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2014 (2) TMI 786 - AT - Income TaxRejection of book result as per section 145(3) of the Act Survey u/s 133A of the Act Held that - The books of account maintained without proper supporting evidence - Assessee contended that no specific defect has been pointed out by the AO before rejecting the book result - After considering the factual position of the survey as well as discrepancy found during the course of survey in impounded book and cash book maintained manually and computerized, the AO was right in applying Section 145 of the IT Act for rejection of book result Decided against Assessee. Addition made on account of unexplained expenditure Violation of section 194J of the Act Held that - CIT(A) was of the view that when assessee itself surrendered the income of Rs.13,62,259/-, the assessing officer was quite justified in making the addition by accepting the income voluntarily surrendered by assessee - when income is voluntarily surrendered during the course of assessment proceedings, assessee cannot contest said addition by filing appeal - for violation of TDS provisions separate addition is already made to the income of the assessee and apart from that there is no other cogent evidence which necessitates lump sum addition - The assessee made the disclosure voluntary and AO had not brought on record any evidence for estimating income at Rs.20,00,000/-. The difference into cash book worked out to Rs.13,62,259/- thus, the CIT(A) was right in upholding the addition of Rs.13,62,259 Decided against Assessee. Disallowance u/s 40(a)(ia) of the Act Legal and professional expenses, office rent and commission to others - Held that - CIT(A) held that the assessee could not give any reasons as to why no TDS has been made from the payment of legal and professional fees, office rent and commission to others - As no TDS is made from the expenditure, provisions of Sec 40a(i)(a) of the Act is directly applicable - the word payable used in the section does not at all mean that there should be any outstanding amount at the end of the year & there is no legislative intent to disallow only the outstanding amount - The assessee had not deducted TDS on above amount, but had claimed as expenditure - As per Section 40(a)(ia), this expenditure is not allowable - The CIT(A) examined the issue thoroughly and confirmed the addition - the income has not been estimated u/s. 144 but determined after detailed scrutiny of the impounded documents as well as statement of the partner Decided against Assessee. Disallowance u/s 40A(3) of the Act Disallowance on account of donation - Held that - CIT(A) held that the assessee could not explain the reasons to make cash payments - the AO scrutinized the impounded documents and considered the statement of the partner and assessed the income on the basis of scrutiny of the impounded documents Decided against Assessee. Addition on account of various expenses Held that - The CIT(A) had restricted this addition on the basis of no quantification made by the AO and not supported by voucher and cash payments made and also personal use the findings of the CIT(A) also confirmed as the reasonable addition Decided against Assessee. Deletion made - Unexplained introduction of cash and inflation of expenditure Held that - The assessee had already shown cash balance of Rs.45,27,670/- in the audited balance sheet as on 31.03.2005 as against cash balance found as on 31.03.2005 in manual cash book at Rs.3,99,493/- which is lesser than cash disclosed in the balance sheet - These entries undisputedly pertained to A.Y. 05-06 - there is no basis to make any addition in the year under consideration - the CIT(A) has given relief on the basis of submission made by the assessee - since the entries pertained to A.Y. 05-06, no addition could have been made in A.Y. 06- 07 - it deserves to be deleted Decided against Revenue.
Issues Involved:
1. Rejection of book results under Section 145(3) of the IT Act. 2. Addition on account of unexplained expenditure. 3. Disallowance under Section 40(a)(ia) of the IT Act. 4. Disallowance under Section 40A(3) of the IT Act. 5. Disallowance of donation expenses. 6. Disallowance of various expenses. 7. Deletion of addition on account of unexplained introduction of cash and inflation of expenditure. Detailed Analysis: 1. Rejection of Book Results under Section 145(3) of the IT Act: The Assessing Officer (A.O.) rejected the book results under Section 145(3) due to discrepancies found during a survey conducted under Section 133A. The discrepancies were identified between manually maintained and computerized cash books. The CIT(A) confirmed this rejection. The Tribunal upheld the rejection, noting that the discrepancies justified the application of Section 145. 2. Addition on Account of Unexplained Expenditure: The A.O. added Rs. 20,00,000/- to the income of the assessee for unexplained expenditure, which was partly confirmed by the CIT(A) to the extent of Rs. 13,62,259/-. The Tribunal upheld the CIT(A)'s decision, stating that the assessee's voluntary disclosure of Rs. 13,62,259/- was justified, and there was no basis for the additional Rs. 6,37,741/-. 3. Disallowance under Section 40(a)(ia) of the IT Act: The A.O. disallowed Rs. 5,26,811/- under Section 40(a)(ia) for non-deduction of TDS on legal and professional expenses, office rent, and commission. The CIT(A) confirmed this disallowance. The Tribunal upheld the CIT(A)'s decision, noting that the non-deduction of TDS warranted the disallowance under Section 40(a)(ia). 4. Disallowance under Section 40A(3) of the IT Act: The A.O. disallowed Rs. 1,58,216/- under Section 40A(3) for cash payments exceeding the prescribed limit. The CIT(A) confirmed this disallowance. The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to provide a valid explanation for the cash payments. 5. Disallowance of Donation Expenses: The A.O. disallowed Rs. 30,200/- claimed as donation expenses due to a lack of evidence. The CIT(A) confirmed this disallowance. The Tribunal upheld the CIT(A)'s decision, noting the absence of supporting evidence from the assessee. 6. Disallowance of Various Expenses: The A.O. disallowed Rs. 3,83,041/- for various expenses on the grounds of personal use and unsupported vouchers, which was reduced to Rs. 50,000/- by the CIT(A). The Tribunal upheld the CIT(A)'s decision, noting that the reduction was reasonable given the circumstances. 7. Deletion of Addition on Account of Unexplained Introduction of Cash and Inflation of Expenditure: The A.O. added Rs. 41,28,177/- as unexplained cash introduction, which was deleted by the CIT(A). The CIT(A) observed that the cash balance as per the audited balance sheet was higher than the manually maintained cash book, and the assessee provided a reasonable explanation for maintaining two sets of cash books. The Tribunal upheld the CIT(A)'s decision, noting that the entries pertained to the previous assessment year (A.Y. 05-06) and no addition could be made in the current year (A.Y. 06-07). Conclusion: Both the assessee's and the Revenue's appeals were dismissed. The Tribunal's decisions were pronounced in open court on 14.02.2014.
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