2018 (3) TMI 229 - HC - Income Tax

Addition of bogus payments - AO disallowed 40% of the total payments made on the basis of the payments made to 13 parties, who were not produced before him during the assessment proceedings - Tribunal justifying the deletion made by the CIT(A) - Held that - We are unable to understand on what basis the disallowance is made on the total payments, if at all it should have been restricted only to the amounts paid to the 13 persons who are not produced before the Assessing Officer. Be that as it may, we find that the respondent assessee had done everything to produce necessary evidence, which would indicate that the payments have been made to the parties concerned. The details furnished by the respondent assessee were sufficient for AO to take further steps if he still doubted the genuineness of the payments to examine whether or not the payment was genuine. AO on receipt of further information did not carry out the necessary enquiries on the basis of the PAN numbers, which were available with him to find out the genuineness of the parties. The CIT(A) as well as the Tribunal have correctly held that it is not possible for the assessee to compel the appearance of the parties before the Assessing Officer. - Decided against revenue

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal for Assessment Year 2009-10.
2. Genuineness of payments made to 13 parties claimed as expenditure by the Assessing Officer.
3. Adhoc disallowance of 40% on total payment made by the Assessing Officer.
4. Appeal to the Commissioner of Income Tax (Appeals) and subsequent remand report.
5. Deletion of addition on account of disallowance by the CIT(A).
6. Appeal by the Revenue to the Tribunal.
7. Dismissal of the Revenue's appeal by the Tribunal.
8. Assessment of disallowed payments and sufficiency of evidence provided by the respondent.

Analysis:

1. The appeal challenges the order of the Income Tax Appellate Tribunal for Assessment Year 2009-10. The primary issue revolves around the genuineness of payments made to 13 parties by the respondent, a firm engaged in Civil Engineering and execution of contracts. The Assessing Officer doubted these payments and made an adhoc disallowance of 40% on the total payment made, adding it to the respondent's income.

2. The respondent filed an appeal to the Commissioner of Income Tax (Appeals) and provided detailed information about the 13 parties, including PAN numbers, addresses, TDS deducted, and other relevant details. The CIT(A), after obtaining a remand report from the Assessing Officer, found that while 8 parties had appeared and their payments were explained, 5 parties had not appeared. Despite this, the CIT(A) held that the respondent had provided sufficient evidence and allowed the appeal, deleting the addition made by the Assessing Officer.

3. The Revenue then appealed to the Tribunal, which noted that the respondent had furnished comprehensive details regarding the payments to the 13 parties. The Tribunal found that the initial burden of proof was discharged by the respondent, shifting the responsibility to the Assessing Officer to further investigate if doubts persisted. The Tribunal ultimately dismissed the Revenue's appeal.

4. The High Court observed that the Assessing Officer's disallowance of 40% on total payments, based on the non-appearance of the 13 parties, was not justified. The respondent had provided ample evidence, including PAN numbers, for further verification. Both the CIT(A) and the Tribunal rightly concluded that the respondent could not compel the appearance of the parties before the Assessing Officer.

5. Consequently, the High Court upheld the Tribunal's decision as reasonable in the circumstances, finding no substantial question of law to consider. The appeal was dismissed, and no costs were awarded. The judgment highlights the importance of providing sufficient evidence in tax assessments and the burden of proof on the tax authorities to investigate further when doubts arise.

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