the Bench to restore the matter back to the file of AO for fresh adjudication. He vehemently relied on the order of AO.
On the other hand, Ld. AR for the assessee before us submitted that the addition was made on estimated basis which is not permissible under the provisions of the Act. The necessary details in respect of repairing of vehicle were duly furnished during the assessment proceedings before the AO. He also submitted that the amount of repairing charges was duly adjusted by TML and this fact was very much in the knowledge of AO but he failed to verify the same from TML. Ld. AR relied on the order of Ld. CIT(A).
23. We have heard the rival contentions of both the parties and perused the material available on record. The disallowance of repairing expenses to the extent 1/4thwas made by the AO on the ground that no details in respect of such expense was furnished. However, Ld. CIT(A) granted relief to assessee by observing that all the necessary expense were duly examined by Assessing Officer and the addition was made by him without any basis. The grievance of Revenue is that relief was granted by Ld. CIT(A) to assessee on the admission of additional evidence which was submitted before Ld. CIT(A) under the provision of Rule 46A of the IT Rules, 1962. However, at the time of hearing a specific quarry was raised to the Ld. DR to refer the additional documents which were admitted by Ld. CIT(A) in contravention to the provision of Rule 46A of the IT Rules, 1962 but Ld. DR has not pointed out to such documents.
23.1 We also note that AO in his assessment order has clearly accepted that assessee has appeared on different dates of hearing before him and furnished different details including extract of books of account to explain the return of income. The necessary finding of AO is reproduced below:-
“In response to the said notices issued to the assessee, Mr.A.K. Singhania, Advocate & A/R and Mr. K.P. Lath, Accountant of the assessee company appeared on different dates and furnished different details including extracts of books of A/c to explain thee return. They were herd and the case was discussed.”
From the above, it is observed that necessary details were duly filed by assessee at the time of assessment proceedings but AO was not satisfied with the same, therefore he disallowed the same on ad hoc basis. In view of above proposition we note that if assessee has not furnished necessary documents then AO should have disallowed all the expenses claimed by it under the head “repairs”. It is settled law that the disallowance on account of ad hoc basis is not permissible under the provision of the Act. If the AO is not satisfied with the submission of assessee then he has to make the disallowance after making specific reference to such documents / vouchers. AO cannot just make the disallowance on ad hoc basis without pointing out any defect / error in the submission of assessee. In this connection, we also rely in the order of Co-ordinate Bench of ITAT Kolkata in the case of Animesh Sadhu Vs. ACIT in ITA 11 /Kol/20 13 Dated 12.11.2014. The relevant extract is reproduced below.:-
“8. We have considered the rival submissions. A perusal of the assessment order shows that the Assessing Officer has disallowed 20% of the expenses on estimate basis on the ground that no independent verification to be made to find out the authenticity of the expenses. Ld. CIT(Appeals) has reduced the same on the same ground. However, we are of the view that no estimated disallowance scan be made for inability to make independent verification. If any specific expenditure is unverifiable or is un-vouched, then such specific expenditure is disallowable. Her no such specific identification has been done. In these circumstances, we are of the view that the estimated disallowance as confirmed by the ld. CIT(Appeals) is unsustainable. Consequently the same stands deleted. In the result, Grounds No. 2 & 3 of the assessee’s appeal stand allowed.”
It was also observed that the entire amount of repairing charges was deducted by TML and the complete addresses of TML was in the possession of AO during the assessment proceedings, in fact, AO was not satisfied with the submission then he should have been sought clarification from TML by issuing notice u/s 133(6) of the Act but we note that AO failed to do so. Therefore we find no reason to interfere with the finding arrived by the Ld. CIT(A). Under the circumstances, this ground of Revenue’s appeal is dismissed.
24. Last ground is general and does not call for any separate adjudication.
25. In the result, Revenue’s appeal stands dismissed.
Order pronounced in open court on 19/02/2018
