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2025 (2) TMI 1024 - AT - Income TaxDisallowance of payment of interest u/s 40(a)(ia) - HELD THAT - Revenue has reclined against the observations and findings recorded by CIT(A) in upholding the additions and submitted that there is no merit in the contentions raised on behalf of the appellant particularly when there was no justification for non deduction of TDS on the said payments. In the course of arguments appellant has not disputed that NBFCs are not banks. Ignorance of law is no excuse. It is not case of the appellant that he had no assistance of any Chartered Accountant. When enquired in the course of hearing Learned counsel admits that the assessee did not furnish any information by way of Form No. 27BA i.e. certificate by the Accountant regarding said payments and deductions required by law. Having regard to the provisions of section 40(a)(ia) of the Act and non compliance thereof by the assessee we do not find any merit in the submission that the appellant was under the impression that NBFCs are not Banks or that the addition be deleted. As a result the impugned orders upholding the additions for the two Assessment Years under consideration are upheld. Lump sum disallowances as regards certain expenses - AO called upon the assessee to produce record to explain as to whether the subject expenses were incurred for business purposes but the assessee was found to have not been maintaining any details or log book of the running vehicle and about use of telephone. Assessing Officer specifically observed that the assessee did not produce any evidence in support of the reply to the query raised i.e. to establish that the expenditures were incurred for business purposes. In absence of any such evidence it can safely be said that the assessee failed to prove the version put forth for the purposes of deletion of the disallowances. CIT(A) was justified in sustaining the orders passed by the AO whereby disallowances were made. Penalty order u/s 271AAB - The appeal filed qua the quantum assessment stands dismissed. In view of the above findings and having regard to the provisions of section 271AAB(1)(c) of the Act no fault can be found with the penalty order.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Additions Regarding Undisclosed Income Relevant Legal Framework and Precedents: The additions were made under sections 132 and 153A of the Income Tax Act, following a search and seizure operation. The presumption under section 292C was crucial, which allows the authorities to presume that the documents found during a search belong to the assessee. Court's Interpretation and Reasoning: The Tribunal upheld the additions, reasoning that the incriminating documents found during the search were sufficient evidence of undisclosed income. The assessee's failure to explain the documents or provide contrary evidence led to the presumption that the documents were linked to him. Key Evidence and Findings: Two documents (pages 38 and 39) were found during the search, detailing money lending transactions. The Tribunal found that these documents clearly indicated unaccounted transactions. Application of Law to Facts: The Tribunal applied the presumption under section 292C, concluding that the documents belonged to the assessee. The failure of the assessee to provide any explanation or evidence to the contrary was pivotal. Treatment of Competing Arguments: The assessee argued that the documents did not belong to him and were not in his handwriting. However, the Tribunal dismissed these arguments due to the lack of evidence supporting the assessee's claims. Conclusions: The Tribunal upheld the additions of Rs. 1,18,83,333/- for AY 2013-14 and Rs. 25,00,000/- for AY 2014-15 as undisclosed income. 2. Penalty Orders Under Section 271AAB Relevant Legal Framework and Precedents: Penalties were imposed under section 271AAB(1)(c) for undisclosed income found during the search. Court's Interpretation and Reasoning: The Tribunal upheld the penalties, finding that the conditions under section 271AAB were met, and the assessee had failed to disclose the income voluntarily. Key Evidence and Findings: The penalty was based on the undisclosed income found during the search, which the assessee failed to explain. Application of Law to Facts: The Tribunal found that the penalties were correctly applied based on the undisclosed income and the assessee's failure to rebut the presumption under section 292C. Treatment of Competing Arguments: The assessee's arguments against the penalties were dismissed due to the lack of evidence and the clear provisions of the law. Conclusions: Penalties of Rs. 35,65,000/- for AY 2013-14 and Rs. 13,95,000/- for AY 2014-15 were upheld. 3. Disallowance of Interest Payments and Expenses Relevant Legal Framework and Precedents: Disallowances were made under section 40(a)(ia) for non-deduction of TDS on interest payments and for expenses with personal elements. Court's Interpretation and Reasoning: The Tribunal upheld the disallowances, noting that the assessee failed to deduct TDS and could not substantiate that the expenses were solely for business purposes. Key Evidence and Findings: The assessee failed to provide evidence of TDS deduction or maintain records proving that the expenses were business-related. Application of Law to Facts: The Tribunal found that the disallowances were justified due to non-compliance with TDS provisions and lack of evidence for business expenses. Treatment of Competing Arguments: The assessee's argument of a bona fide belief that NBFCs were banks was rejected, as ignorance of law is no excuse. Conclusions: Disallowances of interest payments and expenses were upheld. SIGNIFICANT HOLDINGS The Tribunal upheld the additions and penalties, emphasizing the presumption under section 292C and the assessee's failure to rebut it. The core principles established include:
The final determinations on each issue were in favor of the Revenue, dismissing the appeals filed by the assessee.
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