2019 (1) TMI 1256 - AT - Income Tax

Disallowance u/s 40A(3) - expenditure paid in excess of ₹ 20,000/- in cash - Held that - AO never had an occasion to go into the genuineness of transactions nor the assessee furnished any details with supporting evidences to even look into the same. In fact the ld CITA had dismissed this ground for want of furnishing of details by the assessee. Even before us, except making a bald statement, no evidences were submitted by the assessee for incurrence of the said expenditure. Hence we hold that the ld CIT-A had rightly confirmed the disallowance u/s 40A(3) of the Act in the facts and circumstances of the case. Accordingly, the Ground No.1 raised by the assessee is dismissed. Addition of undisclosed income - Assessee did not disclose TDS and corresponding income received from Food Corporation of India, Krishnagar, Nadia - Held that - We hold that the sum of ₹ 2,00,568/- actually received by the assessee together with TDS thereon of ₹ 4,649/- is only reimbursement of expenses which had been routed off as a balance sheet item and which account had been squared off in the said ledger during the year, cannot be brought to tax in the hands of the assessee. CIT-A having accepted the fact that the ledger of transport charges recovery account produced by the assessee is squared off account, ought not to have expected the assessee to first claim the expense incurred as an expenditure in its profit and loss account and thereafter credit the same on receipt of reimbursement of expenses. In either case, the effect on the net profits would be the same. Hence we have no hesitation in directing the AO to delete the said addition of ₹ 2,05,217/- in the assessment but correspondingly the AO should disallow the sum of ₹ 4,649/- which was wrongly claimed as discount allowed in the return of income. - Decided partly in favour of assessee. Disallowance towards delayed payment of provident fund - Held that - The dates of remittance of PF are duly recorded in the assessment order. From the same, it is seen that the PF had been duly remitted before the end of the previous year itself , of course with some delay. This issue has been held in favour of the assessee by the Hon ble Jurisdictional High Court in the case of Vijay Shree Cement reported 2011 (9) TMI 30 - CALCUTTA HIGH COURT . Respectfully following the same, we direct the ld AO to grant deduction to the assessee. Decided in favour of assessee.

Summary

Issues:
1. Disallowance under section 40A(3) of the Income Tax Act.
2. Addition of undisclosed income.
3. Disallowance of delayed payment of provident fund.

Issue 1: Disallowance under section 40A(3) of the Income Tax Act:
The appeal pertains to the disallowance of ?48,500 under section 40A(3) of the Income Tax Act. The Assessing Officer disallowed the amount as it was paid in cash without satisfactory explanation. The appellant, a partnership firm, argued that the payment was made to various laborers but recorded as a single payment. However, the lack of documentary evidence led to the disallowance being upheld by the Commissioner of Income Tax (Appeals). The Appellate Tribunal agreed that without proper evidence, the disallowance was justified, dismissing the appellant's appeal.

Issue 2: Addition of undisclosed income:
The second issue concerns the addition of ?2,05,217 towards undisclosed income. The Assessing Officer noted discrepancies in TDS disclosure and income received from Food Corporation of India. The appellant claimed that the amount was reimbursement for transport charges and wrongly accounted for as a discount. The Commissioner of Income Tax (Appeals) upheld the addition due to lack of evidence. However, the Appellate Tribunal found that the ledger account provided by the appellant proved reimbursement of expenses, not undisclosed income. The Tribunal directed the Assessing Officer to delete the addition of ?2,05,217 but disallow the wrongly claimed discount of ?4,649.

Issue 3: Disallowance of delayed payment of provident fund:
The final issue revolves around the disallowance of ?6,852 for delayed remittance of employees' provident fund. The Assessing Officer disallowed the amount for late payment beyond prescribed due dates. However, the Commissioner of Income Tax (Appeals) granted partial relief based on grace period rules. The Appellate Tribunal, following a High Court precedent, directed the Assessing Officer to allow the deduction of ?6,852 to the appellant. Consequently, the appeal was partly allowed by the Tribunal.

In conclusion, the Appellate Tribunal addressed the issues of disallowance under section 40A(3), addition of undisclosed income, and delayed payment of provident fund in a detailed manner, providing reasoning for each decision based on the facts and circumstances of the case. The Tribunal partly allowed the appeal, directing appropriate actions to be taken by the Assessing Officer in each issue.