2022 (3) TMI 831 - AT - Income Tax

Addition u/s 68 - HELD THAT - In view of the decisions in the case of NDR Promotors Pvt. Ltd. 2019 (1) TMI 1089 - DELHI HIGH COURT and the decision in the case of NRA Iron and Steel (P) Ltd 2019 (3) TMI 323 - SUPREME COURT we are of the considered opinion that the action of the learned Assessing Officer was legal and non-production of the persons summoned had rightly led to the inference that the assessee had routed their own money in the books of accounts through the conduit of investor companies. On this premise, we agree with the authorities below and uphold the addition made under section 68 of the Act. Grounds No. 1 to 3 of the assessee s appeal are accordingly dismissed. Cash payment of portion of the labour charges, loading and unloading expenses and missionary repair and maintenance charges - HELD THAT - According to AO such payments were made in cash and bills were not properly vouched and therefore such expenses remained unverifiable. Precisely for this reason, CIT(A) also confirmed the same. No reasons are forthcoming before us to take a different view. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A). Disallowance of 1/8th portion of the expenditure met further car expenses, conveyance, Festival expenses, telephone expense, travelling expense and sales promotion expenses - HELD THAT - Assessing Officer recorded that the log books of car and complete details of telephone calls were not produced by the assessee and according to the assessee is not feasible to produce the same because the vehicles are almost under the direct control of the management. Ld. CIT(A) recorded that the explanation offered by the assessee was only superficial and log books are maintained mandated really in any concern of whatever the size. On this aspect also, no submissions are forthcoming from the side of the assessee to take a different view. We therefore, do not propose to interfere with the findings of Ld. CIT(A) in the impugned order. Disallowance of a part of the expense under the head repair and maintenance on the ground that the bills in respect of the amounts paid in cash were not properly vouched - HELD THAT - CIT(A) recorded that the assessee sought to take shelter under the fact that certain vendors do not maintain printed bills and expenses are internally vouched. According to the Ld. CIT(A) in the absence of any non-Page availability of the expense disallowance of a portion of the same is justifiable. In the absence of any material or reason before us to take a contrary view. We decline to interfere with the same. Grounds No. 7 and 8 are accordingly dismissed.

Summary

Issues involved:
1. Addition of ?3.96 crores under section 68 of the Income Tax Act, 1961.
2. Disallowance of ?6 lakhs on account of various expenses.
3. Disallowance of ?19,29,050 on account of certain expenses.
4. Disallowance of ?7,94,315 on account of repair and maintenance expenses.

Detailed analysis:
1. The first issue pertains to the addition of ?3.96 crores under section 68 of the Income Tax Act. The assessee failed to produce documentary evidence supporting the genuineness and creditworthiness of the transaction involving fresh share application money and share premium. The authorities noted inconsistencies in the documents provided by the assessee, leading to doubts regarding the transaction. The Assessing Officer required the production of the investing company's directors and relevant documents, but the assessee failed to comply. The appellate tribunal upheld the addition, citing the failure to discharge the onus under section 68 and the characteristics of shell companies. Legal precedents were cited to support the decision, emphasizing the importance of cooperation with tax authorities in such cases.

2. The second issue concerns the disallowance of ?6 lakhs related to certain expenses like labour charges, loading and unloading expenses, and repair and maintenance charges. The Assessing Officer found these payments unverifiable due to lack of proper documentation. The appellate tribunal affirmed this decision, stating no grounds existed to overturn it.

3. The third issue involves the disallowance of ?19,29,050 on various expenses like car expenses, festival expenses, telephone expenses, and sales promotion expenses. The Assessing Officer noted inadequate documentation, such as missing log books and details of telephone calls. The tribunal agreed with the decision, emphasizing the importance of maintaining proper records in business operations.

4. The final issue concerns the disallowance of ?7,94,315 for repair and maintenance expenses due to insufficiently vouched bills. The assessee argued that some vendors did not provide printed bills, but the tribunal upheld the disallowance, stating that without proper documentation, the disallowance was justified. The tribunal dismissed the appeal, affirming the decisions of the lower authorities on all grounds.