2023 (8) TMI 513 - AT - Income Tax

Disallowance of expenses @ 10% under five heads of expenses - Business or personal use expenses - addition on the grounds that some of vouchers were produced and most of the vouchers being self- made verification of possibilities of personal use - HELD THAT - Assessee has not filed any document to prove the genuineness of the expenditure claimed other than the ledger accounts. It is observed from the ledger accounts of the car expenses that most of the expenses are in cash. In these facts and circumstances of the case, since assessee failed to produce the documentary evidence to substantiate the claim of expenditure. We agree with the disallowance made by the Assessing Officer. The onus was on assessee and assessee has failed to substantiate. Accordingly, ground no. 1 of the assessee is dismissed. Addition as notional income for non-charging of interest - assessee has given loan to its sister concern and no interest has been charged - AO added notional interest @ 12% - HELD THAT - There is no provision in the Income Tax Act to add such notional interest therefore, we direct the Assessing Officer to delete the said addition. Accordingly, ground no. 2 of the assessee is allowed.

Summary

Issues involved: Appeal against order of ld. Commissioner of Income Tax (Appeals) sustaining disallowance of expenses and addition of notional income for noncharging of interest.

Ground No. 1: Disallowance of Expenses
The assessee claimed various expenditures totaling Rs. 5,32,209, including car expenses, depreciation on car, telephone expenses, shop expenses, and tea expenses. The Assessing Officer disallowed 10% of the claimed expenditure amounting to Rs. 53,220 due to the failure of the assessee to produce supporting documents. The ld. CIT(A) upheld the disallowance citing lack of details provided. The ITAT noted that the assessee submitted a paper book with 17 pages but failed to provide additional evidence to substantiate the claimed expenses apart from ledger accounts. Most expenses were in cash according to the ledger accounts. As the assessee did not fulfill the onus of proving the genuineness of the expenses, the ITAT affirmed the disallowance made by the Assessing Officer, resulting in the dismissal of ground no. 1.

Ground No. 2: Addition of Notional Income
The assessment revealed that the assessee had given an interest-free loan of Rs. 15,20,000 to a related entity. The Assessing Officer added notional interest at 12% amounting to Rs. 1,82,400. The ITAT determined that there is no provision in the Income Tax Act to include such notional interest. Consequently, the ITAT directed the Assessing Officer to remove the addition of Rs. 1,82,400. Therefore, ground no. 2 of the assessee was allowed. In conclusion, the appeal was partly allowed by the ITAT.

Separate Judgment by Judges: None.