2015 (10) TMI 2813 - AT - Income Tax

Disallowance of bogus expenses - action of the CIT(A) in disallowing expenses @ 2.5% as against 5% disallowed by the AO - HELD THAT - We find that the assessee had claimed certain expenditure and no supporting evidences have been filed before the Assessing Officer. However, before the ld. CIT(Appeals), some vouchers were filed, which were perused in the presence of the AO and found that some vouchers are self-vouched. CIT(Appeals), keeping in view all the factors, restricted the disallowance from 5% to 2.5%. Therefore, we find no reason to interfere with the order passed by the CIT(Appeals) and accordingly, we dismiss the grounds raised by the Revenue. Addition towards unexplained investment in land - HELD THAT - CIT(A) satisfied about the source of fund in assessment year 2003-04 that it came from M/s LKS Petroleum India Pvt. Ltd. CIT(A) is not justified in giving direction to the Assessing Officer to consider the same in assessment year 2004-05. In our opinion, if the cheque is issued from LKS Petroleum India Pvt. Ltd and is duly reflected in the books of account of LKS Petroleum India Pvt. Ltd and they are filing return of income then there is no question of treating the same in the hands of assessee as unexplained investment in assessment year 2004-05. As such, the assessee has to explain the same before the Assessing Officer - we are remitting this issue to the file of the AO for fresh consideration. Unexplained expenses - CIT(A) deleted the addition on the reasoning that this was duly reflected in the books of account of DMDK party - contention of the ld. DR is that DMDK party is not maintaining the proper books of account and the expenses are not reflected in the books of DMDK party - HELD THAT - As submitted that it was reflected in the books of account of the DMDK party. However, no material has been furnished to show that this amount of ₹ 25 lakhs is duly accounted for in the books of account of DMDK party. As such, we are not in a position to express any opinion on this issue and this requires further verification at the end of the AO - Accordingly, we remit this issue back to the file of the Assessing Officer for verification after giving adequate opportunity of hearing to the assessee.

Summary

Issues:
1. Disallowance of expenses uniformly @ 2.5% of the expenditure.
2. Charging of interest u/s 234A, 234B, and 234C.
3. Sustenance of addition towards unexplained investment in land.
4. Additional grounds filed by the assessee.
5. Grounds raised in the Revenue's appeal for assessment year 2006-07.

Issue 1: Disallowance of Expenses:
The assessee's appeals primarily dealt with the disallowance of expenses made uniformly at 2.5% of the expenditure. The Assessing Officer had estimated disallowance of 5% of the expenditure for various assessment years. The CIT(A) reduced the disallowance to 2.5% after considering evidence presented by the assessee. The Tribunal upheld the CIT(A)'s decision based on similar cases and dismissed the Revenue's appeal.

Issue 2: Charging of Interest:
The mandatory nature of charging interest u/s 234A, 234B, and 234C was highlighted. The Assessing Officer was directed to compute interest accordingly, as per the provisions of the Act.

Issue 3: Unexplained Investment in Land:
Regarding the unexplained investment in land, the Assessing Officer disallowed a proportionate value of property due to lack of credible evidence. The CIT(A) sustained part of the addition based on available sources of funds. The Tribunal remitted the issue back to the Assessing Officer for fresh consideration, emphasizing the need for a detailed examination and adequate opportunity for the assessee to explain the source of funds.

Issue 4: Additional Grounds by the Assessee:
The assessee filed additional grounds related to additions made in assessments completed before the search, seeking relief based on absence of incriminating documents. However, as similar issues were already decided in previous appeals, these additional grounds were considered infructuous and dismissed.

Issue 5: Revenue's Appeal for Assessment Year 2006-07:
The Revenue's appeal for the assessment year 2006-07 focused on the disallowance of expenses and deletion of an addition towards unexplained expenses. The Tribunal, following previous decisions, dismissed the grounds related to the disallowance of expenses. Regarding the addition of unexplained expenses, the matter was remitted back to the Assessing Officer for further verification, emphasizing the need for proper examination and evidence.

In conclusion, the Tribunal dismissed the appeals of the assessee for certain years, partly allowed others for statistical purposes, and partly allowed the Revenue's appeal for the assessment year 2006-07. The detailed analysis and remittance of certain issues back to the Assessing Officer underscore the importance of thorough examination and evidence in tax assessments.