2021 (2) TMI 1310 - AT - Income Tax

Addition on account of unsecured loan - HELD THAT - We have gone through the detailed findings of ld CIT(A) and noticed that assessee has failed to produce books of accounts, vouchers, bills and Bank Statements before the assessing officer as well as before ld CIT(A). The Ld Counsel in his written submissions stated that if a chartered Accountant gives unqualified certificate in the prescribed form then in that situation books of accounts, voucher, bills, bank statements etc should not be called for either in the case of public company or in the case of private companies where the accounts have been audited by an auditor qualified to audit a public company's account and he has given a certificate, similar to that given in the case of a public company. We do not agree with ld Counsel. The purpose of scrutiny assessment under section 143(3) is to examine, books of accounts, voucher, bills, bank statements etc. That is, in order to verify the unsecured loan, octroi expenses and advances, the assessing officer has to examine books of accounts, voucher, bills, bank statements, confirmations etc. which the assessee has failed to produce before us. The argument of the ld Counsel to the effect that if the assessee submits audit report then in that situation, the assessee need not to furnish books of accounts, voucher, bills, bank statements, confirmations etc. is not acceptable. We have gone through the order of the CIT (Appeals) and noticed that the Assessee has not submitted any evidence or documents during the appellate proceedings in respect of loans, advances and expenses. Therefore, we do not find any infirmity in the order of CIT (Appeals). We decline to interfere in the order of ld. CIT (Appeals). His order on this issue is hereby upheld and grounds of appeal raised by the assessee is dismissed.

Summary

Issues:
1. Addition on account of unsecured loan
2. Disallowance of expenses for Milgine expenses, Octroi, and freight expenses
3. Addition of advances against sales/goods

Analysis:
1. The appeal before the ITAT Surat concerned the assessment year 1998-99 and involved three key grounds raised by the assessee. The first ground related to the addition on account of an unsecured loan of Rs.13,67,670. The second ground pertained to the disallowance of expenses amounting to Rs.89,285 for Milgine expenses, Octroi, and freight expenses. The third ground focused on the addition of advances against sales/goods totaling Rs.3,00,000.

2. The assessee, in the second round before the Tribunal, submitted written arguments through Shri Yogesh B. Shah, the Learned Counsel. The Counsel emphasized the applicability of Section 44AB for compulsory audit of books of accounts due to turnover exceeding Rs. 40 lakhs. The Counsel highlighted the submission of the audit report along with the return of income, emphasizing that the audit report had been on record with the department since 30-11-1998. The Counsel argued that the non-production of books of accounts and bank statements was due to their loss and reiterated the reliance on the audit report submitted.

3. The Departmental Representative for the Revenue, Ms. Anupama Singla, relied on the order of the Commissioner of Income Tax (Appeals) and contended that the assessee had failed to produce essential documents like books of accounts, vouchers, bills, and bank statements. The Revenue argued that this failure justified upholding the additions made by the CIT(A).

4. Upon hearing both parties and examining the submissions, documents, and case laws, the Tribunal noted the assessee's failure to produce the necessary documents before the assessing officer and the CIT(A). The Tribunal disagreed with the assessee's argument that the submission of an audit report absolved the need to provide books of accounts, vouchers, bills, and bank statements. The Tribunal emphasized that scrutiny assessments under section 143(3) require the examination of such documents to verify financial transactions.

5. Ultimately, the Tribunal upheld the order of the CIT(A) as the assessee had not submitted any evidence or documents during the appellate proceedings regarding loans, advances, and expenses. Consequently, the appeal filed by the assessee was dismissed, and the order of the CIT(A) regarding the three grounds raised was upheld.

6. The Tribunal pronounced the order on 01/02/2021, in accordance with Rule 34 of the Income Tax Appellate Tribunal Rules, 1963.