2023 (7) TMI 228 - AT - Income Tax

Addition of payments made through credit card - second round of appeal - addition in hands of company or individual - HELD THAT - We find sufficient weightage in the submission of Ld. AR that a total payment was made by Company and recorded by Company in its books of account which is very much evident from copy of Ledger A/c supplied by Company as detailed in foregoing paragraph. The expenditure really belonged to Company and any disallowance, even if to be made on account of personal or non-business nature, could only be made in the hands of Company and not in the hands of assessee. Remaining portion of disallowance is concerned, we find that the assessee has been consistently claiming that in absence of full details of Information Report, he was not able to explain the difference. We find that the Information is reported by third party agencies to Income-tax Department and the possibility of wrong reporting cannot be denied - when the assessee was consistently claiming that he is not able to explain the difference in absence of full details of Information Report, either the departmental authorities should have provided full information to assessee to enable him to delve into the difference or else they should have accepted the assessee s simpliciter explanation that difference could not be reconciled in absence of full information. Since the authorities have not taken any pains to provide full information to assessee, the only judicious way to settle the controversy is to accept assessee s explanation - no justification in saddling the assessee with any disallowance. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in this case are the addition of Rs. 5,22,614/- made by the Assessing Officer (AO) in respect of payments allegedly made through credit card, and the subsequent appeals challenging this addition.

Summary of Judgment:

Issue 1: Addition of Rs. 5,22,614/- made by the AO:
The appellant contested the addition of Rs. 5,22,614/- made by the AO in relation to payments made through a credit card. The AO had disallowed these payments, alleging they were for personal use and not for business purposes. The appellant, however, argued that the credit card belonged to the company, and the expenses were recorded in the company's books, not claimed by the appellant. The appellant provided detailed explanations and evidence to support this claim. The ITAT remanded the issue back to the AO for further consideration. The appellant reiterated their submissions, providing a Ledger A/c of the credit card extracted from the company's books, demonstrating that the payments were made by the company and not the appellant. The ITAT found merit in the appellant's submissions, noting that any disallowance should be made in the hands of the company, not the appellant. The ITAT also highlighted the lack of complete information in the Information Report, emphasizing that the department should have provided full details to the appellant. Consequently, the ITAT decided to delete the entire disallowance of Rs. 5,22,614/-, ruling in favor of the appellant.

Conclusion:
The ITAT ruled in favor of the appellant, deleting the entire disallowance of Rs. 5,22,614/- made by the authorities. The ITAT concluded that the expenses in question belonged to the company, and any disallowance should be attributed to the company, not the appellant. The appeal of the appellant was allowed, and the judgment was pronounced on 01/06/2023.