2005 (12) TMI 594 - AT - Income Tax

Summary

Issues:
1. Confirmation of addition of Rs. 97,960 by rejecting claimed loss in gram.
2. Sustenance of small disallowances out of expenses debited to the P & L account.

Analysis:

Issue 1:
The appeal was against the CIT(A)'s order confirming the addition of Rs. 97,960 made by the Assessing Officer due to the rejection of the loss claimed by the assessee in gram. The assessee incurred the loss through transactions conducted by another party on their behalf. The Assessing Officer disallowed the loss, citing lack of documentary evidence and questioning the genuineness of the transactions. However, the assessee provided details and explained the transactions were conducted verbally without formal documents. The ITAT noted that the assessee had made an advance payment to the other party and had no direct relationship with them. The ITAT found that the Assessing Officer failed to provide substantial evidence to prove the transactions were not genuine. It emphasized that the burden of proof lies with the party alleging a transaction is sham. As the assessee had provided evidence supporting the transactions, the ITAT concluded that the CIT(A) was unjustified in upholding the disallowance. Therefore, the ITAT directed the deletion of the addition.

Issue 2:
The second issue pertained to small disallowances from expenses debited to the Profit & Loss account. The ITAT noted that these disallowances were minor and represented a small portion of the total expenses. The disallowances were made due to insufficient evidence supporting the expenses. The ITAT agreed with the CIT(A) in sustaining these disallowances, as they were reasonable given the lack of proper evidence. Consequently, the ITAT partially allowed the appeal of the assessee, upholding the small disallowances in expenses while directing the deletion of the substantial addition related to the claimed loss in gram transactions.