2014 (5) TMI 397 - AT - Income Tax

Disallowance of bogus lorry hire expenses Failure to produce documents Information u/s 133(6) of the act cannot called - Held that - If the broker has not replied to the letter of the AO, no adverse inference can be drawn against the assessee - the payment is not routed through the broker - he is not in a position to reply - where the letter issued to the broker is returned unserved - Merely because the broker has shifted from one place to another or has closed his business or has not received the letter, no adverse inference can be drawn against the assessee - no satisfactory explanation has been given by the assessee in respect of the difference - CIT(A) ought to have sustained the disallowance of lorry hire expenses thus, the order of the CIT(A) is modified and the disallowance out of lorry hire expenses amounting to Rs.12,000 is sustained Decided partly in favour of Revenue.

Summary

Issues: Disallowance of lorry hire expenses

Analysis:
The appeal by the Revenue was against the order of the learned CIT(A) for the AY 2006-07, specifically challenging the deletion of the disallowance of Rs.35,95,655/- made by the Assessing Officer on account of alleged bogus lorry hire expenses. The Revenue contended that the assessee failed to produce any document to substantiate the claimed expenses. The assessee, engaged in transportation business, declared a net loss and claimed expenditure of Rs.83,49,215/- on lorry hire expenses. The Assessing Officer disallowed the payment made to 36 parties due to non-responses and discrepancies. However, the CIT(A) overturned the disallowance, citing the nature of transportation business where payments are not routed through brokers. The CIT(A) found TDS receipts and lack of concrete evidence to support the disallowance. The Revenue argued that lack of replies and evidence justified the disallowance.

During the hearing, the Revenue reiterated the Assessing Officer's stance, emphasizing non-responses from brokers and lack of documentary evidence from the assessee. Conversely, the assessee's counsel highlighted the direct payment to drivers, not brokers, and provided details showing corresponding receipts. The Tribunal noted the lack of responses in most cases but emphasized the nature of the business where brokers may not be involved in financial transactions. Only two cases showed discrepancies in amounts received, which the assessee failed to explain satisfactorily. Consequently, the Tribunal partially upheld the disallowance, modifying the CIT(A)'s order to sustain a disallowance of Rs.12,000/- out of lorry hire expenses. The appeal of the Revenue was partly allowed, with the decision pronounced in May 2014.