NOBEL AUTOMOTIVE INDIA PRIVATE LIMITED,KANCHEEPURAM vs. DCIT, CORP CIRCLE 4(1), CHENNAI

On perusal of the submissions made by the assessee, the ld.CIT(A) confirmed the additions made by the AO since the assessee failed to provide any evidence in support of the deductions claimed u/s.40(a)(i) and the expenditure booked in the name of the Orhan Holding A S. However, the ld.CIT(A) recorded that in respect of the discrepancy in the ledger balance payable by the assessee to M/s.Raymond Fastners India private limited to the tune of Rs.1,17,17,777/-, the assessee filed an additional evidence without submitting any reason for non filing of the evidence before the AO.

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.

The Ld.AR for the assessee submitted that the ld.CIT(A) has confirmed the additions made by the AO without considering their submissions. Further, the ld.AR filed a paper book consisting of 109 pages containing the documents in support of the deduction details and payment of TDS made u/s.40(a)(i) of the Act, Invoice copies and expenditure details of Orhan Holding A S along with subsequent payments made and the reconciliation and confirmation of M/s.Raymond Fastners India private limited towards the difference of Rs.1,17,17,777/-. In view of the above, the Ld. AR prayed for remit the matter back to the AO for verification of additional evidence and direct to delete the additions, if he is satisfied with the evidence.

Per contra, the Ld.DR strongly supported the orders of the lower authorities and submitted that the AO and Ld.CIT(A) had given enough opportunities to the assessee and hence prayed for dismissing the appeal of the assessee.

We have carefully considered the rival submissions, perused the material available on record and examined the orders passed by the authorities below along with the paper book filed. The issues involved in the present appeal arise out of additions made by the AO u/s.143(3) of the Act for the Assessment Year 2022-23, which were substantially confirmed by the Ld.CIT(A).

At the outset, it is an admitted position that the additions have been made primarily on account of non-furnishing of supporting evidence during the assessment proceedings. The AO has not recorded any categorical finding that the impugned claims are inherently inadmissible in law; rather, the disallowances stem from absence of documentary substantiation. The :-4-:

With regard to the claim of deduction u/s.40(a)(i) of the Act amounting to Rs.4,92,74,575/-, the statutory scheme clearly provides that where tax deducted at source has been subsequently paid to the credit of the Central Government, the corresponding expenditure, which was disallowed in earlier years, becomes allowable in the year of such payment. The AO disallowed the claim solely for want of proof regarding deduction and remittance of TDS. Before us, however, the assessee has produced TDS challans, computation statements and reconciliation details in support of its claim. These documents are crucial for determining whether the conditions prescribed u/s.40(a)(i) stand satisfied. Since the allowability of the claim is contingent upon factual verification of these documents, and in the interest of determining the correct taxable income, we are of the considered view that the matter requires fresh examination by the AO.

In respect of the disallowance of expenditure of Rs.4,42,28,662/- paid to Orhan Holding A.S., the AO observed that the expenditure appeared to have been booked to reduce profits and that no supporting details were furnished. The Ld.CIT(A) confirmed the addition for the same reason. Before this Tribunal, the assessee has placed on record invoices, details of services rendered and subsequent payments. The allowability of business expenditure depends upon its genuineness and nexus with business purposes. The authorities below have not examined these aspects on merits but have disallowed the claim for want of supporting evidence. Since relevant documents have now been produced which go to the root of the matter, the issue requires verification of the genuineness and business expediency of the expenditure. In the absence of such verification, a conclusive finding cannot be rendered at this stage.

As regards the addition of Rs.1,17,17,777/- relating to discrepancy in the ledger balance payable to M/s. Raymond Fasteners India Private Limited, the addition has been made on account of failure to furnish reconciliation. The Ld.CIT(A) has recorded that additional evidence in the form of reconciliation statement and confirmation was filed before him but declined to grant relief on the ground that no sufficient cause was shown for non-filing of the same before the AO. The dispute, however, is essentially a matter of reconciliation of accounts. The object of assessment proceedings is to determine the correct taxable income. Where reconciliation statements and third-party confirmations are available, substantive justice demands that the same be examined so that only the real income is subjected to tax. In our considered opinion, procedural lapses should not come in the way of proper adjudication when relevant evidence is now placed on record and no prejudice would be caused to the Revenue by its verification.

Having regard to the totality of the facts and circumstances, we find that all the three additions have been sustained primarily for want of evidentiary support and not on the basis of any adverse finding on merits. The additional evidence filed before us are material and go to the root of the issues involved. In the interest of justice and fair play, and with a view to ensure that the correct income is assessed in accordance with law, we deem it appropriate to set aside the impugned issues to the file of the AO for fresh examination.

The AO shall verify the evidence furnished by the assessee, examine the claims in accordance with the provisions of law and pass a speaking order after affording adequate opportunity of being heard to the assessee. The assessee is also directed to extend full cooperation and furnish all requisite details as may be called for during the remand proceedings.

In the result, the appeal of the assessee is allowed for statistical purposes.