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2019 (3) TMI 2089 - AT - Income TaxDisallowing the expenditure claimed towards VAT / CST and other heads - Addition made on relying on a letter of the CTO - HELD THAT - AO made addition in the absence of original challans in respect of VAT and CST payments and the same was confirmed by the CIT(A) while passing the ex-parte order observing that the original challans of the tax payment were not even filed before him. CIT(A) s order is very cryptic and he ought to have pass a detailed order on merits. We find that the additional evidence filed before us are relevant to the case on hand and they may go to the root of the matter in adjudicating the issues. Therefore we admit the additional evidence filed by the assessee and considering the facts and circumstances of the case and in the interest of justice in our view the issue has to be remitted back to the file of the CIT(A) with a direction to adjudicate the issue afresh after taking into consideration all the details filed before us and pass a speaking order in accordance with the law - Appeal filed by the assessee is allowed for statistical purposes
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Disallowance of VAT and CST expenditure due to non-production of original challans The legal framework governing the allowance of statutory payments such as VAT and CST requires that the assessee substantiate the claim of payment by producing valid evidence, typically original challans or receipts. The A.O. disallowed the expenditure claimed towards VAT and CST amounting to Rs. 31,59,569/- and Rs. 72,636/- respectively because the assessee failed to produce original challans despite repeated requests during assessment proceedings. The CIT(A) upheld this disallowance, noting the assessee's non-appearance and failure to produce original challans either before the A.O. or before the appellate authority. The order passed by the CIT(A) was ex-parte and cryptic, lacking detailed reasoning on merits. The assessee contended that payments were made through banking channels and sought to file additional evidence including bank statements, FIR copy, and other relevant documents to prove genuineness of payments. The Tribunal considered that the additional evidence was relevant and went to the root of the matter, and therefore admitted the same for adjudication. The Tribunal observed that the CIT(A) should have passed a detailed speaking order on merits rather than dismissing the appeal ex parte. In the interest of justice, the issue was remitted back to the CIT(A) for fresh adjudication after considering the additional evidence and providing the assessee a reasonable opportunity of hearing. Issue 2: Applicability of Section 43B to disallow VAT and CST payments claimed Section 43B mandates that certain statutory dues are allowable as deduction only on actual payment. The A.O. disallowed the VAT and CST payments on this basis. However, the assessee argued that no confirmed demand was raised by VAT authorities and the returns filed were found to be genuine, hence section 43B should not apply. The Tribunal did not delve into detailed analysis on this issue in the present order, as the matter was remitted to the CIT(A) for fresh consideration. The CIT(A) was directed to consider the facts and circumstances, including genuineness of payments and status of VAT/CST demands, while adjudicating afresh. Issue 3: Non-debit of statutory expenditure in Profit & Loss Account and its impact on disallowance under Section 43B The assessee contended that since the statutory expenditure towards VAT and CST was not debited to the Profit & Loss account, the disallowance under section 43B was not warranted. The Tribunal did not specifically address this contention in the present order but implicitly required the CIT(A) to consider all relevant facts and submissions on remand. Issue 4: Allowability of VAT and CST expenditure under Section 37(1) as business expenditure The assessee submitted that the expenditure was incurred for business expediency and hence allowable under section 37(1) of the Income Tax Act. The Tribunal did not make a conclusive finding on this issue but remitted the matter for fresh adjudication, requiring the CIT(A) to consider this argument along with other evidence. Issue 5: Addition of Rs. 1,11,12,631/- on adhoc and estimated basis without clear quantification The assessee challenged the addition made on an adhoc and estimated basis without clear quantification of unrefunded expenditure. The Tribunal did not specifically address this issue but by directing a fresh adjudication, implicitly required the CIT(A) to examine the basis and quantification of such addition and pass a reasoned order. Issue 6: Dismissal of appeal ex parte by CIT(A) without appreciating submissions and evidence The CIT(A) dismissed the appeal ex parte due to the assessee's non-appearance and non-production of original challans. The Tribunal found the order to be cryptic and lacking merits-based reasoning. It admitted the additional evidence filed before it and remitted the matter for fresh adjudication with directions to provide reasonable opportunity of hearing to the assessee. Issue 7: Reliance on inconclusive and non-committal letter from CTO The assessee argued that the letter from the CTO relied upon by the A.O. and CIT(A) was inconclusive and non-committal, and hence not a proper basis to disallow the expenditure. The Tribunal did not explicitly rule on this contention but by remanding the matter, required the CIT(A) to consider the nature and weight of such evidence in the fresh adjudication. Issue 8: Addition without tangible evidence or material The assessee contended that the addition made by the A.O. and upheld by the CIT(A) was without any tangible material or evidence. The Tribunal found that the CIT(A) did not pass a detailed speaking order and that the additional evidence filed by the assessee was relevant. Consequently, it admitted the evidence and remanded the matter for fresh adjudication. 3. SIGNIFICANT HOLDINGS The Tribunal held that the CIT(A)'s ex-parte order dismissing the assessee's appeal for non-production of original challans was cryptic and lacked merits-based reasoning. It emphasized the importance of a detailed speaking order and the necessity to consider all relevant evidence and submissions. The Tribunal stated: "We find that the additional evidence filed before us are relevant to the case on hand and they may go to the root of the matter in adjudicating the issues. Therefore, we admit the additional evidence filed by the assessee and considering the facts and circumstances of the case and in the interest of justice, in our view, the issue has to be remitted back to the file of the CIT(A) with a direction to adjudicate the issue afresh after taking into consideration all the details filed before us and pass a speaking order in accordance with the law and it is needless to say the assessee should be given a reasonable opportunity of being heard in accordance with law." The core principles established include:
On each issue raised by the assessee, the Tribunal refrained from making final
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