2019 (7) TMI 310 - HC - Income Tax

Disallowance of expenditure on estimated basis - addition @12.5% on which TDS was not deducted and addition @ 8.12% on which TDS was deducted - HELD THAT - Assessee was unable to produce the books of accounts which had been prepared by the Chartered Accountant ( CA ). CA, who was asked to appear before the AO, did not participate in the assessment proceedings. All that was available before the AO were the statement of bank accounts and some sketchy details from which no proper assessment could be made. However, the ITAT took a reasonable view of the matter and reduced the disallowance from 25% to 12.5%. The Court is unable to find any substantial question of law arising as far as the above issue is concerned. Reconciliation of income with TDS certificate HELD THAT - As far as addition of ₹ 4.73 lacs is concerned, this became necessary as the Assessee was unable to explain the corresponding income in respect of which the TDS has been deducted. Even on this issue, the Court is unable to find any substantial question of law arising from the impugned order of the ITAT.

Summary

Issues:
1. Appeal against ITAT order for assessment year 2008-09.
2. Disallowance of expenditure by ITAT.
3. Reduction of disallowance from 25% to 12.5%.
4. Addition of ?4,73,047 due to TDS deduction.
5. Inability to produce books of accounts by the Assessee.
6. Lack of proper assessment due to incomplete details.
7. Absence of CA during assessment proceedings.
8. Lack of explanation for corresponding income of TDS deduction.
9. Finding of no substantial question of law by the Court.

Analysis:
1. The appellant filed an appeal against the ITAT order for the assessment year 2008-09. The High Court limited the notice in the appeal to the quantum of addition made by disallowance of expenditure at 12.5% and the addition of ?4,73,047 due to TDS deduction. The Court clarified the specific issues to be considered in the appeal.

2. The Court observed that the Assessee failed to produce the books of accounts prepared by the Chartered Accountant (CA) during the assessment proceedings. The CA did not participate, leaving only bank statements and insufficient details for assessment. Despite this, the ITAT reduced the disallowance from 25% to 12.5%, taking a reasonable view of the situation.

3. Regarding the disallowance reduction, the Court found no substantial question of law arising from this issue. The decision of the ITAT to decrease the disallowance percentage was deemed reasonable and did not warrant further legal scrutiny.

4. The addition of ?4,73,047 was made as the Assessee could not explain the corresponding income related to the TDS deduction. The Court, upon review, also did not identify any substantial legal questions arising from this aspect of the ITAT's order.

5. The Court highlighted the importance of proper documentation and explanation of financial transactions to enable accurate assessment by tax authorities. The absence of complete records and the CA's non-participation hindered the assessment process, emphasizing the necessity of cooperation and compliance with procedural requirements.

6. Ultimately, the Court dismissed the appeal, indicating that no substantial questions of law were found in the issues raised from the ITAT's order. The decision affirmed the ITAT's adjustments and underscored the importance of maintaining thorough financial records and providing adequate explanations during tax assessments.