2020 (1) TMI 604 - AT - Income Tax

Expenditure incurred and payment of rent pertaining to information centers - CIT(A) partly deleted the addition made by the AO on the total expenditure claimed by the assessee after restricting to 30% - HELD THAT - Establishment of information centers, incurring of expenditure towards rent and salary is not in dispute, however, entire claim of the assessee cannot be allowed in absence of supporting documents, bills and vouchers etc., therefore, the addition is necessary and obvious on failure of assessee in producing the relevant documentary evidence in support of his claim - CIT(A) has confirmed 30% of the amount of claim of assessee which is excessive and seems to be unreasonable, therefore, we hold that in the interest of justice, to cover up the possible leakage of revenue the addition confirmed by the CIT(A) i.e. 30% of the total claim of the assessee is reduced to 15% and the AO is directed to recalculate the disallowance accordingly. Unexplained investment - HELD THAT - Although the department has two documents in their hands for making addition in the hands of the assessee but without any other corroborative and substantive evidence. At the same time, as we have already observed that both the documents as relied on by the authorities below, contains mentioning of payment of ₹ 70 lakhs but it has been stated therein that ₹ 70 lakhs has been paid afterwards and there is no positive evidence or material to establish that on which date or by whom this payment was made by the assessee or on behalf of the assessee to the seller (IPSAR). Therefore, in absence of such substantive evidence, we are compelled to hold that there was no over and above payment of ₹ 70 lakhs by the assessee to the seller. In this situation, when Dr. J.K.Mishra, Director of IPSAR (seller) in his statement before the AO categorically denied having received the amount of ₹ 70 lakhs over and above and there is no action against the seller by the department in this regard disbelieving his statement, thus, the socalled receivable of over and above money is denied having received the impugned amount. Hence, the action of AO loses its legs to stand on the platform of justified and reasonable cause for making addition. We have no hesitation to hold that neither the AO nor the CIT(A) by way of corroborative and cogent evidence could not establish and substantiate that the assessee has made payment of. ₹ 70 lakhs over and above consideration of ₹ 4,95,00,000/- as has been shown in the registered sale deed. Therefore, no addition in this regard is called for and, thus, we direct the AO to delete the entire addition. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?5,46,000/- for the assessment year 2010-2011.
2. Disallowance of expenses claimed for rent and salary for information centers for the assessment years 2010-2011 to 2016-2017.
3. Addition of ?70 lakhs on account of unexplained investment for the assessment year 2014-2015.

Issue-Wise Detailed Analysis:

1. Addition of ?5,46,000/- for the Assessment Year 2010-2011:
The assessee argued that the addition was made "in absence of any incriminating materials seized in course of search and seizure operation." The Tribunal noted that the assessee had submitted audited books of accounts, and the AO had disallowed 70% of the expenses without pointing out any discrepancies. The CIT(A) reduced the disallowance to 30%, but the Tribunal found this excessive and reduced it further to 15%, directing the AO to recalculate the disallowance accordingly.

2. Disallowance of Expenses Claimed for Rent and Salary for Information Centers for the Assessment Years 2010-2011 to 2016-2017:
The AO disallowed a significant portion of the expenses claimed for rent and salary for information centers, suspecting the expenses were not fully genuine. The CIT(A) restricted the disallowance to 30% of the total expenditure claimed. The Tribunal noted that the assessee had established information centers at 17 places to facilitate patient treatment. The Tribunal found that while the establishment of information centers and incurring of related expenses were not in dispute, the disallowance of 30% was excessive. The Tribunal reduced the disallowance to 15%, directing the AO to recalculate accordingly for all assessment years from 2010-2011 to 2016-2017.

3. Addition of ?70 Lakhs on Account of Unexplained Investment for the Assessment Year 2014-2015:
The AO added ?70 lakhs as unexplained investment, which was partly confirmed by the CIT(A). The assessee argued that this amount was not paid over and above the registered sale deed amount. The Tribunal noted that the addition was based on two documents: an email and a handwritten noting, neither of which specified the date or mode of payment. The Tribunal emphasized that the seller, Dr. J.K. Mishra, had categorically denied receiving ?70 lakhs over the registered amount. The Tribunal found no corroborative evidence to substantiate the AO's claim and directed the deletion of the entire addition of ?70 lakhs.

Conclusion:
The Tribunal partly allowed the appeals of the assessee, reducing the disallowance of expenses for rent and salary to 15% for the assessment years 2010-2011 to 2016-2017 and deleting the addition of ?70 lakhs for the assessment year 2014-2015. The Tribunal directed the AO to recalculate the disallowances and make necessary adjustments accordingly.