BHARATHI JAGDISH BOLOOR,MANGALURU vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1 (1) AND TPS MANGALORE , MANGALORE

Since the issue involved are common in all the appeals, the ground. raised by the assessee in is extracted below and the decision arrived shall apply mutatis mutandis to the other appeals filed by the assessees. to 12/Bang/2025 3. The brief facts of the case are that both the assessees are Directors of M/s. Yojaka India (P) Ltd. and filed their return of income. Thereafter, the case was reopened u/s. 147 and notice u/s. 148 was issued for which the assessee filed their return of income on 23/09/2019. Thereafter, the AO had furnished the copy of the reasons recorded for reopening the assessment. During the assessment proceedings, several details were called for by the AO for which the assessee had furnished some details. The AO proposed to disallow the reimbursement of expenses and proposed to disallow the uniform allowance, medical allowance, etc. The AO also not allowed the deduction on the payment of interest paid on by them on the loans borrowed from the banks and given to the company for carrying out the business activities. The assessees submitted that the company became sick and financially they were not able to carry on the business since the banks had initiated proceedings to attach the assets of the company for the non-payment of the dues. Therefore the assessees to help the company, obtained loan and infused the same into the company. The assessee claimed the said payment of interest as deduction but the AO had disallowed the same since the complete details were not made available to the AO. The AO concluded the assessment u/s. 143(3) r.w.s. 147 of the Act.

As against the said orders, the assessees filed appeals before the Ld.CIT(A) and contended that the expenses claimed by the assessees are allowable expenditure. Further, the assessees contended that the reimbursement of expenses could not form part of the salary. Similarly, the assessees contended that the interest expenses could not be treated as salary income to the Directors and explained the circumstances under which the interest expenses were claimed.

At the time of hearing, the assessee also filed one written submissions on 07/09/2023. Thereafter, the Ld.CIT(A) had again issued a notice on 25/10/2023 requesting the assessee to avail the personal hearing. The assessee had not responded to the notice dated 25/10/2023 and therefore the Ld.CIT(A) had decided the appeals based on the written submissions to 12/Bang/2025 filed by the assessee. The Ld.CIT(A) had considered the grounds separately and confirmed most of the grounds but allowed the interest expenditure as not liable to be added as income. As against the said order of the Ld.CIT(A), the assessees are in appeal before this Tribunal.

At the time of hearing, the Ld.AR submitted that the assessees had responded to the notices issued by the AO but unfortunately relevant documents could not be filed for the reasons beyond their control. The Ld.AR further submitted that even though the assessee had filed their written submissions, because of the various problems faced by the company, the further documents in support of their claim of deduction could not be filed before the Ld.CIT(A) and therefore, prayed an opportunity to appear before the AO with the documents.

The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeals filed by the assessees.

We have heard the arguments of both sides and perused the materials available on record.

We have considered the submissions made by the assessee that because of the various reasons which were beyond their control, the necessary documents could not be filed before the authorities below. We have also considered the paper books filed by the assessee in support of their claim that the company was in financial difficulties and the banks also initiated recovery proceedings under the various Acts and therefore they were not in a position to furnish all the details before the authorities below. At the time of hearing, the assessee had given an undertaking that they will appear before the jurisdictional assessing officer with the documents in support of their grounds of appeal

In the result, all the four appeals filed by the assessees are allowed for statistical purposes.