2017 (9) TMI 518 - AT - Income Tax

Computational error in AO s order - rectification - Held that - Since the returned income reflected by the assessee was ₹ 3,84,06,321/- and the assessee suffered addition aggregating ₹ 50,60,177/- and therefore the determined income should has been ₹ 4,34,66,498/- whereas the same has been taken as ₹ 4,25,38,780/- by Ld. AO and therefore, require rectification. Addition against write-off of advances - Held that - We are inclined to confirm the same since the assessee could not adduce any material to show that the advances were given in the ordinary course of assessee s business and the same constitute trading loss for the assessee. Per query from the bench, the assessee could not produce any agreement / documentary evidences to substantiate this fact and therefore, this addition is confirmed and this ground of assessee s appeal stands dismissed. Addition on account of bad debts written-off - Held that - After perusal of ledger extract placed in the paper book, we concur with the stand of the Ld. DR that the same reveals no movement in the debtor s balances since past many years and does not show fulfillment of condition prescribed u/s 36(2)(i). However, the Ld. AR has contended that the income from these debtors was offered to tax in earlier years and the assessee is in possession of necessary evidences to substantiate this fact and therefore, we deem it fit to restore the matter back to the file of Ld. AO to verify this fact and decide as per law after affording adequate opportunity to the assessee, who, in turn, is also directed to substantiate the same with evidences. Resultantly, this ground of assessee s appeal stands allowed for statistical purposes. Adhoc addition of expenses was on the higher side - Held that - Upon perusal of the cited Tribunal order, we find that the bench has taken a view that disallowance to the extent of 5% would suffice to meet the end of justice. Therefore, taking the same stand, we restrict the adhoc disallowance to 5% of ₹ 1,04,93,675/- which comes to ₹ 5,24,684/-. Resultantly, the assessee s ground of appeal stands partly allowed. Disallowance u/s 14A - Held that - The assessee simply asserted that no expenses were incurred to earn the exempt income without substantiating the same. Therefore, the addition, thereof @0.5% of average investments, in terms of Rule 8D(2)(iii), requires no interference on our part. Resultantly, this ground of assessee s appeal stands dismissed.

Issues:
1. Deduction disallowance of ?4,00,000
2. Addition of ?25,29,605 as bad debts
3. Addition of ?20,98,735 for cash expenses
4. Addition of ?31,837 u/s.14A

Deduction Disallowance of ?4,00,000:
The assessee appealed against the disallowance of ?4,00,000 by the assessing officer, contending that the advances were given in the ordinary course of business and should be considered as a trading loss. However, the tribunal confirmed the disallowance as the advances were not proven to be made in the relevant year as per Section 36(2)(i) of the Act. The tribunal held that the appellant failed to establish the advances were made in the previous year, leading to the disallowance under Section 36(2)(i).

Addition of ?25,29,605 as Bad Debts:
The tribunal found that the bad debts written off were not considered in the income computation for the relevant years, and the appellant failed to prove that the bad debts were written off in the relevant previous years. The tribunal upheld the disallowance of ?25,29,605 under Section 36(2)(i) as the bad debts did not meet the conditions prescribed by the Act. However, the matter was remanded back to the assessing officer to verify if the income from these debtors was offered to tax in earlier years.

Addition of ?20,98,735 for Cash Expenses:
The assessing officer disallowed ?20,98,735 of cash expenses as they were not fully supported by bills or vouchers. The tribunal confirmed the disallowance, stating that the cash expenses were not incurred wholly and exclusively for the appellant's business. The tribunal considered the disallowance reasonable based on the lack of genuine supporting documents for the cash expenses.

Addition of ?31,837 u/s.14A:
The tribunal confirmed the addition of ?31,837 under Section 14A for tax-exempt income earned by the appellant. The tribunal found that the appellant failed to prove that no expenses were incurred to earn the exempt income, leading to the dismissal of the appeal regarding this addition.

In conclusion, the tribunal partially allowed the assessee's appeal by confirming some additions while partly allowing others based on the merits of each issue. The tribunal directed the assessing officer to verify certain aspects and make decisions accordingly. The order was pronounced on 16th August 2017.

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