2025 (11) TMI 1252 - AT - Income Tax

Tax addition confined to Rs. 1,80,000 as partial relief on disputed miscellaneous expenses, no wider precedent set

ITAT RAJKOT partly allowed the assessee's appeal concerning disallowance of miscellaneous expenses treated as capital in nature. The assessee admitted ... Disallowing the expenses on account of various misc. items considering the same as alleged capital expenses - HELD THAT:- As assessee explained that assessee had failed to provide the bills and vouchers and sufficient evidence in respect of the purchases, therefore, addition should be sustained in the hands of the assessee, to the tune of Rs. 1,80,000/-. Revenue has fairly agreed that out of total amount of Rs. 4,67,800/-, an addition in the hands of the assessee, to the tune of Rs. 1,80,000/-, is sufficient to protect the interest of the revenue, as the assessee, failed to submit the required documentary evidences, to prove the genuineness of purchase of Rs. 1,80,000/-. Therefore, considering the smallness of the amount, direct the assessing officer, to make addition in the hands of the assessee - once again emphasise that this decision is rendered on the peculiar facts of this case and having regard to the smallness of the amounts involved, and, therefore, it cannot be construed as laying down propositions of law of general applications. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the delay in filing the appeal before the Tribunal should be condoned. 2. Whether expenses aggregating Rs. 4,67,800 shown as purchases from nearby market (camera, computers, mobiles, aqua-guard and other items) are allowable as revenue expenditure or are capital/unproved purchases and therefore rightly disallowed by the assessing officer and confirmed by the Commissioner (Appeals). 3. If disallowance is warranted, whether an ad hoc/conservative addition of a specified lesser amount is appropriate in the facts of the case. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing appeal Legal framework: Tribunal's discretionary power to condone delay is exercised where sufficient cause/mitigating circumstances exist in accordance with procedural provisions and established practice. Precedent Treatment: No precedent cited or relied upon in the decision; determination was fact-driven. Interpretation and reasoning: The affidavit explained reasons for delay of 73 days and the Revenue did not seriously oppose condonation. The Tribunal found existence of mitigating circumstances on the material before it and exercised discretion in favour of the assessee. Ratio vs. Obiter: Ratio (operative) - discretion to condone delay was properly exercised on the facts; not intended as a general rule beyond the facts. Conclusion: Delay of 73 days in filing the appeal is condoned. Issue 2 - Allowability of purchases of Rs. 4,67,800; classification as capital or unproved purchases Legal framework: Tax law principles requiring taxpayer to substantiate claimed expenses/purchases with documentary evidence; assessing officer empowered to disallow unproved purchases or items which are capital in nature; appellate fora entertain evidence and submissions to determine correctness of AO's addition. Precedent Treatment: No case law was applied, followed or distinguished by the Tribunal in its reasoning; decision rests on parties' contentions and documentary record rather than doctrinal authority. Interpretation and reasoning: The AO observed purchases from nearby market and, on inspection of bills, treated items such as camera, computers, mobiles and aqua-guard as capital in nature or unproved, issued notices under section 142(1), and recorded non-compliance by the assessee. CIT(A) confirmed the disallowance. At Tribunal hearing the assessee's representative accepted inability to produce vouchers/proof in respect of Rs. 1,80,000 and conceded that that portion could be subjected to addition. The Revenue also did not oppose sustaining an estimated addition of Rs. 1,80,000 as sufficient to protect revenue. The Tribunal took a pragmatic, fact-specific approach: having regard to (a) the assessee's failure to substantiate part of the purchases, (b) the concurrence of the Revenue with an ad hoc addition, and (c) the smallness of the amounts involved, the Tribunal reduced the disallowance from Rs. 4,67,800 to Rs. 1,80,000 and directed the AO to make that addition. Ratio vs. Obiter: Ratio (operative) - where material evidences non-production and parties agree an ad hoc addition protects revenue, Tribunal may sustain a limited estimated addition; such a determination is confined to the facts and smallness of amounts involved and does not lay down a general legal proposition. Obiter - any broader inference about classification of the entire set of items as capital or revenue is not made; no general rule about similar purchases is established. Conclusion: The Tribunal partly allowed the appeal by directing an addition of Rs. 1,80,000 in lieu of the AO's disallowance of Rs. 4,67,800; the remainder of the disallowance was set aside. This decision is explicitly confined to the peculiar facts and the smallness of the amounts and does not constitute a general precedent on allowability of such purchases. Cross-references and operative directions The Tribunal's directions: (a) condone the appeal's delay, and (b) remit to the assessing officer to make an addition of Rs. 1,80,000. The Tribunal emphasized that the decision rests on the specific facts, parties' concessions and the modest sum involved, and therefore is not a proposition of law of general application.