2015 (10) TMI 1433 - AT - Income Tax

Addition of sundry creditors - Record of Rights had not been produced - Held that - As the Assessee has produced fresh evidences before us in the form of Record of Rights of some of the creditors who have been disbelieved and whose credits have been added in the hands of the Assessee, as also taking into consideration the confirmation given by the ld. AR that he would be able to produce these evidences before the AO, this issue is restored to the file of the AO for re-adjudication after granting the Assessee adequate opportunity to substantiate its claim. - Decided in favour of assessee for statistical purposes. Disallowance of Vehicle expenditure - Held that - . Considering the fact that the Assessee is operating in remote places in Belgaum and also taking into consideration that the expenditure relates to trucks also, we are of the view that the interest of justice would be served if the disallowance is restricted to 10% of the total expenditure. 10% of the total expenditure would come to about ₹ 75,100/- which is rounded off to ₹ 75,000/-. Consequently, the AO is directed to restrict the disallowance to ₹ 75,000/-. - Decided in favour of assessee in part.

Summary

Issues: Appeal against order confirming additions made by AO, disbelieving sundry creditors; Reduction of disallowance under 'Vehicle expenditure'.

Analysis:

1. The appeal was filed against the order of the ld. CIT(A) confirming additions made by the AO by disbelieving sundry creditors. The Assessee, a commission agent involved in transportation work, was directed to substantiate the sundry creditors, many of whom were claimed to be farmers. The AO accepted some creditors based on evidence but disbelieved others. The Assessee requested another opportunity to produce further details before the AO. The Tribunal considered fresh evidence presented by the Assessee and decided to restore the issue to the AO for re-adjudication, granting the Assessee adequate opportunity to substantiate its claim. Ground nos. 1 & 2 of the Assessee's appeal were partly allowed for statistical purposes.

2. Regarding ground no. 3, the issue was the reduction of disallowance under 'Vehicle expenditure'. The AO had disallowed 25% of the diesel and vehicle expenditure due to possible personal usage and self-made vouchers, amounting to Rs. 1,87,869. The ld. CIT(A) reduced this disallowance to 20%. The Assessee, operating in a remote area, requested further relief, arguing that obtaining proper vouchers was challenging as vehicles were repaired locally, and personal use was unlikely. The Tribunal, considering the Assessee's operational challenges and the nature of expenses related to trucks, directed the AO to restrict the disallowance to 10% of the total expenditure, amounting to Rs. 75,000. As a result, ground no. 3 of the Assessee's appeal was partly allowed.

In conclusion, the appeal of the Assessee was partly allowed for statistical purposes, with the Tribunal addressing issues related to the credibility of sundry creditors and the disallowance under 'Vehicle expenditure' in a detailed and reasoned manner.