2020 (9) TMI 145 - AT - Income Tax

Disallowance of bogus liabilities - assessee has failed to bring any evidence on record to support his claim to prove the nature of liabilities party names etc. - unascertained trade liabilities - Revenue contended that the deletion has been made by the ld. CIT (A) without providing an opportunity of being heard to the AO for verifying the submissions made by the ld. AR for the assessee - HELD THAT - CIT(A) has neither himself examined the documents nor he has got the same verified from the AO by calling remand report rather accepted the contention of the ld. AR for the assessee as a gospel truth and proceeded to delete the addition. So we agree with the contentions raised by the Revenue that the deletion has been made without giving an opportunity of being heard to the AO for verifying the submissions/evidence filed by the assessee. So in these circumstances we deem it necessary to remit the issue back to the ld. CIT (A) to decide afresh in accordance with law after providing an opportunity of being heard to the assessee as well as AO hence ground no.1 of AY 2012-13 is determined in favour of the Revenue for statistical purposes. Disallowance @ 25% on account of bogus expenditure claimed under the head bogus liabilities - Addition no supporting voucher/evidence has been produced by the assessee - HELD THAT - Bare perusal of the findings returned by the ld. CIT (A) goes to prove that disallowance @ 25% made by the AO has been restricted to 10% merely on the basis of whims and fancies and without perusing any record. No doubt disallowance has been made by the AO also purely on ad hoc basis but on failure of the assessee to support the claim with any voucher/evidence. In these circumstances the ld. CIT (A) was not expected to restrict the disallowance to 10% also on ad hoc basis. So we deem it necessary to set aside the issue to the ld. CIT (A) to decide afresh in accordance with the law by providing opportunity of being heard to the parties. So ground no.2 of AYs 2012-13 2014-15 is determined in favour of the assessee for statistical purposes.

Summary

Issues Involved:
1. Disallowance of expenditure under unascertained trade liabilities.
2. Restriction of addition of Administrative & Employee expenses.
3. Perversity of the CIT(A) order.
4. Misconceived ground of addition in AY 2014-15.

Issue 1 - Disallowance of Expenditure under Unascertained Trade Liabilities:
The Appellant, ACIT, sought to set aside the order passed by CIT(A) regarding the deletion of expenditure treated as unascertained trade liabilities. The AO disallowed a significant amount as bogus liabilities, which the CIT(A) partly deleted based on the AR's submissions. However, the Revenue contended that the deletion was made without giving an opportunity to the AO to verify the submissions. The ITAT agreed with the Revenue, stating that the CIT(A) accepted the AR's contentions without proper verification. The issue was remitted back to the CIT(A) for fresh consideration.

Issue 2 - Restriction of Addition of Administrative & Employee Expenses:
The AO made additions on account of bogus expenditure claimed under various heads due to lack of supporting vouchers/evidence. The CIT(A) restricted the disallowance to 10% from the original 25% disallowed by the AO. The ITAT found that the CIT(A) limited the disallowance without proper scrutiny, solely based on ad hoc reasons. The issue was set aside for the CIT(A) to reevaluate after providing an opportunity for both parties to be heard.

Issue 3 - Perversity of CIT(A) Order:
The grounds of appeal raised by the Revenue were deemed general in nature and did not require specific adjudication. The ITAT allowed both appeals for AYs 2012-13 & 2014-15 filed by the Revenue for statistical purposes.

Issue 4 - Misconceived Ground of Addition in AY 2014-15:
In AY 2014-15, the Revenue raised a ground for adjudication, which was found to be misconceived as no such addition/disallowance was made by the AO. The CIT(A) had given directions in AY 2013-14, but the issue was directed to be set aside for fresh consideration in the interest of justice.

This judgment by the ITAT Delhi addressed various issues related to the disallowance of expenditures, restriction of additions, and the perversity of the CIT(A) order. The decision highlighted the importance of proper verification and providing opportunities for both parties to be heard in such matters.