2022 (12) TMI 1313 - AT - Income Tax

Disallowing the expenses incurred on electricity - manufacturing activities had not taken place - HELD THAT - As the fact that it was an ongoing business undergoing a lull has been accepted by the AO himself as various other business expenses have been allowed. It is further seen that the aforesaid payments in terms of the bills raised by the Punjab State Electricity Corporation is an evidence of third party evidence which cannot be easily discounted as a self created evidence. The payments have been made is also not in dispute. We further find that statements of two Security Guards in February, 2016 in regard to the factual position of the assessee's business functioning in the year under consideration i.e. 2012-13 assessment year does not have much relevance. The fact that it has not been confronted to the assessee is also a fact evident on the face of the record. We further find that merely because the Punjab State Electricity Corporation, even to the AO, has failed to respond and provide information u/s. 133(6) is a fact for which the remedy lies with the Revenue. Assessee has no role to play and cannot be held to be answerable for the lapses of the Corporation. Considering the submissions of the assessee consistently on record wherein it is evident that the assessee tried to keep his business alive and viable and ultimately had to close down, expenses so disallowed in the facts of the present case cannot be sustained. Addition made is directed to be deleted. Appeal of the assessee is allowed.

Issues:
1. Challenge to the order passed by the Ld. Commissioner of Income Tax (Appeals)
2. Disallowance of expenses incurred on electricity
3. Permission to add, amend, or alter any ground of appeal

Issue 1: Challenge to the order passed by the Ld. Commissioner of Income Tax (Appeals)

The appeal filed by the assessee challenges the order dated 15.11.2019 of CIT(A)-I Chandigarh regarding the 2013-14 assessment year. The grounds of challenge include the assertion that the order passed under section 250(6) by the Ld. Commissioner of Income Tax (Appeals) is contrary to law and facts of the case.

Issue 2: Disallowance of expenses incurred on electricity

The Assessing Officer (AO) disallowed expenses of Rs. 24,05,249/- claimed by the assessee on account of power and fuel expenses, as no manufacturing or business activities were carried out despite claiming such expenses. An Inspector was deputed to verify the genuineness of the expenditure, revealing no electricity connection with the assessee and the absence of manufacturing activities. Statements from Security Guards confirmed the non-functioning of the business. Despite efforts to keep the business functioning, the AO made the addition. The First Appellate Authority upheld the addition, leading the assessee to appeal before the ITAT.

Issue 3: Permission to add, amend, or alter any ground of appeal

The appellant sought permission to add, amend, or alter any ground of appeal before or at the time of the hearing of the appeal before the Hon'ble Income Tax Appellate Tribunal, Chandigarh.

The ITAT analyzed the case, noting that various other business expenses were allowed, indicating the business was an ongoing concern facing a temporary lull. Payments to Punjab State Electricity Corporation were supported by bills and receipts, providing third-party evidence. The statements of Security Guards in 2016 were deemed irrelevant to the 2012-13 assessment year under consideration. The failure of the Corporation to respond to inquiries was not the assessee's fault. Considering the efforts to keep the business viable, the disallowed expenses were deemed unsustainable, leading to the deletion of the addition. The appeal of the assessee was allowed, and the order was pronounced in the Open Court on 15th December 2022.

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