2023 (6) TMI 916 - AT - Income Tax

Tribunal decision: Disallowance deleted, interest expenses overturned, property transaction addition upheld, bogus purchases remanded for review.

ACIT, Circle-57 (1), New Delhi Versus Subhash Chand Jain

The Tribunal upheld the CIT(A)'s decision to delete the disallowance under section 40A(3) due to lack of evidence, overturned the addition of Rs. ... Addition u/s 40A(3) - assessee failed to furnish the documentary evidence like bills or mode of payment - assessee did not furnish the bank account details relating to the direct expenses made on the purchase of construction material - CIT(A) deleted the addition on the grounds holding that the books of accounts have been produced before the AO, the payments of amounts in cash over the specified limit has not been established and there was no basis for ad-hoc disallowance of 30% - HELD THAT:- Since, the order of the ld. CIT(A) is on sound rationale, we decline to interfere with the order of the ld. CIT(A). Disallowance of Interest expenses - business nexus of interest expenses can never exist - CIT(A) deleted the addition holding that, the order of the AO is cryptic, the assessee has not purchased any property as alleged by the AO, there is no justifiable ground to disallow the interest expenses as the assessee has earned taxable income and doing regular business - HELD THAT:- There were no evidence brought on record by the AO to prove that the amount has been utilized for personal purpose and other than business purpose. Hence, we decline to interfere with the order of the ld. CIT(A). Purchase of flat in cash - HELD THAT:- Apparently, the revenue itself is not very sure of the receipt of the cash nor there was any evidence. The ld. CIT(A) deleted the addition holding that there was no basis for such allegation. Hence, we decline to interfere with the order of the ld. CIT(A). Bogus Purchases, Sundry Creditor - HELD THAT:- The books of accounts of the appellant which are audited have been duly accepted. We find that the A.O has no basis to disallow purchases made from this parties as bogus in this year, when the existence of the seller has not been denied and continuing transactions from this year have been accepted as genuine in the subsequent year. Assessee has failed to discharge the primary onus of proving the purchases as genuine against the discrepancies found out by the AO viz., the signature and mismatch of the credit balances. Hence, we remand the matter to the file of the AO to provide an opportunity to the assessee to submit the relevant documents with complete details. The appeal of the assessee on this ground is allowed for statistical purpose. Issues involved:The appeal involves issues related to disallowance under section 40A(3), addition of certain amounts made by the Assessing Officer, and the treatment of alleged bogus purchases by the appellant.Disallowance u/s 40A(3):The Assessing Officer disallowed 30% of the direct expenses claimed by the appellant under section 40A(3) due to the lack of documentary evidence such as bills or bank account details. However, the CIT(A) deleted the addition, stating that the books of accounts were produced, and the basis for the ad-hoc disallowance was not established. The Tribunal declined to interfere with the CIT(A)'s order, finding it to be on sound rationale.Addition of Rs. 18,12,451/-:The AO disallowed interest expenses and bank charges based on the appellant's balance sheet and alleged property purchase. The CIT(A) overturned this addition, noting the lack of justifiable grounds for disallowance, as the appellant had taxable income and was engaged in regular business activities. The Tribunal upheld the CIT(A)'s decision, finding no evidence that the amount was used for personal purposes.Addition of Rs. 2,50,000/-:The AO questioned the amount received in cash for a property transaction, citing an inspector's report comparing it to other transactions. The CIT(A) deleted this addition, as there was no concrete basis for the allegation. The Tribunal declined to interfere with the CIT(A)'s decision due to the lack of evidence supporting the AO's claim.Bogus Purchases, Sundry Creditor:The AO identified certain sundry creditors and alleged bogus purchases, requesting proof from the appellant. The CIT(A) deleted the addition, highlighting that payments were made by cheque or RTGS, transactions continued in subsequent years, and the appellant's business activities were accepted in previous assessments. The Tribunal remanded the matter to the AO for further review, allowing the appeal for statistical purposes.In conclusion, the Tribunal dismissed certain grounds of appeal while allowing others, emphasizing the need for proper documentation and evidence to support claims and decisions regarding disallowances and additions in the assessment process.