DCIT, CIRCLE-1(1), GURUGRAM vs. ABIDI YAHIYA SYED, GURUGRAM

Commissioner of Income Tax (Appeals)-2, Gurgaon dated 28.12.2018 for the AY 2014-15. The Revenue raised the following grounds: - 1. “Ld.CIT(A) has erred in deleting the addition of Rs.56,34,534/- made by the AO on account of travelling expenses since the Ld.CIT(A) has not considered the facts that the assessee has not explained how the air tickets were booked i.e. whether the booking was made through the travel agent or directly from the airlines or otherwise.

The Ld. DR submits that in the appeal proceedings the remand report was called for from the AO and the AO submitted remand 2 report stating that the expenses are not covered under the provisions of Section 194C of the Act. The Ld. DR submits that based on the remand report the Ld.CIT(A) deleted the addition/disallowance on the ground that the assessee has produced the proof of expenses before the AO. The Ld. DR submits that the question is whether the travelling expenses incurred by the assessee can be subject matter of TDS or not was not at all examined by the Ld.CIT(A) but the disallowance was deleted only based on the observations of the AO that the provisions of Section 194C of the Act are not attracted. Therefore, Ld. DR submits that the matter may be restored back to the AO for denovo verification.

Ld. Counsel for the assessee reiterating the submissions made before the lower authorities submits that the TDS provisions are not applicable to the travelling expenses incurred by the assessee.

On hearing both the sides and perusing the order of the authorities below, we observe that the assessee did not produce any bills/vouchers etc. during the course of assessment proceedings. In the remand report the AO has simply stated that the provisions of Section 194C are not attracted to these expenses. The Ld.CIT(A) also has not given any finding as to whether the TDS provisions are applicable to the travelling expenses or not. Therefore, we are of 3 the considered view that the matter has to be reexamined by the AO in accordance with law. Thus, the same is set aside to the file of the AO for denovo examination in accordance with law after providing adequate opportunity of being heard to the assessee.

The second ground of appeal is relating to deletion of addition made on account of offsite/event expenses disallowed u/s 40(a)(ia) of the Act. The Ld. DR submits that in this case also the assessee has not furnished complete details before the AO and not explained as to why the TDS was not made. The AO also observed that there were also personal expenses incurred by the assessee which were not allowable u/s 37 of the Act. Therefore, the AO disallowed the same u/s 40(a)(ia) of the Act and also u/s 37 of the Act. Ld. DR submits that the Ld.CIT(A) deleted the disallowance observing that the AO verified the bills/vouchers in the remand proceedings and the nature of expenditure is payment to hotels, forex payments and other petty payments, payments made for purchases at the time of events abroad or in India. The Ld. DR submits that in the remand proceedings the AO only stated that he has test checked the bills and vouchers and he has not given any finding that these expenses are not liable for TDS. Ld. DR further submits that even the Ld.CIT(A) has not examined as to whether any TDS provisions are attracted for the expenses incurred by the assessee. Therefore, the Ld. DR submits that the matter may be restored to the file of the AO for denovo adjudication after thorough verification.

The last ground of appeal is in respect of deletion of addition made on account of rental income. The Ld. DR submits that the AO observed that the assessee has earned income of Rs.14,88,242/- from the guest house during the FY 2012-13. However, the assessee has not shown any income from the guest house during the subject assessment year. Ld. DR submits that the AO also observed that the 5 assessee also incurred guest house expenses of Rs.5,30,742/- and, therefore, he has concluded that the assessee has not reported the income from guest house and the expenses cannot be allowed. On appeal the Ld.CIT(A) deleted the addition based on the remand report submitted by the AO.

The Ld. Counsel for the assessee submits that during the assessment year under consideration the guest house of the assessee was vacant and no income was earned from it. Ld. Counsel further submits that the assessee has also given declaration certificate stating that the company was in the business of guest house providing accommodation facility for corporate staff till the FY 2012-13 and due to certain financial reasons the assessee closed the said business. Ld. Counsel also submits that expenses of Rs.5,30,742/- which was incurred during the year were against the event expenses for transit accommodation of guest. Ld. Counsel submits that considering all these submissions and since there was no adverse comments given by the Ld.AO the addition was rightly deleted by the Ld.CIT(A).

Heard rival submissions, perused the orders of the authorities below. The contentions of rival parties have been considered by the Ld.CIT(Appeals) and the AO in the remand proceedings 6 examined the issue and there was no adverse comments given by the AO. Therefore, based on the remand report the Ld.CIT(A) deleted the addition which in our view there is no valid reason to interfere with the findings of the Ld.CIT(A). The ground raised by the Revenue is dismissed.

In the result, appeal of the Revenue is partly allowed for statistical purpose.