KARNATAKA TYRE AGENCIES, ,SHIMOGA V. INCOME TAX OFFICER, WARD- 3 , SHIMOGA

ITA 1914/BANG/2024

AI Insights

This case involves an appeal by Karnataka Tyre Agencies against the order of the National Faceless Appeal Centre (NFAC), Delhi, which confirmed various disallowances made by the AO under section 144 of the Income Tax Act for the assessment year 2017-18. The disallowances included salary expenses, club, vehicle, and computer expenses, provision for taxation, non-deduction of TDS on rent, underreporting of partners' current account, and unexplained sundry creditors. The CIT(A) upheld most of these disallowances due to lack of supporting evidence. Dissatisfied with the CIT(A)'s decision, the assessee appealed to the Income Tax Appellate Tribunal (ITAT), which decided to remand the matter back to the AO for a fresh assessment, allowing the assessee a final opportunity to present the necessary documents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471030 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: REVENUE; GANESH R GHALE; STANDING
• Assessee Lawyers: HIRAN KRISHNASWAMY
• Keywords: Corroborative evidences; TDS
• Section: 144; 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH: BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA No.1914/Bang/2024 Assessment Years: 2017-18 Karnataka Tyre Agencies, A partnership firm, P.B No.41, BH Road, Shimoga. PAN – AADFK 4609 E Vs. The Income Tax Officer, Ward No.3, Shimoga. APPELLANT RESPONDENT Assessee by : Shri Hiran Krishnaswamy, Advocate Revenue by : Shri Ganesh R Ghale, Advocate – Standing Counsel for Revenue Date of hearing : 28.02.2025 Date of Pronouncement : 05.03.2025 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the order passed by the NFAC, Delhi dated 29/07/2024 vide DIN No. ITBA/NFAC/S/250/2024-25/1067118906(1) for the assessment year 2017-18. 2. The assessee is a partnership firm and assessed under section 143(3) read with section 144 of the Act for the year under consideration. The Assessing Officer (AO) issued a notice under section 142(1) of the Act along with multiple letters, requiring the assessee to furnish specific ITA No.1914/Bang/2024 Page 2 of 5 . details and documents during the assessment proceedings. However, the assessee did not respond to any of these notices. Due to non- compliance, the AO completed the assessment under section 144 (best judgment assessment) of the Act and made the following disallowances: • Salary expenses: ₹96,790 • Club, vehicle, and computer expenses: ₹1,16,418 • Provision for taxation: ₹56,100 • Non-deduction of TDS on rent: ₹6,54,000 • Underreporting of partners’ current account: ₹2,73,610 • Unexplained sundry creditors: ₹29,51,311 3. These disallowances were added to the total taxable income of the assessee in the assessment framed under section 144 of the Act. 3.1 The assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who partly allowed the appeal after confirming majority of the disallowances made by the AO due to the absence of supporting evidence. The relevant extract of the ld. CIT-A order is extracted below: “Ground No.2a.Relates expenditure related to the salaries. The assessee has stated that the salary expenditure is not comparable to the previous year. However, the assessment order clearly states that the assessee was asked to substantiate the claim which it did not at the assessment or appellate stage. In the absence of any evidence or further clarification by the assessee the appeal on this point is dismissed. Ground No.2b. Relates to vehicle maintenance expenditure. The same has not been evidenced hence appeal is allowed. Ground No. 2c. Relates to this allowance of computer maintenance and consumables. The same has not been evidenced hence appeal is allowed. ITA No.1914/Bang/2024 Page 3 of 5 . Ground No.2d. Provision for tax in this next ground of appeal the assessee has stated that a double addition has been made due to provision for tax having already been accounted for in the competition of income. The net profit as per profit and loss account as on 31.03.2017 is 1, 26, 372.18 The net profit before tax as per competition of income is 1, 82, 882 Difference between the two is provision for taxation as per balance sheet ^ 56, 510 As is evident from the documents the provision for taxation has been added back in the competition. Accordingly this ground of appeal is allowed.” 4. Dissatisfied with this decision of the ld. CIT-A, the assessee came in 2nd appeal before me. 5. Before me, the Ld. Assessee’s Representative (AR) submitted that the assessee was unable to provide the necessary documents before the AO and ld. CIT(A) due to unavoidable circumstances. The ld. AR accordingly requested us to remand the matter back to the AO for fresh adjudication and assured that all relevant documents would be submitted during the proceedings. 6. On the contrary, the ld. Departmental Representative (DR) supported the orders of the lower authorities but did not object to a remand if it is deemed necessary for fresh adjudication as per the law. 7. I have reviewed the facts, arguments of the both the parties, and records. At the threshold, from the preceding discussion, I note that the issue on hand is limited to the extent of the addition made by the AO as detailed below: • Salary expenses: ₹96,790 • Non-deduction of TDS on rent: ₹6,54,000 ITA No.1914/Bang/2024 Page 4 of 5 . • Underreporting of partners’ current account: ₹2,73,610 • Unexplained sundry creditors: ₹25,67,659 7.1 It is further noted that the assessment was completed under section 144 of the Act due to non-compliance by the assessee. Thus, the AO, in the absence of necessary records, acted within the provisions of law by making disallowances based on available records. The ld. CIT(A) confirmed most of the disallowances due to a lack of supporting documentary evidence, but the order of the ld. CIT-A did not provide clear reasoning for upholding the disallowance made by the AO. As such, the order of ld. CIT(A) lacked detailed reasoning and evaluation of the disallowances. 8. I also observed that the assessee’s counsel failed to explain why the necessary documents were not submitted at earlier stages. Moreover, the submissions made before the ld. CIT(A) were not backed by substantial evidence. 9. Furthermore, the ld. CIT(A) did not fully comply with Rule 46A of the Income Tax Rules, which regulates the admission of additional evidence at the appellate stage. 10. Considering these circumstances, I find it appropriate, in the interest of justice and fair-play, to remand the matter back to the AO for a fresh adjudication as per the provisions of law. The assessee is given a final opportunity to furnish the required evidence in support of its claims. The AO is directed to verify the documents and reassess the disallowances as per the provisions of the law. I also direct that the ITA No.1914/Bang/2024 Page 5 of 5 . assessee must fully cooperate during proceedings before the AO, failing which the AO would be justified in proceeding based on available records. Hence, the appeal is partly allowed for statistical purposes. 11. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in court on 5th day of March, 2025 Sd/- (WASEEM AHMED) Accountant Member Bangalore Dated, 5th March, 2025 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore "