2014 (4) TMI 438 - AT - Income Tax

Revenue's Appeals Dismissed, CIT Upheld Decisions on Expense Disallowance. Section 68 Verification Emphasized.

The Revenue's appeals for various assessment years challenging the deletion of additions on account of disallowance of expenses were dismissed. The ... Disallowance of expenses – Held that:- There was no infirmity in the finding of CIT(A) - The CIT(A) has considered all the facts in detail - the AO has not pointed out any defect or expressed even doubt with regard to any particular expenses - The disallowance has been made purely on adhoc basis - the adhoc disallowance was found to be without basis – thus, there is no need to interfere in the order of the CIT(A) – Decided against Revenue. Validity of Assessment u/s 153A of the Act – No pending proceedings – Held that:- The AO is directed to verify whether there is any credit during the accounting year relevant to the assessment year under consideration either in the books of the assessee or in the books of the partnership firm, viz., M/s BLK Furnishers and Contractors - If there is no fresh credit during the year either in the assessee’s books or in the books of the firm taken over by the assessee, the addition for the unexplained credit cannot be made in the hands of the assessee in the assessment year - if there is a fresh credit, then the Assessing Officer will certainly examine the same in accordance with the provisions of Section 68 – Decided in favour of Assessee. Disallowance of expenses on wages – Held that:- As decided in assessee’s own case for the previous assessment year, it has been held that, the disallowance has been set aside – thus, by following the same the disallowance is set aside – the order of the CIT(A) upheld - Decided against Revenue. Issues:1. Revenue's appeal for AY 2005-06 - Deletion of addition of Rs.22,00,000 on account of disallowance of expenses.2. Assessee's Cross Objection for AY 2005-06 - Legality of assessment order.3. Revenue's appeal for AY 2006-07 - Deletion of addition of Rs.9,00,000 on account of disallowance of expenses.4. Assessee's appeal for AY 2006-07 - Addition of Rs.6,30,000 as unexplained cash creditors.5. Revenue's appeal for AY 2008-09 - Deletion of addition of Rs.12,00,000 on account of disallowance of expenses.6. Revenue's appeal for AY 2009-10 - Deletion of addition of Rs.10,00,000 on account of disallowance of expenses of wages.1. Revenue's appeal for AY 2005-06:The Revenue challenged the deletion of an addition of Rs.22,00,000 on account of disallowance of expenses. The Assessing Officer disallowed the amount on an ad-hoc basis. However, the CIT(A) deleted the disallowance citing lack of basis for the ad-hoc disallowance. The Tribunal upheld the CIT(A)'s decision, noting that the Assessing Officer did not point out any specific defect or doubt regarding the expenses. The deletion was justified as the disallowance lacked a valid basis.2. Assessee's Cross Objection for AY 2005-06:The assessee raised a cross-objection regarding the legality of the assessment order. However, since the Revenue's appeal was dismissed, the cross-objection was not pressed and rejected accordingly.3. Revenue's appeal for AY 2006-07:Similar to the previous year, the Revenue appealed the deletion of an addition of Rs.9,00,000 on account of disallowance of expenses. The Tribunal upheld the CIT(A)'s decision, as the ad-hoc disallowance was made without a valid basis, mirroring the decision for AY 2005-06.4. Assessee's appeal for AY 2006-07:The assessee appealed the addition of Rs.6,30,000 as unexplained cash creditors. The Tribunal directed the Assessing Officer to verify if there were fresh credits during the relevant accounting year. If no new credits were found, the addition for unexplained credit would not be sustainable. However, if fresh credits existed, the Assessing Officer was instructed to examine them in accordance with Section 68.5. Revenue's appeal for AY 2008-09:The Revenue contested the deletion of an addition of Rs.12,00,000 on account of disallowance of expenses. The Tribunal upheld the CIT(A)'s decision, as the ad-hoc disallowance lacked a valid basis, similar to previous years.6. Revenue's appeal for AY 2009-10:In this appeal, the Revenue disputed the deletion of an addition of Rs.10,00,000 on account of disallowance of wages expenses. The Tribunal upheld the CIT(A)'s decision, as the ad-hoc disallowance was made without a valid basis, consistent with earlier years.In conclusion, all appeals of the Revenue were dismissed, the cross-objection of the assessee was dismissed, and the appeal of the assessee was deemed allowed for statistical purposes. The judgments emphasized the importance of valid bases for disallowances and the need for proper verification of credits to ensure fair assessments.