2015 (7) TMI 352 - AT - Income Tax

Disallowance of expenditure - CIT(A) deleted the addition - Held that - We are not inclined to interfere in very well reasoned finding of the learned CIT(A). As he rightly observed, in the absence of Assessing Officer having pointed out any specific cases of non verifiable expenses or any specific cases where such expenses are not incurred for the purpose of business, the disallowance is indeed unsustainable in law. We approve learned CIT(A) s order on this issue. - Decided in favour of assessee. Appropriation of the cash seized during the course of search against the advance tax liability - CIT(A) delete the statutory interests charged u/s 234A, 234B & 234C - Held that - We are inclined to confirm and approve very well reasoned conclusions arrived at by the CIT(A). This issue, as rightly observed by the learned CIT(A), is now covered in favour of the assessee by a series of judicial precedents, including, such as in the cases of CIT Vs. Ashok Kumar (2010 (9) TMI 771 - Punjab and Haryana High Court ), and CIT Vs. Kesar Kimam Karyalaya (2005 (5) TMI 58 - DELHI High Court ). It is also important to bear in mind that Explanation-2 to Section 132B of the Act, which restricts the scope of existing liability to liabilities other than tax payable, is specifically enacted with effect from 1st June, 2013, whereas at present dealing with Assessment Year 2010-11. Learned Assessing Officer s reliance on Explanation-2 to Section 132B of the Act, as made out in the ground of appeal, is, therefore, ill-conceived. This provision was not in force at the relevant point of time. On this view of the matter, as also bearing in mind entirety of the case, we approve the stand of learned CIT(A) and decline to interfere in the matter. The assessee was entitled to adjustment of seized cash against advance tax liability and therefore, no interest could be charged u/s 234A & 234B in the event of the department no responding to assessee s request for adjustment of cash seized against advance tax liability - Decided against revenue.

Summary

Issues:

1. Disallowance of expenses without specific instances of non-verifiable nature.
2. Adjustment of seized cash against advance tax liability and deletion of statutory interests charged.

Issue 1: Disallowance of Expenses

The Assessing Officer challenged the CIT(A)'s order deleting the addition of Rs. 1,70,233 made from disallowances in various expenditure heads. The AO disallowed 10% of expenses due to handmade vouchers during a search and seizure operation. The CIT(A) deleted the disallowance stating that no specific instances of non-verifiable expenses were pointed out, and no incriminating documents were found during the operation. The ITAT upheld the CIT(A)'s decision, noting the absence of specific cases of non-verifiable expenses or expenses not incurred for business purposes, making the disallowance unsustainable in law.

Issue 2: Adjustment of Seized Cash

The AO contested the CIT(A)'s direction to adjust seized cash against advance tax liability and delete statutory interests charged under sections 234A, 234B, and 234C. The CIT(A) upheld the assessee's grievance, highlighting the appellant's efforts to adjust the cash towards tax liability, which were not responded to by the authorities. Citing judicial precedents, the CIT(A) ruled in favor of the assessee, emphasizing that the AO's action in charging interest was unjustified. The ITAT agreed with the CIT(A), noting that the issue was covered by judicial precedents like CIT Vs. Ashok Kumar and CIT Vs. Kesar Kimam Karyalaya. The ITAT also pointed out that Explanation-2 to Section 132B, relied on by the AO, was not in force during the relevant assessment year. Consequently, the ITAT affirmed the CIT(A)'s decision, dismissing the appeal.

In conclusion, the ITAT dismissed the appeal, upholding the CIT(A)'s orders on both issues. The judgment emphasized the importance of specific instances and legal provisions in determining the validity of expenses disallowance and the adjustment of seized cash against tax liability, ultimately ruling in favor of the assessee based on established legal principles and precedents.