2023 (5) TMI 1008 - AT - Income Tax

Appellate tribunal overturns tax additions, stresses valid reasoning and evidence evaluation.

The appellate tribunal allowed the appeal, overturning additions of unexplained expenditure and discrepancies in ledger balances made by the assessing ... Unexplained expenditure - Ledger Confirmation submitted by assessee ignored - HELD THAT:- We note that assessee had furnished before the assessing officer the invoices, bank statements and payment details in respect of expenditure/ purchases made from these two parties and assessing officer did not find any mistake in these documents and evidences. AO has not refuted or discredited these documents and evidences. AO does not mention in his assessment order that why he is not accepting these evidences and documents. AO ought to have examined all these details, documents and evidences and refuted / rejected them, with a cogent adverse findings and discernable line of reasoning, in order to arrive at a conclusion and to make the addition. We note that assessing officer has not refuted or discredited these evidences and documents. On the contrary, the assessing officer has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. Decided in favour of assessee. Differential amount of balance as compared to Ledger Confirmation of the Parties - HELD THAT:- These additions are opening balances coming from the previous year, therefore these two amounts did not pertain to assessment year under consideration. The principle of taxation is that right income should be taxable in the right assessment year and we note that these two additions made by the assessing officer do not pertain to assessment year 2017-18, under consideration, therefore we delete these additions. Issues involved:The judgment involves issues related to the addition of unexplained expenditure, confirmation of ledger balances, and small additions based on ledger confirmations.Addition of Unexplained Expenditure:The assessing officer made additions totaling Rs. 18,05,492 as unexplained expenditure due to lack of responses from certain creditors to whom notices were sent under section 133(6) of the Income Tax Act. The appellant submitted documentary evidence like invoices, bank statements, and payment details to prove the genuineness of the transactions. The appellant argued that the transactions could be verified alternatively from these documents, but the assessing officer disallowed the expenses, considering them as bogus. The appellate tribunal noted that the assessing officer did not provide a valid reason for rejecting the appellant's evidence and documents. Consequently, the additions were deleted as the appellant had sufficient evidence to support their claim.Confirmation of Ledger Balances:The appellant challenged small additions of Rs. 24,905 and Rs. 17,885, which were discrepancies in ledger balances compared to the parties' confirmations. The appellant clarified that these amounts were opening balances from previous years and did not pertain to the assessment year under consideration. The tribunal agreed that these additions were not relevant to the current assessment year and, therefore, deleted them.Conclusion:The appellate tribunal allowed the appeal filed by the assessee, overturning the additions made by the assessing officer. The tribunal emphasized the importance of valid reasoning and evidence evaluation in tax assessments. The judgment was pronounced on 23/05/2023.