2022 (9) TMI 1318 - AT - Income Tax

Disallowance being 10% of expenditure on the ground that the assessee failed to discharge the onus cast on him by proving the genuineness of the expenditure debited - Onus to prove - HELD THAT - It is the settled proposition of law that for claiming any expenditure as allowable, the onus is always on the assessee to prove to the satisfaction of the Assessing Officer by furnishing bills and vouchers for such expenditure. However, the assessee in the instant case failed to furnish all the details before the Assessing Officer for which the disallowance of expenditure on estimate basis is justifiable. Disallowance of expenditure @ 10% of the expenditure in the instant case appears to be on the higher side since it gives a profit rate of 37.78% which is not possible in the line of business. Considering the fact that the assessee has already declared profit rate of 9.29%, the disallowance on lumpsum basis in the instant case, in our opinion, meet the ends of justice. We hold and direct accordingly. The grounds raised by the assessee on the first issue of disallowance is partly allowed. Disallowance being 30% of the expenditure (professional services Contract charges) - As the assessee in its computation of income has suo moto disallowed an amount which includes the amount disallowed by the Assessing Officer. We, therefore, deem it proper to restore the issue to the file of the Assessing Officer with a direction to verify the computation statement and after being satisfied, delete the addition. The 2nd issue raised by the assessee in the grounds of appeal is accordingly allowed for statistical purposes.

Summary

Issues:
1. Disallowance of expenditure by Assessing Officer
2. Disallowance of TDS under section 40(a)(ia)

Issue 1: Disallowance of Expenditure by Assessing Officer

The appellant, engaged in construction business, declared a net profit of 9.29% on total sales. The Assessing Officer disallowed Rs. 85,56,088 (10% of total expenditure) due to lack of proof for expenses. The CIT (A) upheld this addition, leading to a total income determination of Rs. 1,20,33,452. The appellant challenged this, citing the high profit rate of 37.78% post-disallowance, which seemed unrealistic for their business. The Tribunal noted the appellant's failure to provide necessary documentation but found the 10% disallowance excessive, given the declared profit rate. Consequently, the Tribunal partially allowed the appeal, reducing the disallowance to Rs. 10,00,000, considering the circumstances and the declared profit rate.

Issue 2: Disallowance of TDS under Section 40(a)(ia)

The Assessing Officer disallowed Rs. 1,00,764 (30% of certain expenditure) for TDS non-deduction. The appellant argued that they had already accounted for this in their income computation. The Tribunal observed that the appellant had indeed self-disallowed Rs. 1,32,828, covering the disputed amount. Therefore, the Tribunal directed the issue back to the Assessing Officer for verification based on the computation statement. Consequently, the Tribunal allowed the appeal on this issue for statistical purposes.

In conclusion, the Tribunal partially allowed the appeal concerning the disallowance of expenditure by reducing the amount and allowed the appeal on the TDS disallowance issue for verification. The decision aimed to balance the need for proper documentation with fairness in assessing the appellant's income.