TaxTMI 
TaxTMI 
2026 (7) TMI 1070
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....rovisions of the Income Tax Act, 1961 ('the Act'). 2. The Learned CIT(A) ought to have quashed the assessment order, which is based solely on surmises, conjectures, and unfounded assumptions, without any supporting material or evidentiary basis, and therefore unsustainable both on facts and in law. The Learned CIT(A) has erred in upholding the action of the Learned Assessing Officer in disallowing almost the entire expenditure amounting to Rs. 40,63,56,656 (comprising 94% of the Assessee's turnover for the year under assessment). Ground No. 3 to 7 Disallowance of expenditure amounting to Rs. 35,51,32,556 alleging that the vendors are fictitious 3. The Learned CIT(A) has erred in upholding the action of the Learned Assessing Officer in disallowing the expenditure amounting to Rs. 35,51,32,556 almost entirely made through banking channels, solely on the ground that confirmations were not received from the vendors or that the letters issued to such vendors were returned undelivered, which finding is untenable both on facts and in law. 4. The Learned CIT(A) has erred in not appreciating the fact that the Learned Assessing Officer has disa....
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....erse, and untenable, as such income could not have been earned without incurring corresponding expenditure. Ground No. 8 to 10 Disallowance under section 40A(3) of the Act amounting to Rs. 5,12,24,100 8. The Learned CIT(A) has erred in upholding the action of the Learned Assessing Officer in disallowing a sum of Rs. 5,12,24,100/- (being almost the entire cash payment made during the year under assessment) under section 40A(3) of the Act, by reason of an erroneous reading of that section. 9. The Learned CIT(A) has erred in upholding the action of the Learned Assessing Officer, which is based on an incorrect application of the threshold limit of Rs. 35,000/- on the aggregate payments made during the year, instead of on a per-day, per-transaction basis, despite the Appellant having specifically raised this submission. 10. The Learned CIT(A) and the Learned Assessing Officer have erred in not appreciating that no payment exceeding Rs. 35,000/- was made by the Appellant in respect of any transaction on any single day. Consequently, the Appellant has fully complied with the provisions of Section 40A(3) of the Act during the year. Ground No. 11....
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....okhani, either in whole or on in part, which was the sole and only basis of the proceedings, thereby violating the principles of natural justice and rendering the reassessment order void-ab-initio. 7. The Learned CIT(A) ought to have deleted the addition, in the absence of any evidence to support the contention that the purported statement of Mr. Abhishek Chokhani even refers to or implicates the Appellant, and therefore, the disallowance of expenditure is unjustified and unsustainable in law. 8. The Learned CIT(A) ought to have deleted the disallowance on the ground that the Learned Assessing Officer failed to produce Mr. Abhishek Chokhani for cross-examination, despite relying upon his purported statement which appears to be non-existent in the records of the Learned Assessing Officer to make the addition. 8.1 The Learned CIT(A) ought to have appreciated that it is trite law that if any statement of a third party is relied upon, then the statement must be produced to the Appellant for rebuttal and the person who issued the statement must be produced for cross examination. The onus rests squarely on the Revenue to produce the alleged statement of Mr. Abh....
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....or 'the Appellant') is engaged in the business of transportation of goods, stevedoring, port handling, warehousing and allied services. The subject appeal is against the assessment order passed by the Assistant Commissioner of Income Tax, Corporate Circle 2(1), Chennai ('Learned AO') dated 31.03.2016. The assessee filed an appeal before the Commissioner of Income Tax (Appeals) - 6, Chennai on 30.04.2016 and the subject appeal has been transferred to the National Faceless Appeal Centre. For the subject AY, the turnover of the Company amounts to Rs. 43.31 Crores and expenditure towards freight, stevedoring and port handling amounts to Rs. 41.74 Crores. The following additions have been made by the AO: S. No. Particulars Amount (Rs) 1 Disallowances under Section 40A(3) 5,12,24,100 2 Disallowances on account of payment made to fictitious transporters 35,51,32,556 3 Interest on statutory dues 1,30,000 4 Disallowance under section 36(1)(va) - delayed remittance of employees contribution to PF & ESI 129,340 Total 40,66,15,996 5. Aggrieved assessee filed appeal before the ld.CIT(A). The ld.CIT(A) sustained both....
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....tify wholesale disallowance of genuine business expenditure. He further added that the AO has not disputed the revenue earned by the assessee. 9. The assessee places reliance on the order of the Tribunal in its own case for earlier assessment years, wherein it was held that if vendor confirmations are not forthcoming, the AO ought to verify the transactions through the respective Assessing Officers of such vendors. Only in case of discrepancies should adverse inference be drawn. The Appellant submits that it has furnished all requisite vendor details including PAN and transaction summaries. In transport contracts falling under Section 194C(6), no TDS obligation arises subject to statutory conditions. The Assessee has discharged its primary onus by placing complete documentary evidence on record. It is further submitted that for AY 2014-15, the same AO completed the assessment without making any comparable disallowance. This reinforces the assessee's submission that the impugned assessment for AY 2013-14 is a high-pitched assessment completed in haste, without due inquiry or application of mind. 10. The ld.AR for the assessee submitted that assessee in the course of the appell....
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.... complete particulars of the transporters including names, addresses, PAN, bank details, invoices, lorry receipts, consignment notes and proof of payments made through banking channels. The disallowance has been made solely on the basis of non-response by third parties, without bringing any positive material on record to demonstrate that the transactions were bogus or that the payments had come back to the assessee. Further, the assessee has contended that no effective opportunity was granted before drawing adverse inference and that additional evidences filed during appellate proceedings were not duly considered. In our considered view, mere non-response to notices u/s. 133(6), without conducting further independent verification particularly when complete primary evidences were furnished, cannot justify wholesale disallowance of nearly the entire expenditure. When turnover is accepted, corresponding business expenditure cannot be disallowed in toto unless it is shown that the transactions are sham or fictitious through cogent material evidence. Moreover, where the assessee has discharged its primary onus, the burden shifts to the Revenue to make further enquiry, including verifica....
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....on was not produced for cross-examination despite specific requests made by the assessee. The ld. AR submitted that reliance on an undisclosed statement without affording an opportunity of rebuttal amounts to a violation of the principles of natural justice. The ld. AR further submitted that the assessee had discharged the primary onus cast upon it by furnishing various evidences in support of the impugned expenditure, including confirmation letters from the vendor, invoices, goods consignment notes and other supporting documents evidencing the services rendered. It was contended that despite the assessee furnishing such documentary evidence, the Assessing Officer (AO) proceeded to disallow the entire expenditure without conducting proper verification. It was also contended that the AO has accepted the turnover declared by the assessee and therefore the corresponding expenditure incurred for earning such income cannot be disregarded in the absence of cogent material establishing that the expenditure is bogus. The ld.AR further submitted that in the assessee's own case for earlier assessment years, the Tribunal had considered a similar issue and had decided the matter in favour of t....