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Facts
The assessee, a Director of M/s. Yojaka India Pvt. Ltd., challenged reassessment orders concerning A.Ys. 2012-13 and 2014-15. The case was reopened under Section 147, with notices issued under Section 148. The Assessing Officer (AO) disallowed reimbursement of expenses, uniform allowances, and medical allowances, and a deduction claimed under Section 57(iii).
Held
The Tribunal held that the CIT(A) erred in dismissing the appeal as withdrawn based on the assessee's intention to settle under the Vivad se Vishwas Scheme, especially when the scheme was not completed. The Tribunal also noted that the AO disallowed claims without sufficient evidence and failed to consider specific exemptions.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal as withdrawn and whether the disallowances made by the AO for reimbursement of expenses, uniform allowances, and medical allowances were valid.
Sections Cited
147, 148, 201(1A), 57, 10(14), 271(1)(c), 143(2), 142(1), 57(iii)
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
These are the appeals filed by the assessee challenging the order of the NFAC, Delhi dated 06/05/2024 and 03/05/2024 in respect of the A.Ys. 2012-13 and 2014-15 respectively.
Since the issue involved in both the appeals are common, the grounds raised by the assessee in is extracted below and the decision arrived shall apply mutatis mutandis to the other appeal filed by the assessee.
& 8/Bang/2025 “1. The orders passed by the learned on 30.10.2019 under section 143 (3) r.w.s 147 of the IT Act, 1961 for assessment year 2012-13 is liable to be set aside as erroneous, arbitrary opposed to the facts and circumstances of the case and the law, so also to the principles of natural justice.
2. The learned Authorities has erred in considering that the salary does not include the reimbursement of expenses. The 'Reimbursement of Expenses' as shown in the IT Returns represents the expenses incurred by the appellant on behalf of the company. when company was not in position to avail any Financial Assistance from Bank or any other financial institution during the Financial Years 2011-12 to 2015-16 due to its NPA position with the Banks, all the 5 directors of the company bought loan of Rs.1,00,00,000/- each to the company from on their individual capacity totalling to Rs.5,00,00,000/-on dated 30.07.2011 in the form of share capital instead of Unsecured loan Against this loan repayment, company paid instalment and interest payment every month until closure of its loan in 2015-16. These payments have been made from company to each of its director for closure of loan only and not for their personal benefit. The said payment treated by the Assessing Officer as Remuneration/Salary paid to the Directors and accordingly order u/s 201(1A) were issued for said Financial Years for non-deduction of IDS. The company as well as the Director both have filed appeal against the order u/s201(1A) before the Commissioner of Income Tax (Appeals). Subsequently Company has opted for payment of disputed tax under the VsV Scheme.
The appellant submits, that due to financial difficulties of the Company the appellant took loan from bank, in his personal capacity, and thereafter infused the funds into the company in the form of share capital. The investment was made with an intention of earning Income from other sources (i.e. Dividend income), the same shall be allowable expense u/s 57. As held in the case "Commissioner of income Tax, West vs Rupendra Prasad Moody, Calcutta,', it was observed that, 'It is not necessary to show that expenditure was a profitable one or that in fact any profit was earned'. Further, it was held that 'whatever is a proper outgoing by way of expenditure must be debited irrespective whether there is receipt of income or not That is the plain requirement of proper accounting and the interpretation of section 57(iii) cannot be different.
& 8/Bang/2025 4. The Authorities below has overlooked the uniform allowances and medical allowances. He went on disallowing such expenses without considering the facts. Uniform allowances are allowable under section 10(14) (i) and medical allowances are exempted up to Rs. 15,000/-. Therefore, the tax and the interest levied on such expenses have to be deleted. 5. on the basis of this erroneous assumption and presumption the learned Authorities below have held the appellant is in default and penalty proceedings under section 271(1) (c) is initiated. It is submitted as there is no valid demand, and suppression of facts and hence the question of penalty does not arise.
The Appellant crave leave of this tribunal that he may raise or to urge any other ground or other grounds at the time of hearing.”
3. The brief facts of the case are that the assessee is a Director of M/s. Yojaka India Pvt. Ltd. and filed her return of income. Thereafter, the case was reopened u/s. 147 and notice u/s. 148 was issued. The assessee had not responded to the said notice and therefore a show cause notice was issued on 16/09/2019. Thereafter the assessee filed her objection on 30/09/2019 by stating that the notice issued u/s. 148 is not within the period of limitation. Subsequently, on 05/10/2019, the assessee filed a return of income u/s. 148 of the Act. Thereafter the AO had furnished the copy of the reasons recorded for reopening the assessment. The assessee was also served with notices u/s. 143(2) and 142(1) calling for certain details. The assessee had not responded to the said notices and therefore the AO after considering the objections made by the assessee that the notice is not within the period specified, had disallowed the reimbursement of expenses claimed by the assessee. Similarly, the assessee had not given any details about the claim of deduction of uniform allowances and medical allowances. Therefore the AO had disallowed the said deductions. The AO had also disallowed the deduction claimed u/s. 57(iii) of the Act on the ground that the assessee had not furnished the evidence of having paid the interest. Finally, the AO had made the assessment by disallowing the above said three expenses. As against the said order, the assessee filed an appeal & 8/Bang/2025 before the Ld.CIT(A). The assessee also filed her written submissions in which the assessee had informed about the intention of the company to settle the dispute under the Vivad se Vishwas (VsV) Scheme and also informed that the disputed tax as per Vivad se Vishwas form – 3 also paid within the period prescribed and submitted that the form -4 and 5 has to be issued by the authority. The Ld.CIT(A) by relying on section 4 of The Direct Tax Vivad Se Vishwas Act, 2020, had disposed the appeal as withdrawn.
As against the said order, the present appeal is filed by the assessee.
At the time of hearing, the Ld.AR submitted that in similar circumstances, in respect of the other two Directors of the company viz., M/s. Yojaka India Pvt. Ltd., similar disallowances were made but this Tribunal had considered the submissions that the assessee would appear before the AO along with the required documents had remitted the issue to the AO for denovo consideration and prayed to grant the very same relief in respect of this assessee is also concerned. The Ld.AR further submitted that the assessee had not settled the dispute under the said Act and therefore the Ld.CIT(A) without having any materials before him, could not have treated the appeal as withdrawn and dismissed.
6. The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeals.
We have heard the arguments of both sides and perused the materials available on record.
We have perused the assessment order from which we find that the entire disallowances were made for the reason that the assessee had not submitted any details in respect of the said claim of expenditures. Similarly, the assessee had also not availed the opportunity since the Ld.CIT(A) had dismissed the appeal as withdrawn by relying on the statement given by the assessee in the written submissions. The Ld.CIT(A) had relied on the said & 8/Bang/2025 submissions made in the written submissions and sought for the details of the forms filed by the assessee under the said Act but no details were furnished by the assessee before him. Therefore the Ld.CIT(A) by following section 4 of the said Act, had dismissed the appeal as withdrawn.
Now before us, the Ld.AR submitted that the assessee would not be able to settle the dispute under the Act because of various difficulties and therefore the order of the Ld.CIT(A) has to be set aside. We are also surprised to note that when the assessee had given a statement by way of written submissions, without furnishing any other details of opting to resolve the disputes under the Act, 2020, the Ld.CIT(A) could have decided the appeal on merits instead of disposing the appeals as withdrawn. Further, we have also considered the similar issue arose in the case of Smt. Bharathi Jagdish Boloor and Shri Jagadish Boloor in to 12/Bang/2025 vide order dated 29/05/2025. This Tribunal had given the following findings: “10. Considering the said submissions made by the assessees as well as the peculiar position in which the assessees are situated and also recording the submissions made by the assessees that they will appear before the AO along with the required documents, we are inclined to grant an another opportunity to the assessee to appear before the AO.
11. We, therefore, set aside the order of the Ld.CIT(A) insofar as it confirms the addition made by the AO and remitted the issue to the file of the AO for denovo consideration. We also made it clear that the assessees should appear before the jurisdictional assessing officer, within a period of 90 days from the date of receipt of this order along with the documents in support of their case, otherwise, the order of the Ld.CIT(A) would restore automatically.”
We have also considered the submissions made before us and by following the earlier order of this Tribunal in the above said order cited supra, we are also remitting these appeals to the file of the AO for denovo consideration and also directed the assessee to appear before the jurisdictional assessing officer within the period of 90 days from the date of & 8/Bang/2025 receipt of this order along with the documents in support of their case. In the event of failure on the part of the assessee, we also made it clear that the order of the Ld.CIT(A) would revive automatically without any notice to this Tribunal.
In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open court on 15th December, 2025.