2012 (9) TMI 546 - AT - Income Tax

Disallowance of Expenditure on ad-hoc basis - Held that - As AO had given sufficient opportunities to assessee but assessee did not attend the proceedings and during remand proceedings also, verification of books of accounts along with various expenses could not be done. Assessee submits require documents with AO which AO has denied. Matter remanded back to revenue

Summary

Issues:
1. Disallowance of 40% of total expenditure by the Assessing Officer.
2. Non-cooperation of the assessee during the remand proceedings.
3. Absence of supporting bills/vouchers and proof of TDS for expenses.
4. Deletion of addition based on best judgment assessment.
5. Admissibility of fresh grounds of appeal.

Issue 1: Disallowance of 40% of total expenditure
The Assessing Officer disallowed 40% of the total expenses incurred by the assessee due to the absence of documentary evidence supporting the expenses. The Ld CIT(A) deleted this addition after considering the submissions made by the assessee's representative, who argued that the Assessing Officer did not make any adverse comments on the merit of the expenses claimed. The Ld CIT(A) found that the appellant had provided voluminous details establishing the genuineness of the expenditure, leading to the deletion of the addition.

Issue 2: Non-cooperation of the assessee during the remand proceedings
The assessee claimed that they did not receive the notices issued by the Assessing Officer, resulting in non-appearance during the proceedings. The Ld CIT(A) requested specific comments from the Assessing Officer on two occasions, but the Assessing Officer did not examine the records. The Tribunal noted that the Assessing Officer did not verify the books of accounts and expenses during the remand proceedings. The case was remitted back to the Assessing Officer for fresh examination to ensure proper opportunity for the assessee to be heard.

Issue 3: Absence of supporting bills/vouchers and proof of TDS for expenses
The Ld CIT(A) found that the Assessing Officer had not made any adverse comments on the merit of the expenses claimed by the appellant. The appellant submitted ledger accounts of various expenses and provided supporting documents such as bank statements, party-wise purchases and sales details, and TDS registers. The Ld CIT(A) considered these submissions along with the remand report and deleted the addition made by the Assessing Officer.

Issue 4: Deletion of addition based on best judgment assessment
The Ld CIT(A) deleted the addition made by the Assessing Officer based on best judgment assessment. The Ld CIT(A) found that the Assessing Officer had disallowed expenses in an arbitrary manner during the appellate proceedings without making any adverse comments on the merit of the claims. The Ld CIT(A) concluded that the appellant had discharged its onus regarding the genuineness of the expenditure, leading to the deletion of the addition.

Issue 5: Admissibility of fresh grounds of appeal
The appellant requested to be allowed to add fresh grounds of appeal or amend existing grounds. However, the Tribunal allowed the appeal filed by the revenue for statistical purposes, remitting the case back to the Assessing Officer for fresh examination to ensure proper opportunity for the assessee to be heard.