2016 (1) TMI 710 - AT - Income Tax

Disallowance of outstanding liability - Held that - the assessee has not able to file confirmation letters from the 24 trade creditors. Since the trade liability was not proved by filing the confirmation letters from the trade creditors, we find that the Assessing Officer has judiciously disallowed the above amount and the ld. CIT(A) has rightly confirmed the above disallowance. Therefore, we find no infirmity in the order passed by the ld. CIT(A) on this issue. - Decided against assessee Disallowance towards expenditure incurred in respect of paddy and lorry hiring business - Held that - The basis for estimating the disallowance was not mentioned in the assessment order. Further, it is not disputed that such expenses are not at all incurred by the assessee. Incurring expenses in running the lorries such as sundry repairs and other recurring expenses are very common. Since the Assessing Officer has partially accepted the expenses incurred by the assessee and made disallowance, considering the nature of the business, we are of the firm view that the Assessing Officer was not justified in making disallowance on estimated basis in the present case. Accordingly, the disallowance made by the Assessing Officer is deleted. - Decided against revenue Disallowance towards advertisement and payment for festivals, etc. - Held that - As in the absence of original cash bills and the assessee has produced self made vouchers, after considering nature of the claim, the Assessing Officer has fairly estimated and disallowed only 20% of the total claim - Decided against assessee

Issues Involved:
1. Addition of trade creditors amounting to Rs. 9,80,850.
2. Confirmation of outstanding credits in the names of two individuals.
3. Disallowance of Rs. 2 lakhs towards expenditure in paddy and lorry hiring business.
4. Disallowance of Rs. 1,06,316 towards advertisement and festival expenses.

Issue 1: Addition of Trade Creditors
The assessee's appeal contested the addition of Rs. 9,80,850 towards trade creditors. The Assessing Officer disallowed this amount as the outstanding liability was not proven by filing confirmation letters from 24 creditors. The ld. CIT(A) upheld this disallowance as the confirmation letters were not provided even during the appeal. The Tribunal concurred, stating that since the trade liability was unproven, the disallowance was justified. The ground raised by the assessee was dismissed.

Issue 2: Confirmation of Outstanding Credits
The appeal raised concerns about confirming outstanding credits in the names of two individuals. However, during the hearing, the assessee's counsel did not press these grounds, leading to their dismissal as not pressed.

Issue 3: Disallowance of Expenditure
Regarding the disallowance of Rs. 2 lakhs for expenditure incurred in the paddy and lorry hiring business, the Assessing Officer made the disallowance on an estimated basis due to lack of proper documentation for most claimed expenses. The ld. CIT(A) upheld this disallowance. The Tribunal disagreed, noting that the disallowance was not justified as the expenses were not disputed to have been incurred, and the basis for estimation was not mentioned. Hence, the disallowance of Rs. 2 lakhs was deleted, and the ground raised by the assessee was allowed.

Issue 4: Disallowance of Advertisement and Festival Expenses
The Assessing Officer disallowed Rs. 1,06,316 towards advertisement and festival expenses, citing lack of full support by bills and vouchers. The ld. CIT(A) confirmed this disallowance, stating that 20% of the expenses were fairly estimated and disallowed. The Tribunal found no issue with this estimation and upheld the ld. CIT(A)'s order, dismissing the ground raised by the assessee.

In conclusion, the appeal by the assessee was partly allowed, with the disallowance of Rs. 2 lakhs towards expenditure being overturned while the other grounds were dismissed.

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