2018 (11) TMI 1239 - AT - Income Tax

Disallowance of expenses w.r.t. payments made to K G N Enterprises for plaster work - notices u/s. 133(6) returned unserved - Held that - The assessee did discharged its burden by bringing on record all necessary details and no addition to the income of the assessee by way of disallowance of expenses w.r.t. payments made to K G N Enterprises for plaster work is warranted merely based on suspicious and only ground that notices u/s. 133(6) returned unserved in the absence of other incriminating evidence in the possession of AO which could substantiate that this payments were bogus and merely accommodation entries were taken is not sufficient to discredit the version of the assessee. The payments were made to said party for plaster work which is directly related to business of the assessee and similar payments made to the said party in preceding year stood allowed by the AO itself in scrutiny assessment framed u/s 143(3) of the 1961 Act. Suspicion howsoever strong cannot take the place of proof is cardinal rule of jurisprudence. Thus, based on our above detailed discussions and reasoning, we are ordering for deletion of aforesaid additions to the tune of ₹ 9,15,043/- as was made by the AO and later confirmed by learned CIT(A). The assessee succeeds in this appeal. - Decided in favour of assessee.

Summary

Issues Involved:
Disallowance of expenditure paid to M/s K.G.N. Enterprises - Genuine or not.

Detailed Analysis:

1. Background of the Case:
The appeal was filed by the assessee against the appellate order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The dispute arose from the disallowance of expenditure of ?9,15,043 paid to M/s K.G.N. Enterprises for plaster work done by the party for the assessee.

2. Assessee's Arguments:
The assessee contended that the expenditure was genuine, supported by necessary evidence, and payments were made through crossed account payee cheques with TDS deductions. The party, K.G.N. Enterprises, could not be traced as they left the work unfinished, but the assessee provided PAN, addresses, ledger accounts, and bank statements of the party.

3. AO and CIT(A) Decisions:
The Assessing Officer disallowed the expenses, and the CIT(A) upheld the decision, citing untraceability of K.G.N. Enterprises. Despite TDS deductions and supporting documents, the authorities did not make efforts to locate the party.

4. Tribunal's Analysis and Decision:
The Tribunal observed that the assessee, a contractor, had significant revenue and allowed expenses exceeding ?18 crores in the scrutiny assessment. The Tribunal noted that the assessee provided necessary details and no incriminating evidence was found against the payments to K.G.N. Enterprises.

5. Conclusion and Ruling:
Based on the factual matrix and evidence presented, the Tribunal ruled in favor of the assessee, ordering the deletion of the disallowed expenses. The Tribunal emphasized that suspicion alone is not sufficient to discredit the assessee's version, especially when payments were related to business activities and had been allowed in previous assessments.

6. Final Outcome:
The Tribunal allowed the appeal filed by the assessee, ordering the deletion of the disallowed expenses of ?9,15,043. The decision was pronounced in the open court on 23.07.2018.

This detailed analysis highlights the key arguments, decisions, and rationale behind the Tribunal's judgment regarding the disallowance of expenses paid to K.G.N. Enterprises, emphasizing the importance of supporting evidence and lack of incriminating material to justify the ruling in favor of the assessee.