DCIT, CIRCLE-1(1), CHANDIGARH V. M/S SALUJA MOTORS PVT. LTD., CHANDIGARH

ITA 62/CHANDI/2023

AI Insights

The case involves the Revenue's appeal against the order of the CIT(A) which had deleted certain additions made by the AO for the assessment year 2016-17. The main issues revolved around the disallowance of interest expenditure and discrepancies in TDS details as per Form 26AS compared to the entries in the books of the assessee, M/s Saluja Motors Pvt. Ltd. The Tribunal examined the findings of the CIT(A) and the submissions made by both parties, ultimately agreeing with the CIT(A)'s conclusions and dismissing the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469837 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR
• Assessee Lawyers: TEJMOHAN SINGH
• Keywords: TDS; FORM 26AS
• Section: 142(1); 143(2); 250

Judgement Text

"आयकर अपील य अ\u000bधकरण,च\u0010डीगढ़ \u0014यायपीठ, च\u0010डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 62/CHD/2023 \rनधा\u0011रण वष\u0011 / Assessment Year: 2016-17 The DCIT, Circle-1(1), Chandigarh. Vs M/s Saluja Motors Pvt. Ltd., Plot No. 140, Indl. Area-II, Chandigarh. \u0016थायी लेखा सं./PAN NO: AAHCS8397L अपीलाथ\u001a/Appellant \u001b\u001cयथ\u001a/Respondent Assessee by : Shri Tej Mohan Singh, Advocate Revenue by : Dr. Ranjit Kaur, Addl.CIT, Sr.DR Date of Hearing : 29.01.2025 Date of Pronouncement : 11.03.2025 PHYSICAL HEARING O R D E R PER RAJ PAL YADAV, VP The Revenue is in appeal before the Tribunal against the order of the ld.Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 08.12.2022 passed for assessment year 2016-17. The Revenue has taken seven grounds of appeal, out of that Ground Nos.1, 6 and 7 are general grounds which do not call for recording of any specific finding. ITA No.62/CHD/2023 A.Y.2016-17 2 2. The Registry has pointed out that appeal is barred by 8 days. Revenue has filed an application for condonation of delay. The Revenue has pleaded that there were lots of movements of file for taking necessary approval and due to this communication gap, it could not file the appeal within time. Taking into consideration the explanation of the DCIT, Circle-1, Chandigarh, we condone the delay in filing the appeal which is of a very short period and proceed to decide the appeal on merit. 3. We first take Ground 3. In this Ground, Revenue has pleaded that ld. CIT(A) has erred in deleting addition of Rs.45,70,407/- which was added by the AO under Section 36(1)(iii) of the Act by making a disallowance out of interest expenditure. 4. The brief facts of the case are that assessee company at the relevant time was working as authorized dealer of Ford India Pvt. Ltd. for sale and service of passenger cars. It has filed its return of income on 17.10.2016 declaring loss of Rs.67,08,198/-. The case of the assessee was selected for scrutiny and notice under Section 143(2) as well as ITA No.62/CHD/2023 A.Y.2016-17 3 questionnaire under Section 142(1) were issued and served upon the assessee. The ld. AO has made a disallowance of interest expenditure simply by observing that the value of inventory has been increased from Rs.10.16 Cr to Rs.14.42 Cr. Similarly he found that the bank balance was also increased from Rs.2.03 Cr to Rs.3.19 Cr. 5. On appeal, ld. CIT(A) has deleted the disallowance by observing that AO has failed to demonstrate as to how much amount bearing interest expenditure was not used by the assessee for the purpose of the business. The finding of the ld. CIT(A) on this point in paragraph No. 5.3 to 5.3.3 is very specific. 6. With the assistance of ld. Representative, we have gone through the record carefully. An interest expenditure to a businessman/professional will not be allowed as a deduction if it is demonstrated that interest bearing funds were not used wholly and exclusively for the purpose of the business. We find that ld. CIT(A) has recorded a specific finding that AO has nowhere pointed out which amount was not incurred by the assessee for the purpose of business. We have ITA No.62/CHD/2023 A.Y.2016-17 4 perused the assessment order as well as the impugned order of the CIT(A). We find that instead of pointing out user of interest bearing funds for the purpose of non business,the AO has only made reference with reference to the increase in inventory i.e. unsold cars/spares with the assessee. Similarly, he made reference to the increase of balance in the bank. We fail to understand that how these two components could goad any adjudicating authority to assume that interest bearing funds have not been used for the purpose of the business. The increase in the inventory in itself shows that higher funds were used for procuring those cars from manufacturers for sale. Thus, ld. AO miserably failed to demonstrate as to how interest expenditure is not allowable under Section 36(1)(iii) of the Act. The ld. CIT(A) has rightly construed the dispute and rightly deleted the disallowances. The CIT(A) has called for the remand report also from the AO. Therefore, we do not find any merit in this ground of appeal. It is rejected. Ground No. 4 7. In this ground, grievance of the Revenue is that ld. CIT(A) has erred in deleting the addition of Rs.1,67,41,985/-. ITA No.62/CHD/2023 A.Y.2016-17 5 This addition was made by the AO on the ground that there is a mismatch between the TDS details submitted in Form No. 26AS vis-à-vis the entries in the books of account. The ld. CIT(A) has observed that assessee has duly reconciled the alleged discrepancy construed by the AO. The finding of the CIT(A) on this point reads as under : “6.3 I have gone through the above discussion. In his submissions made before me the appellant states that as per 26AS total receipts on which TDS deducted is Rs. 2,16,15,450/-(this amount is confirmed by the AO also). The reconciliation for the same is submitted in para 2 of submission dated 13.01.2021 whereby it is stated that the insurance company also deducted TDS while making payment of insurance claims of accidental cars as well as certain owners also deduct TDS while paying repair charges and the same are credited as labour charges in their books. It is further stated that as per 26AS the total receipts are Rs. 2,42,61,591/- and as per books is Rs. 4,80,19,457/-. Even in the Remand Report the AO states the receipts submitted are as per receipts declared in the Profit & Loss A/c of the Return of Income filed. However, the AO has expressed reservation in giving credit for such TDS on the ground that party-wise details of such and ledgers of the same have not been provided. In his rejoinder the appellant states that such party-wise details have not been asked at any time during the assessment and also that the same would be evident in Form 26AS. Before me the party-wise and section-wise details reconciling a TDS made with the amount of receipts declared by him were also given as part of appellate proceedings and the same appear to be matched. 6.3.1 The AO is therefore directed to verify such reconciliation of TDS as per Form 26AS available with him and the party and section-wise details given by the appellant and the same if found correct is directed to be deleted. 6.4 Hence, the Ground No. 2 of the appeal is allowed for statistical purposes.” 8. A perusal of the above finding would reveal that firstly CIT(A) was satisfied that reconciliation has been made by the assessee. Secondly, with abundant caution CIT(A) has ITA No.62/CHD/2023 A.Y.2016-17 6 relegated this issue to the file of AO for verification. Thus, while giving effect to the order of the CIT(A), AO could examine this aspect. We fail to understand as to how the Revenue aggrieved with this issue. Hence this ground is rejected. Ground No. 5 9. In this Ground of appeal, grievance of the Revenue is that ld. CIT(A) has erred in deleting the addition of Rs.35,21,320/-. The ld. AO has made this addition on the ground that sundry creditor has increased from Rs.50,28,562/- to Rs.85,49,882/-. The assessee has submitted that it has basically two sundry creditors; (a) Ford India Ltd. against whom a credit of Rs.51,33,612/- is outstanding, (b) American Express Card. The assessee has used this card for making payments of insurance of new cars and renewal of insurance. Thus, credit of Rs.12,87,897/- of this company is available in the books of the assessee. The ld. CIT(A) has recorded the finding that both the creditors have confirmed the credit balance towards the assessee. Their identity is not in doubt. Both the creditors are major ITA No.62/CHD/2023 A.Y.2016-17 7 business entities in the country. The credits and the increase is because of business necessity, hence deleted the addition. 10. We have perused the finding of the ld. CIT(A) in paragraph No. 7.3 to 7.3.1 and we find that as far as Ford India Ltd. is concerned, it is the manufacturer of Ford cars, for whom assessee is working as Authorized Dealer. If few cars are supplied to the assessee on credit basis, then its credit balance will increase in the books of the assessee. Similarly, other one is a card being used for renewing the insurance of the car as well as for making insurance of new cars. How this increase in the credit could be construed as non-genuine by the AO is beyond our comprehension. Therefore, we are of the view that ld. CIT(A) has rightly deleted the addition. Ground No.2 11. In this Ground, Revenue has pleaded that on the facts and circumstances of the case, ld. CIT(A)’s order passed under Section 250 is perverse. He has not sent any document nor any document was served upon the AO. ITA No.62/CHD/2023 A.Y.2016-17 8 12. We have gone through the record. This type of ground gives us a surprise. Firstly, a fatuous attempt is being made by the ACIT or the AO while making the above three disallowances. Furthermore, without going into the details of the complete record, this type of ground has been raised by the Revenue. The ld. CIT(A) has called for the reports of the AO while dealing with each issue exhaustively. Before us, nothing has been submitted by the Revenue demonstrating the fact which document was not with the AO. No affidavit of the AO has been filed. Therefore, to our mind, this is a misconceived ground which deserves to be rejected. 13. In result, the appeal of the Revenue is dismissed. Order pronounced on 11.03.2025. Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश क\u0002 \u0003ितिलिप अ\tेिषत/ Copy of the order forwarded to : 1. अपीलाथ\u000f/ The Appellant 2. \u0003\u0010यथ\u000f/ The Respondent 3. आयकर आयु\u0014/ CIT 4. िवभागीय \u0003ितिनिध, आयकर अपीलीय आिधकरण, च\u0018डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड\u001c फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "