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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI N.K. BILLAIYA & MS. ASTHA CHANDRA
The appeal by the assessee is filed against the order dated 23.11.2017 of the Ld. Commissioner of Income Tax (Appeals)-20, New Delhi (“CIT(A)”) pertaining to the assessment year 2013-14.
The assessee is a Solicitors and Advocate by profession. For the assessment year 2013-14 the assessee filed NIL return of income on 19.9.2013. The case was selected for scrutiny under CASS. During the assessment proceedings the assessee filed necessary information/ documents etc. as required by the Ld. Assessing Officer (“AO”). The assessee produced books of account and vouchers which were examined by the Ld. AO.
The Ld. AO completed the assessment under section 143(3) of the Income Tax Act, 1961 (the “Act”) on total loss of Rs. 34,96,900/- as against loss of Rs. 40,54,008/- as per computation filed by the assessee making disallowance, inter alia, of Rs. 49,423/- being outstanding TDS payable; Rs. 2,77,654/- being 10% of expenses on car maintenance, depreciation on car, conveyance, telephone and tour and travel for personal use and Rs. 1,71,996/- being 10% of expenses on repair and maintenance, printing & stationery, office expenses, entertainment, diwali expenses, staff expenses on account of unverifiable bills/vouchers.
On appeal, the Ld. CIT(A) maintained the disallowance of Rs. 49,423/- on account of outstanding TDS payable; allowed relief of Rs. 5,933/- being disallowance out of car insurance thereby retaining the disallowance to the extent of Rs. 2,71,721/- out of car maintenance expenses etc. for personal use; and confirmed disallowance of Rs. 1,71,996/- out of miscellaneous expenses on account of unverifiable bills/vouchers.
Aggrieved, the assessee is before the Tribunal challenging the retention by the Ld. CIT(A) of the aforesaid disallowances.
We have heard the arguments of both the parties and perused the material on record.
Disallowance of Rs. 49,423/- on account of outstanding TDS payable :-
6.1 From the balance sheet submitted by the assessee the Ld. AO noticed that as on 31.03.2013 the assessee has shown outstanding statutory liability of Rs. 49,423/- on account of TDS payable. According to the Ld. AO this TDS payable is a part of the expense which the assessee has claimed as expenditure in his Profit and Loss Account. As the assessee is following cash system of accounting whereby only payments which have been made during the year can be claimed as expense and thus, these expenses which have not been paid cannot be allowed as an expense. The only reason of the impugned disallowance is that the assessee had not paid it before the end of the financial year.
6.2 Before the Ld. CIT(A) the assessee submitted that the Ld. AO ignored the provision of section 43B and 40(a)(ia) of the Act. Both the provisions stipulate that any tax payable and/ or any expenditure is deductible/ allowable if same is paid before the due date of filing the income tax return. Reliance was placed on the judgment of Hon’ble Delhi High Court dated 01.07.2013 in CIT vs. Rajinder Kumar. The submission of the assessee was not acceptable to the Ld. CIT(A).
6.3 Before us the Ld. AR relied on the decision of Delhi Bench “C” of the Tribunal dated 07.02.2020 in the case of M/s. Gagrat & Co. vs. ACIT (ITA No. 3194/Del/ 2017 Assessment Year 2013-14). The Ld. DR supported the orders of Ld. AO/CIT(A).
6.4 We find that identical issue arose for consideration before the Tribunal in the case of M/s. Gagrat & Co. (supra) which was decided in favour of the assessee by recording the following findings :-
“6.1 Undisputedly the TDS deducted by the assessee u/s 194J for the month of March, 2013 has been duly paid on 11th March, 2013 which is well before the due date specified in Section 139(1) of the Act. When the assessee has duly deposited the TDS before filing the return of income for the year under assessment, the same is allowable u/s 43B of the Act. No doubt, the assessee is following the cash method of accounting and has made cash payment to various parties after deducting TDS, the portion of which has been allowed by the AO as deductible expenditures, U/s 198 of the Act tax deducted at source by the assessee as per Income Tax Act is deemed to be income received by the recipient of the said income and as such TDS deducted by the assessee is deemed to have been received by the recipient of the income and as such it cannot be held that the assessee has not paid the amount of tax deductible at source on or before the due date. So it cannot be held that the aforesaid amount of TDS has not been paid by the assessee while following the cash system of accounting.
6.2 Hon’ble Delhi High Court in case of Commissioner of Income Tax XIII Vs. Naresh Kumar in Income Tax Appeal No. 24/2013 decided on 6th September, 2013 and Judgment of Delhi High Court in the matter of Commissioner of Income Tax Vs. Rajinder Kumar in Income Tax Appeal No. 65/2013 decided on 1st July, 2013 held that if the statutory liability of depositing the TDS has been fulfilled before the due date of filing of the return u/s 139(1) of the Act, the same are allowable expenses in the year to which it relates. This is also mandate of Section 43B of the Act. Even otherwise identical issue has been decided by the revenue itself in favour of the assessee in its own case in A.Y. 2008-09, 2010-11 and 2011-12, so rule of consistency has to be followed by the Revenue.
6.3 Co-ordinate Bench of Tribunal in case of Associated Law Advisers, Antriksh Bhawan Vs. ACIT, A.Y. 2013-14 on 11.09.2019 decided the identical issue in favour of the assessee. So we are of the considered view that AO as well as Ld. CIT(A) have erred in making disallowance of Rs. 5,33,700/- on account of TDS, hence, ordered to be allowed / deleted. So ground no. 3 is determined in favour of the assessee.”
6.5 Respectfully following the decision (supra) of the Coordinate Bench of Tribunal, we delete the impugned disallowance and direct the Ld. AO to modify the assessment order accordingly.
Disallowance out of expenses of Rs. 2,71,721/- and Rs. 1,71,996/-
The assessee claimed expenses as under :-
Head of Account Amount (Rs.) (a) Car Maintenance 5,53,721 (b) Depreciation on car 3,56,939 (c) Conveyance 2,24,231 (d) Telephone Expenses 7,26,224 (e) Tour and travel 8,56,096 ___________ 27,17,211 (f) Repair & Maintenance 2,56,851 (g) Printing & Stationery 1,71,684 (h) Office Expenses 6,09,080 (i) Entertainment 4,14,086 (j) Diwali Expenses 61,824 (k) Staff Expenses 2,06,433 ___________ 17,19,958 The Ld. AO made adhoc disallowance of 10% for personal use and for unverifiable bills/vouchers. The Ld. CIT(A) confirmed the action of the Ld. AO. Before us the Ld. AR drew our attention to the decision of Delhi Bench “G” of the Tribunal dated 19.08.2021 in the case of Thakur Vaidyanath Aiyar & Co. vs. ACIT (ITA No. 6986/Del/2017 Assessment year 2013-14) and submitted that the Ld. AO/ CIT(A) were not justified in making the impugned disallowance without pointing out any expenditure which was not supported by bills/vouchers. The Ld. DR relied on the order of the Ld. AO/ CIT(A).
7.1 We have considered the rival submissions. We are of the view that adhoc disallowance out of expenses claimed by the assessee without bringing on record any adverse material deserves to be deleted being purely on conjecture and surmises alone. In the case of Thakur Vaidyanath Aiyar & Co. (supra) similar disallowances were held to be unjust and improper. We quote para 10 of the decision (supra) :-
10. We have heard the Ld. DR and perused all the relevant material available on record. It is pertinent to note that the Assessing Officer has simply rejected all these expenses stating in the Assessment order that the assessee could not produce proper vouchers. But from the perusal of the records which was before the Assessing Officer, it can be seen that the assessee has given all the vouchers and the relevant details of these expenses which was not at all taken into consideration by the Assessing Officer. Thus, merely on assumption basis the Assessing Officer disallowed 1/10th of these expenses which are not just and proper. Therefore, Ground No. 8 is allowed.
7.2 Respectfully following the decision of the Coordinate Bench of Tribunal (supra) and holding the same view, we delete the impugned disallowance and direct the Ld. AO to modify the assessment order accordingly.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 6th April, 2022.