2020 (2) TMI 922 - AT - Income Tax

Addition on account of creditors - HELD THAT - As informed by AO of the alleged creditor while transmitting the Balance Sheet and the list of sundry creditors, that the name of the assessee was not to be found in such list. Further, the inspector who tried to locate the premises of M/s, Mahavir Forging (P) Ltd could not find such an entity at the given address. He was informed that such building was used as residence by its previous owner three years back and no company like M/s Mahavir Forgings had ever located in that premises. Further, on downloading the Balance Sheet filed with the letter from the ROC site, it was found that it was not signed by auditor or Director of the company, leading to the inference that the assessee was misusing name of some assessee to show bogus corridor in its books of accounts. There is no proper explanation from the assessee in respect of these reasons recorded by the learned Assessing Officer to draw the inference that the transaction is a bogus one. In the absence of any material touching on the aspect, we are of the considered opinion that the Ld. CIT(A) is justified in confirming the addition. There are no reasons warranting interference with the same. Disallowance of expenses - Assessing Officer who is the first authority directly dealing with the assessee and its business details had taken a view that 25% of the expenses should be disallowed. To take any contrary view or to modify it, there shall be some material before us or some acceptable explanation from the assessee. Since the assessee had not taken sufficient precaution for prosecution of the case on merits, we find it difficult to interfere with the discretion of the learned Assessing Officer. We, therefore, uphold the same. - Decided against assessee.

Summary

Issues:
1. Addition on account of creditors
2. Disallowance of expenses

Addition on account of creditors:
The appellant, a trading company, filed an appeal against the assessment order for the year 2012-13. The Assessing Officer added amounts on three counts, including a significant sum on account of a creditor, M/s Mahavir Forging P Ltd, deemed bogus due to lack of physical existence and untrustworthy bills. The appellant argued before the Ld. CIT(A) that the office of the creditor was in a commercial area, not residential, and bills being computer-generated did not make them bogus. The Ld. CIT(A) upheld the addition, emphasizing the need for the appellant to establish the creditor's existence and transaction genuineness. Relief was granted on one count. The appellant contended before the ITAT that details provided were genuine, and non-verification by the Assessing Officer did not justify the addition. However, as the appellant did not appear, the ITAT proceeded based on available records. The ITAT considered the Assessing Officer's findings, including the absence of supporting documents and discrepancies in the creditor's confirmation, upholding the addition due to lack of evidence from the appellant.

Disallowance of expenses:
The Assessing Officer disallowed certain expenses, citing lack of supporting details and non-compliance with requests for information. The Ld. CIT(A) upheld the disallowance of 25% of expenses, as the appellant failed to prove the business purpose of the expenses and did not provide adequate explanations. The ITAT noted the absence of material or explanations from the appellant to challenge the Assessing Officer's decision. As the appellant did not present sufficient evidence or explanations, the ITAT upheld the disallowance. Ultimately, the ITAT dismissed the appeal, emphasizing the importance of providing necessary documentation and explanations to support expense claims.