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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
Per Chandra Poojari, Accountant Member
This appeal is directed against the order of the CIT(Appeals) dated 28.01.2020 of the CIT(Appeals)-2, Bengaluru for the assessment year 2006-07.
The assessee has raised the following effective grounds:-
“2. Disallowance of amount claimed under section 40(a)(i)/ (ia) of the Act 2.1. The learned CIT(A) and the learned AO have erred in law and on facts in disallowing the amount of INR 5,53,12,436 under section 40(a)(ia) of the Act, representing deduction claimed in AY 2006-07 with respect to disallowance made in earlier Assessment Years ("AY"). 2.2. The learned CIT(A) and the learned AO have erred in law and on facts in disallowing the amount of INR 5,53,12,436 under section 40(a)(i)/(ia) of the Act without appreciating the fact that the said amount represented reversal of expenses credited to Profit & Loss account, which was earlier disallowed by the Appellant while filing the return of income for AY 2005 06. The learned CIT(A) and the learned AO erred in not appreciating that non-allowance of the same would lead to double taxation of the same amount in two years. 2.3. Notwithstanding and without prejudice to the above grounds, the learned CIT(A) erred in disregarding the remand report furnished by the learned AO wherein the learned AO, after verification of records, had categorically mentioned an amount of INR 4,38,44,566 may be allowed. 2.4. The CIT(A) has erred in law in disregarding the remand report furnished by AO even when no adverse opinion was formed in relation to the details furnished by the Appellant to the extent of INR 4,38,44,566. 2.5. Without prejudice to the above, the learned CIT(A) erred in disallowing the remaining amount of INR 1,14,67,870 out of the total claim of INR 5,53,12,436, on basis of lack of evidence even when no adverse opinion was formed by the learned AO in relation to the details furnished to the extent of INR 4,38,44,566.”
The assessee has claimed an amount of Rs. 11,15,58,254/- as a deduction in AY 2006-07 under section 40(a)(i) of the Income-tax Act, 1961 [the Act] which was suo motu disallowed by the assessee itself in the AY 2005-06. During the assessment proceedings the AO found that the appellant was able to produce the evidence for Rs. 5,62,45,818/- only, thus the balance of Rs. 5,53,12,437/- was added to the total income.
During the appellate proceedings, the Appellant contended that the company has created year end provisions on accrual basis for which services were utilized but invoices were not received till the end of the financial year, thus the same was reversed but claimed in subsequent year i.e., year under consideration. The Appellant submitted copies of screenshots (on sample basis) capturing the entry passed for reversal and argued that the evidence of 80% of expenses in this manner i.e., screenshots of the accrual and reversal, are submitted. The appellant argued that since the amount was reversed in earlier year, the deduction should automatically be allowed in the year in which it is claimed. The CIT(Appeals) was of the view that there is no discrepancy in the logic but the expenses need to be examined to ascertain their authenticity and genuineness which the appellant has failed to prove. The AO has allowed all the expenses for which the evidences were produced to the extent of Rs. 5,52,43 318, out of the total claim of Rs. 11,15,58.254. The assessee further submitted that since the matter is very old it was difficult to produce the same and since a major portion of the expenses are backed with supporting documents, the balance may also be allowed. The CIT(Appeals) observed that this plea was not tenable as the matter was brought to assessee’s knowledge vide order u/s. 143(3) r.w.s. 263 dated 30.3.2015 but the assessee failed to produce further evidence. Therefore, he confirmed the order of the AO. Against this, the assessee is in appeal before us.
We have heard both the parties and perused the material on record. As seen from the order of CIT(Appeals), the assessee has not produced the requisite details before the CIT(Appeals) and also expressed inability to produce further evidence. Before us, the ld. AR submitted that the AO in his remand report accepted the assessee’s claim of Rs.4,38,44,566 which was produced during the course of remand proceedings and atleast to that extent it may be allowed. However, in our opinion, this remand report has not been considered by the CIT(Appeals) while adjudicating the issue. Therefore, it would be appropriate to remit the entire issue in dispute to the CIT(Appeals) for fresh consideration. Accordingly, the issue is remitted back to the CIT(Appeals) to consider the evidence and the remand report of the AO and decide the issue afresh, after providing opportuning of being heard to the assessee.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Pronounced in the open court on this 22nd day of July, 2021.