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Income Tax Appellate Tribunal, “C” BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), vide order no. ITBA/NFAC/S/250/2024-25/1067690905(1), dated 16.08.2024, passed against the assessment order by Assistant Commissioner of Income Tax, Circle – 13(1)(2), Mumbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 27.12.2018 for Assessment Year 2016-17.
Grounds taken by the assessee are reproduced as under: 1.(a) The learned Assessing officer has erred in making the addition of Rs. 32,31,483/- debited to the Profit & Loss account towards the difference in rate written off which is upheld by CIT(Appeals).
2. The learned Assessing Officer has erred in making addition of Rs. 2,61,363/- towards disallowance of expenses claimed and subsequently disallowed in the return of income by the appellant under Section 37(1) of the Income Tax Act, 1961 which is upheld by CIT (Appeals). 3.(a) The learned Assessing Officer has erred in making disallowance of expenses claimed and subsequently disallowed in the return of income by assessee under Section 43B of the Income Tax Act.1961; of Rs. 5,82,761/- towards Service Tax not paid on or before due date which is Upheld by CIT (Appeals). (b) The learned Assessing Officer has erred in making disallowance of expenses claimed and subsequently disallowed in the return of income by assessee under Section 43B of Rs. 16,08,900/-towards VAT not paid on or before due date which is upheld by CIT(Appeals) 4. The learned Assessing Officer has erred in initiating penalty under Section 271(1)(c) of the Income Tax Act, 1961. 5. The learned Assessing Officer has erred in levy of interest under Section 234A, 234B and 234C of the Income Tax Act, 1961.
2.1. There is a delay of 1 day as noted by the Registry in filing this appeal before the Tribunal for which petition for condonation of delay is placed on record. Having gone through the same, we condone the said delay and take up the matter for adjudication.
Brief facts of the case are that assessee is engaged in the business of transport and earth work job at Baroda and Vishakhapatnam. Assessee filed its return of income on 31.03.2018 reporting a total income at Rs.80,32,330/-. Assessee had claimed Rs.32,31,483/- by debit in its profit and loss account, towards difference in the rate as write off. In this respect, it was submitted that principal contractor of the assessee M/s. Modern Road Makers deducted additional kilometres run by its vehicles apart from its actual route framed by them. Assessee explained that additional kilometres were run by its vehicles since it took longer route for the safety of vehicles, material as well as to take care of wear and tear of the trucks. In order to explain the rate difference claim, assessee Pranay Traders and Suppliers Pvt. Ltd., AY 2016-17 placed on record copy of work order, forming part of paper book from page 33 to 53. Based on this work order, it computed the amount of rate difference which was claimed by the assessee from the principal contractor but owing to its decline was charged to profit and loss account. The said computation is extracted below for ready reference:
3.1. This computation of rate difference was based on escalation clause contained in work order for which assessee raised its contract bill on M/s. Modern Road Maker. However, the rate difference claimed by the assessee was declined and therefore was claimed as a charge in the profit and loss account, which has been disallowed by the ld. Assessing Officer.
Before us, these facts were reiterated along with reference to corroborative material placed on record in the paper book containing 53 pages. We have perused the material on record and note that assessee raised its contract bill for the work done by it and charged certain amounts based on escalation clause contained in the work order. However, rate difference claim made by the assessee through its contract bill was declined and was therefore claimed as an expense in its profit and loss account. We find that it is a legitimate business expenditure claimed by the assessee on decline of the claim made by the assessee which it had incurred in performing the work order with M/s. Modern Road Makers. Assessee explained the commercial expediency of taking longer route in order to safeguard the material and the vehicles. Section 37(1) of the Act allows such a claim of expenses incurred wholly and exclusively for the business purpose of the assessee. In term of the said section, claim made by the assessee is neither capital in nature nor personal and is also not covered by sections 30 to 36 of the Act. Considering the factual matrix of the case, corroborated by documentary evidences on record, we delete the addition of Rs.32,31,483/-. Accordingly, ground no.1(a) raised by the assessee is allowed.
Pranay Traders and Suppliers Pvt. Ltd., AY 2016-17 5. In respect of additions/disallowances made for which assessee has raised ground No. 2, 3(a) and 3(b), it was pointed out that the same have been suo moto added back by the assessee in its computation of profits and gain of business and profession reported in the return filed by it. In this respect, reference was made to page-3 of the paper book, wherein computation of total income is placed on record. From the perusal of the same, it is noted that all these three additions/disallowances made by the ld. Assessing Officer have already been added back by the assessee to arrive at profits and gains of business and profession of Rs.80,32,325/-. Accordingly, disallowances/additions made by the ld. Assessing Officer on these accounts, tantamount to double addition which is unwarranted in the given set of undisputed verifiable facts. Considering the fact on record and the documents placed before us, addition/disallowances so made are deleted. Ground no.2, 3(a) and 3(b) are allowed.
In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 24 February, 2025