2023 (8) TMI 509 - AT - Income Tax

Disallowance as expenses under the head Rent - assessee submitted that the assessee was undertaking his contract work at very far and remote area at where one prominent person had provided the premises to the assessee with the undertaking that the amount for rent is to be paid who will settle or pay the rent to the actual owner - HELD THAT - Though the assessee has claimed to have made payment by way of cheque to Sh. Vijay Sharma as rent, the said Sh. Vijay Sharma has specifically denied before the AO of receipt of any such rent from the assessee. It is also noted that the AO has not provided an opportunity of cross examining the said Sh. Vijay Sharma. Therefore, we restore the issue to the file of the AO with a direction to provide an opportunity of cross examining Sh. Vijay Sharma to the Assessee and decide the matter afresh, accordingly, Ground No. 1 is partly allowed for statistical purpose. Disallowance as outstanding amount payable - Assessee submitted that the A.O made addition towards the assessee income by not accepting the liability appearing in the balance sheet in respect of outstanding payment to be made to various vendors related with the purchases - HELD THAT - The assessee himself shown the name of Sh. Vijay Sharma in the balance sheet stating outstanding amount payable to various vendor, but the said Sh. Vijay Sharma has denied about outstanding amount payable to various vendors appearing in the balance sheet. The assessee has filed an affidavit of Sh. Vijay Sharma before us wherein the said Sh. Vijay Sharma has made certain averments supporting the claim of the assessee. Considering the fact that the said Sh. Vijay Sharma has filed an affidavit supporting the claim of the assessee, we deem it fit to restore the matter to the file of the A.O. for de-novo consideration and the assessee is directed to establish the claim before the A.O. Ground No. 2 of the assessee is partly allowed for statistical purpose. Unexplained loan - assessee submitted that the said amount are not related to the year under consideration and are the old outstanding amount carried forward from the previous years, which is reflected in the balance sheet as liability payable to three persons - HELD THAT - Considering the fact that the aforesaid amount does not related to the year under consideration and are the old balance and also the assessee has paid the aforesaid amount to the creditors in the subsequent years through cheques, we find no reason to sustain the addition made u/s 68 of the Act. Disallowance of expenses under various heads - HELD THAT - It is found from the record the A.O. while disallowing the expenses from various heads of expenses, has not given specific finding, even the CIT(A) while restricting the addition made by the A.O. has only considered the past history of the Appellant and not referred to any of the documents produced by the Assessee. CIT(A) has not given any specific finding in respect of expenses claimed by the assessee and the assessee pleaded that the entire expenses should have been allowed by the CIT(A). We deem it fit to restore the issue of disallowance of expenses which was sustained by the CIT(A) to the file of A.O. to pass speaking order by considering the past history of the assessee and also the documents produced by the assessee. Ground of the assessee is partly allowed for statistical purpose.

Summary

Issues involved:
The issues involved in the judgment are:
1. Disallowance of rent payment
2. Disallowance of outstanding amount payable
3. Addition of unexplained loan
4. Disallowance of various expenses

Issue 1: Disallowance of rent payment
The assessee claimed Rs. 66,000 as rent payment, but the recipient denied receiving it. The Assessing Officer did not allow cross-examination, leading to a partial allowance for statistical purposes.

Issue 2: Disallowance of outstanding amount payable
An addition of Rs. 11,89,800 was made by disallowing outstanding payments to vendors, with Sh. Vijay Sharma's name mentioned. The AO did not verify with the vendors, leading to a partial allowance for statistical purposes.

Issue 3: Addition of unexplained loan
An addition of Rs. 3,50,000 was treated as an unexplained loan. The amount was old outstanding balance carried forward, not related to the current year, and was subsequently paid, leading to its deletion.

Issue 4: Disallowance of various expenses
A disallowance of Rs. 20,00,000 out of total expenses was sustained without specific reasons. The matter was restored to the AO for a detailed consideration based on past history and documents produced, resulting in a partial allowance for statistical purposes.

The judgment addressed each issue raised by the appellant, providing detailed reasoning and directing appropriate actions for further consideration or deletion of additions. The appeal was partly allowed for statistical purposes, emphasizing the need for proper verification and documentation in tax assessments.