AI Structured Summary
Not yet generated for this judgment
Judgment
PER KRINWANT SAHAY AM
Appeal in this case has been filed by the revenue against the order dated 17.10.2025 passed by the Ld. CIT(A)/NFAC, Delhi for the A.Y. 2022-23. Grounds of appeal are as under :-
“1.Whether the Ld.CIT(A) has erred both on facts and in law in deleting the addition of Rs. 27,06,000/-made on account of disallowance of Provision for Audit Fee and Other Provisions, by allowing deduction solely on the basis of the assessee's unverified submissions, without calling for or examining any supporting documentary evidence such as Invoices, confirmations, or correspondence, to establish the existence of a legally enforceable liability as on the balance sheet date.
2.Whether the Ld.CIT(A) has erred on the facts and in law in deleting the disallowance made by the Assessing Officer amounting to Rs. 1,69,46,700/- on account of various expenses, without appreciating that the assessee failed to discharge the onus u/s 37(1) of the Income-tax Act, 1961, to establish that the expenditure was incurred wholly and exclusively for the purposes of business and was supported by complete and verifiable documentary evidence, despite repeated opportunities during the assessment proceedings.
3.Whether the Ld.CIT(A) has erred on the facts and in law in deleting the disallowance by accepting partial and unverified explanations of the assessee, while ignoring the specific adverse findings of the Assessing Officer, and in holding the expenses allowable merely on the basis of arm's length determination and sample evidence, without appreciating that compliance with transfer pricing provisions does not substitute the statutory requirement u/s 37(1) to prove genuineness, business expediency, and allowability of expenditure.
4.Whether the Ld.CIT(A) has erred on the fact and in law in deleting the disallowance of Rs. 87,49,000/-on account of bad debts, without appreciating that the assessee failed to establish the mandatory precondition u/s 36(2) of the income-tax Act, 1961, namely that the amounts written off had been taken Into account in computing income of any previous year; mere production of ledger extracts does not satisfy this statutory requirement
5.Whether the Ld.CIT(A) has erred on the facts and in law that the Ld.CIT(A) failed to appreciate that section 36(1)(vii) is expressely subject to section 36(2), as clarified by the Hon'ble Supreme Court in TRF Ltd. v. CIT (2010) 323 ITR 397 (SC), and further reaffirmed in Pr.CIT v. Khyati Realtors (P.) Ltd. (2022) 141 taxmann.com 461 (SC), wherein it was held that deduction of bad debts cannot be allowed in the absence of material demonstrating statutory compliance.
6.Whether the Ld.CIT(A) has erred on the fact and in law relying on the principle of business expediency and the notion that the AD cannot substitute the assessee's commercial judgement, whereas the AD had not questioned the commercial wisdom of the write-off but had rightly examined compliance with statutory requirements, u/s 36(2); consequently, the deletion of the disallowance is contrary to law and unsustainable.
7.The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.
At the very outset the Ld. DR brought it the notice of the Bench that the Ld. CIT(A) has allowed the appeal filed before him by the assessee on different grounds solely on the basis of assessee’s unverified submissions without calling for or examining any supporting documentary evidences such as invoices, confirmations or correspondence to establish the existence of a legally enforceable liability as on the balance sheet date.
During the proceedings the Ld. DR has also submitted that a report from the AO showing that additions made by the AO were deleted by the Ld. CIT(A) without brining on record any supporting documentary / evidences or details which were to be verified or investigated by the AO. So simply accepting the submissions of the assessee the Ld. CIT(A) allowed the appeal of the assessee.
None appeared on behalf of the assessee.
We have considered the findings given by the AO in the assessment orders and the Ld. CIT(A) in the appellate order. We find that appeal of the assessee on the most of the additions were allowed by the Ld. CIT(A) without making any genuine investigation. He has simply accepted the submissions of the assessee. Therefore, we are of this considered view that in order to give natural justice to the revenue the matter should be remanded back to the file of the Ld. CIT(A) with a direction that submission /details filed by the assessee before him should be thoroughly investigated and if he feels necessary he may call for a remand report from the AO.
The assessee is also directed to cooperate with the revenue in the appellate proceedings. Thus, revenue’s appeal is allowed for statistical purpose.