2018 (2) TMI 2128 - AT - Income Tax

Bogus LTCG - HELD THAT - It is a settled position of law that suspicion alone cannot be the basis for making an addition in an assessment. Suspicion cannot take place of proof. In the instant case, we find no material could be brought on record by the Revenue to impeach the related transactions. We do not find any infirmity in the order of CIT(A). Hence, this ground of appeal of Revenue is dismissed. Unexplained labour/wage expenses - Gross profit estimation - CIT (A) deleted the addition on the ground that books of accounts were audited u/s.44AB of the Act and bills and vouchers, wages sheets/register/muster roll etc. were produced and test checked by the AO - HELD THAT - AO has not given any basis of his assuming that outstanding wages at the end of the year cannot be more than Rs. 10 lakhs.DR also could not, during the course of hearing, substantiate the finding of AO of his arriving at such a conclusion. Thus in our considered opinion, the disallowance of labour and wages outstanding as at the end of the year under the head sundry creditors cannot be sustained in law. Hence, we confirm the order of CIT (A) and dismiss this ground of appeal of the Revenue. Addition on account of interest in the profit and loss account - CIT (A) deleted the addition on the ground that the AO failed to establish any nexus between the interest bearing funds and advances given by the assessee - HELD THAT - DR during the course of hearing supported the order of AO but could not controvert the above finding of CIT (A) by brining any cogent and positive material on record. Hence, we do not find any good and justifiable reason to interfere with the order of CIT(A), which is confirmed and this ground of appeal of Revenue is dismissed. Disallowance of expenses on personal use of the vehicles - HELD THAT - We find that the AO has not given the basis of working out the disallowance of Rs. 25,000/- out of the vehicle expenses of Rs. 2,53,689/- claimed by the assessee. Adhoc disallowance of any genuine business expenditure of the assessee is not permitted in law. Therefore, we find no good reason to interfere with the order of CIT(A), which is confirmed and this ground of appeal of Revenue is dismissed. Low withdrawal for household expenses - CIT (A) deleted the addition as found that the assessee had shown drawings for household expense - HELD THAT - DR during the course of hearing could not bring any material on record to controvert the finding of CIT (A) or that the actual expenses incurred by the assessee was higher than Rs. 62,500/-. Hence, we do not find any good reason to interfere with the order of CIT(A), which is confirmed and this ground of appeal of Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of bogus Long Term Capital Gain (LTCG) of Rs. 33,15,612/-.
2. Deletion of disallowance of Rs. 20,76,968/- out of wages expenses.
3. Deletion of disallowance of Rs. 24,464/- out of interest expenses.
4. Deletion of disallowance of Rs. 25,000/- out of vehicle expenses.
5. Deletion of addition of Rs. 1,20,000/- on account of low withdrawal for household expenses.

Issue-wise Detailed Analysis:

1. Bogus Long Term Capital Gain (LTCG):
- The assessee claimed LTCG of Rs. 33,15,612/- on shares of Bolton Properties Ltd. The AO doubted the genuineness of the transactions due to the phenomenal price increase and treated the gains as income from undisclosed sources. The CIT(A) deleted the addition, noting that the AO did not prove the transactions were sham, and the assessee provided sufficient evidence, including contract notes and demat account details, supporting the genuineness of the transactions. The Tribunal upheld CIT(A)'s decision, emphasizing that suspicion alone cannot justify the addition without concrete evidence.

2. Disallowance of Wages Expenses:
- The AO disallowed Rs. 20,76,968/- from wages expenses, suspecting excessive outstanding wages. The CIT(A) deleted the disallowance, stating that the AO did not point out specific defects in the books or establish that the expenses were not genuine. The Tribunal confirmed this, noting that the AO's assumptions lacked substantiation and the books were audited without any adverse findings.

3. Disallowance of Interest Expenses:
- The AO disallowed Rs. 24,464/- of interest, arguing that interest-bearing funds were diverted for non-business purposes. The CIT(A) deleted the disallowance, observing that the AO failed to establish a nexus between borrowed funds and advances given. The Tribunal agreed, citing the absence of evidence showing that interest-bearing funds were used for non-business purposes.

4. Disallowance of Vehicle Expenses:
- The AO made a lump sum disallowance of Rs. 25,000/- from vehicle expenses due to the lack of a logbook and potential personal use. The CIT(A) deleted the disallowance, and the Tribunal upheld this decision, noting that the AO did not provide a basis for the disallowance and that adhoc disallowances without evidence are not permissible.

5. Addition for Low Withdrawal for Household Expenses:
- The AO added Rs. 1,20,000/- for low household withdrawals, assuming the assessee did not withdraw enough for living expenses. The CIT(A) deleted the addition, finding that the AO's assumption was incorrect and the assessee had shown withdrawals of Rs. 62,500/-. The Tribunal confirmed the deletion, as the AO's addition was based on incorrect facts without evidence of higher actual expenses.