2014 (1) TMI 876 - AT - Income Tax

Addition on account of disallowance of expenses Held that - All the facts and figures appearing in the financial statements clearly show that the amount expenses of Rs. 8, 17, 7462/- were claimed by the assessee as regular business expenses incurred during the post survey period against regular business income which resulted in reduction of its regular business income which was estimated at Rs.1, 42, 00, 000/- as on 15.03.2007 for advance tax purpose to that extent - the AO and the CIT(A) misconceived the claim of the assessee for the said expenses as that of against the additional income of Rs.15, 00, 000/- declared during the course of survey and made disallowance of the said expenses on the basis of this misconception without considering or examining the said claim on merit being the claim for regular business expenses of post survey period against regular business income order set aside and the matter remitted back to the AO for fresh adjudication with a direction to consider and allow the claim of the assessee for the expenses as regular business expenses Decided in favour of Assessee. Set off of brought forward business loss and unabsorbed depreciation Application made u/s 154 of the Act Held that - The claim of the assessee for set off of brought forward loss and unabsorbed depreciation was not considered at all by the AO while framing the assessment - Since the AO has still not disposed of the application despite the specific direction given by the ld. CIT(A) Thus the AO is directed to dispose of the application filed by the assessee u/s 154 Decided in favour of Assessee.

Summary

Issues:
1. Disallowance of expenses claimed by the assessee.
2. Set off of brought forward business loss and unabsorbed depreciation.

Disallowed Expenses Issue:
The appeal was against the disallowance of expenses amounting to Rs.8,17,462 made by the Assessing Officer (AO) and confirmed by the ld. CIT(A). The dispute arose from the variance in the business profit declared by the assessee during a survey and in the return of income. The AO disallowed the expenses claimed post-survey period, asserting that the profit declared already accounted for all relevant expenses. The ld. CIT(A) upheld the disallowance, emphasizing that the net income offered for taxation by the assessee did not permit further deductions. The Tribunal, after reviewing the financial statements and explanations, found that the disallowed expenses were regular business expenses incurred during the post-survey period against regular business income. The Tribunal set aside the previous orders, directing the AO to consider and allow the claim of the assessee for the disallowed expenses as regular business expenses on merit.

Set Off Issue:
The second issue pertained to the claim of the assessee for set off of brought forward business loss and unabsorbed depreciation from earlier years. The AO had not considered this claim during assessment, prompting the assessee to file an application under section 154. The ld. CIT(A) directed the AO to expedite the disposal of the application. However, despite the direction, the AO had not addressed the application. The Tribunal directed the AO to promptly dispose of the application under section 154, emphasizing the need for timely consideration of the assessee's claim for set off of brought forward loss and unabsorbed depreciation. As a result, the appeal of the assessee was treated as allowed for statistical purposes.

In conclusion, the Tribunal's judgment addressed the disallowance of expenses claimed by the assessee and the overlooked claim for set off of brought forward business loss and unabsorbed depreciation. The Tribunal emphasized the need to consider the expenses as regular business expenses and directed the AO to expedite the assessment of the application for set off.