The Tax Publishers2020 TaxPub(DT) 4963 (Ctk-Trib)

INCOME TAX ACT, 1961

Section 37(1)

Where provision debited into profit and loss account without creating any liability was not allowable under the IT Act but in the financial statements produced, it was not found anywhere that particular amount was debited into the profit and loss account, therefore, addition made by AO under the head provision for unreconciled OD and CC loan was deleted and the appeal of the revenue was dismissed.

Business expenditure - Disallowance of provision for unreconciled OD and CC loan - Allowability -

Assessee was involved in the business of trading and distribution of fertilizer, paddy, rice, and rental business. The case was selected for scrutiny and statutory notices were issued to the assessee. During course of assessment proceedings, it was noticed that the statutory audit of accounts of assessee was not yet over, therefore, he rejected the books of account under section 145(3) after communicating to authorized representative of assessee. AO further noticed that in the profit and loss account assessee had debited a sum under the head provision for unreconciled OD and CC loan and the provisions are not admissible deduction as per the Income Tax Act. Since assessee could not explain to the satisfaction of AO in this regard and AO disallowed the amount claimed under the head provision for unreconciled OD and CC loan. Held: Provisions debited into profit and loss account without creating any liability was not allowable under the Income Tax Act but in financial statements produced, it was not found anywhere that the particular amount was debited into profit and loss account. Accordingly, order of CIT(A) with regard to deletion of addition made by AO was upheld under the head provision for unreconciled OD and CC loan and the appeal of the revenue was dismissed.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-2011



IN THE ITAT, CUTTACK BENCH

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