2019 (9) TMI 996 - AT - Income Tax

Penalty upheld for lack of evidence on claimed expenses under Income Tax Act

Alpesh Girishbhai Patel Versus The ACIT Kheda Circle, Nadiad

The ITAT upheld the penalty imposed under s. 271(1)(c) of the Income Tax Act for the assessment year 2010-11 due to lack of evidence to substantiate ... Penalty u/s 271(1)(c) - additions towards claim of various business expenses, such as, car loan interest, petrol expenses, salary expenses, telephone bill etc. - HELD THAT:- The quantum order shows that the assessee could not substantiate the claim of expenses claimed by him by any documentary evidence in the quantum proceedings. Even in the penalty proceedings, the assessee has failed to substantiate the expenses except for making generalized observations towards existence of car in the balance sheet and incurring other expenses. The entry shown in an unaudited balance sheet does not inspire confidence in the absence of any tangible documentary evidence adduced. The claim of the expenditure allegedly incurred in relation to earning of income by way of interest and remuneration from partnership firm is also totally unproved in the quantum proceedings. The explanation offered by the assessee, thus, cannot be assumed to be bonafide. In the absence of relevant facts relating to expenses claimed, the observations of the co-ordinate bench in quantum proceedings would squarely apply. We also note that the CIT(A) has categorically observed the claim of the assessee to be false and without any evidence. The plea of the assessee sounds hollow on the face of such reasonings. We thus find no infirmity in the conclusion drawn by the CIT(A) and thus decline to interfere therewith. - Decided against assessee Issues:Challenge to imposition of penalty under s. 271(1)(c) of the Income Tax Act concerning AY 2010-11 for disallowance of various expenses.Detailed Analysis:1. Imposition of Penalty:The appeal was filed by the assessee against the penalty order passed by the Assessing Officer under s. 271(1)(c) of the Income Tax Act, 1961, concerning AY 2010-11. The assessee challenged the penalty imposed for additions of &8377; 6,58,616 towards various expenses, such as car loan interest, petrol expenses, salary expenses, and telephone bills. The learned AR for the assessee argued that the expenses were incurred to earn business income and should be deductible from business income, even if incorrectly claimed under a different category.2. Dispute on Expenses:The Assessing Officer disallowed the expenses and made additions on an estimated basis. The AR submitted that all relevant facts for assessment were provided, and while the disallowances were sustained in the quantum proceedings, it did not justify the penalty under s. 271(1)(c). The AR contended that the disallowance should not lead to a penalty, emphasizing that expenses were incurred for business purposes. The AR also argued against the observation that no evidence of vehicle ownership was submitted, pointing to the balance sheet reflecting vehicle ownership.3. Confirmation of Disallowance:The Dispute Resolution (DR) highlighted that the disallowance of expenses was confirmed by the ITAT in a previous order concerning the same assessment year. The ITAT observed the lack of evidence and utilization of expenses for business purposes. The ITAT order detailed specific expenses disallowed and the absence of substantiating evidence for these claims.4. Judgment and Conclusion:The ITAT considered the submissions from both sides and upheld the penalty under s. 271(1)(c) based on the lack of evidence to substantiate the claimed expenses. The ITAT found that the assessee failed to provide any documentary evidence during both the quantum and penalty proceedings to support the expenses. The ITAT concluded that the explanations offered by the assessee were not sufficient, and the claim of expenses for earning business income was unproved. The ITAT declined to interfere with the CIT(A)'s decision, affirming the disallowance and penalty imposed.In conclusion, the ITAT dismissed the appeal of the assessee, emphasizing the importance of substantiating expenses claimed and the consequences of failing to provide adequate evidence in both quantum and penalty proceedings.