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2019 (9) TMI 1700 - ITAT KOLKATADisallowance of Misc. construction expenses - Addition on estimated basis - failure of the assessee in producing supporting bills and vouchers - HELD THAT:- It is a well-established principle that ad hoc disallowance made by an Assessing Officer without proper verification of the facts is bad in law and in gross violation of the principles of natural justice. Scheme of the Act does not authorize the Assessing Officer to make a disallowance according to his wishes, rather it provide that he should first point out the defects in the accounts of the assessee. In the instant case, since ad hoc disallowance is made by making general observation, we do not find any merit in the addition made by the AO, That being so we decline to interfere in the order passed by ld CIT(A), his order on this issue is hereby upheld and grounds of appeal raised by the Revenue is dismissed. Depreciation on goodwill - goodwill as acquired during merger - As per AO goodwill is not reflected in the post-merger audited financial statement and the tax audit report of the assessee - HELD THAT:- As assessee has submitted that post approval of merger by the Hon’ble High Court of Delhi and Hon’ble Calcutta High court, the audited financial statement for FY 2006-07 clearly reflected the amount of goodwill that arose pursuant to the merger. The same was also filed with the A.O. vide letter dated 21st March, 2014. Though in the tax audit report the tax auditor has not considered the depreciation on goodwill, but the same cannot be the basis of disallowance. We find that such disallowance made by the AO is erroneous. On appeal by assessee, CIT(A) has appreciated the facts of the assessee company and deleted the addition. We decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the grounds of appeal raised by the revenue are dismissed. Addition on account of bad debts - CIT-A deleted the addition - HELD THAT:- As amount mentioned as opening balance in the details submitted before the AO is the unrealized amount which is nothing but unrealized amounts against invoices raised by the assessee on PWD & IRCON during the FYs 2001-02, 2004-05 and 2005-06 which were offered to tax as income in the earlier years and on becoming irrecoverable, the same has to be allowed as bad debts during the relevant assessment year under the provisions of section 36(1)(vii) of the Act. CIT(A) has rightly deleted the addition made by assessing officer. Decided against revenue. Unreconciled closing balance - excess liability shown by the assessee company in the books of accounts and thus difference added back to the total income of the assessee - HELD THAT:- We note that the difference in liability is primarily on account of the accounting of service tax. Counsel submits that it is not the case where excess expenditure has been recorded for which liability has arisen. The amount of service tax for which liability is reflected is not claimed by the assessee as an expense - liability so created has subsequently been paid by the assessee. The difference in accounting treatment followed by the both the parties cannot lead to any addition as unexplained liability. Therefore, question of overstating the expenditure of accounting for unexplained purchases does not arise. Decided in favour of assessee.
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