2020 (2) TMI 1174 - AT - Income Tax

Addition u/s 68 - HELD THAT - Assessee declared, inter-alia, loan credit of ₹ 2,69,000/- in the name of M/s. Yashoda Construction. Though, the relevant evidence was not filed at the assessment stage because of paucity of time, the assessee did furnish copy of return of M/s. Yashoda Construction along with Profit and Loss Account and Balance Sheet, indicating that the said creditor had acknowledged such a balance receivable from the assessee, which was also reflected in his Balance Sheet. Once the creditor had admitted the transaction and also incorporated the same in his accounts, there remained nothing more to prove the genuineness of the transaction, more so, when the AO of the creditor also did not raise any doubt over it. Considering the above facts, order to delete the addition. Ad-hoc disallowance towards Salary to labourers - AO found certain infirmities in the details furnished in as much as the expenses were mostly backed by self-made vouchers - HELD THAT - Though, there is no legal bar on challenging an agreed addition, but the fact of the matter is that a valid challenge can be laid before the appellate authorities only if such an admission before the AO was not in consonance with law. If, on the other hand, an admission is based purely on factual matrix, then the assessee cannot challenge the same before the appellate authorities without there being any contrary evidence. The reason is obvious that when an assessee agrees for an addition, the AO does not proceed further in his examination on that issue and closes it by recording the concession of the assessee. The later challenge to such an admission de hors any contrary evidence cannot bring the arms of the clock back enabling the AO to continue from the stage where he left the issue on the assessee agreeing for the surrender. In such a scenario, the assessee cannot be allowed to resile from the agreed addition made before the AO in the backdrop of a pure factual panorama. The extant addition, being an agreed addition on purely factual aspects without any thing contrary, cannot, ergo, be interfered with. I, therefore, countenance the impugned order on this score. This ground fails.

Summary

Issues:
1. Confirmation of addition made by the Assessing Officer under section 68 of the Income-tax Act, 1961.
2. Confirmation of ad hoc disallowance of expenses.

Issue 1:
The appeal challenged the addition of ?2,69,000 made by the Assessing Officer under section 68 of the Income-tax Act, 1961. The assessee, a civil contractor, had sundry creditors of ?50,86,860 in the Balance Sheet. The AO required confirmations from creditors, and the assessee failed to provide one from M/s. Yashoda Construction for ?2,69,000 within the short time limit. The assessee later submitted the Profit and Loss Account and Balance Sheet of M/s. Yashoda Construction, showing the assessee as a debtor for the amount. The AO invoked Rule 46A of the Income-tax Rules, 1962, for rejecting additional evidence. The CIT(A) confirmed the addition based on a remand report and the absence of necessary records from the AO of M/s. Yashoda Construction. However, the Tribunal found that since the creditor acknowledged the transaction and reflected it in their accounts, the genuineness was proven. The addition was deleted as there was no doubt raised by the AO of the creditor.

Issue 2:
The second ground of appeal was against the confirmation of an ad hoc disallowance of ?25,000 out of expenses. The assessee had recorded ?92,65,070 towards salary to laborers, but the expenses lacked proper external vouchers. During assessment, the assessee agreed to an ad hoc disallowance of ?25,000 due to unsupported expenses. The Tribunal noted that the assessee's admission during assessment cannot be challenged in appellate proceedings unless it is against the law. As the agreed addition was based on factual aspects without any legal issues, the Tribunal upheld the confirmation of the ad hoc disallowance. The appeal on this ground failed, and the impugned order was upheld.

In conclusion, the Tribunal partly allowed the appeal, deleting the addition under section 68 but upholding the confirmation of the ad hoc disallowance of expenses. The judgment was pronounced on February 7, 2020.