2013 (6) TMI 497 - AT - Income Tax

Undisclosed income for payment of registry charges - Held that - Perusal of sale deeds placed on record reveals that the seller has paid the expenses for registration. There was thus, document evidencing payment made by Shri Sohan Lal Mali, the seller of the agricultural land on which the aforesaid amount of Rs. 4,63,960/- for stamp registration charges is under consideration. AO has recorded the statement behind the back of the assessee and collected information without allowing cross examination of said Shri Sohan Lal Mali. The said Shri Sohan Lal Mali was a witness of the Income Tax Department. It was, therefore, the duty of the AO to have allowed opportunity to the assessee by way of cross examination even though the assessee had not asked for. Without cross examination, statement as such was of no evidentiary value nor such evidence could have been used against the assessee as decided in Union of India Vrs. T.R. Verma 1957 (9) TMI 41 - SUPREME COURT and Kishan Chand Chellaram Vs. CIT (1980 (9) TMI 3 - SUPREME Court). In the face of documentary evidence on record, oral evidence is not entitled to any weight as decided in Behari Lal Murarka and Ors. 1977 (11) TMI 130 - SUPREME COURT . Thus in absence of any conclusive evidence, the document could not have been disbelieved. In favour of assessee. Disallowance for non business use of expenses - repair and maintenance on account of telephone expenses - Held that - Disallowance of expenses has been made for non business purpose by making a reasonable estimate. Reasonable estimate is permissible for making such disallowances. Finding no merit in grounds raised in appeal. Against assessee. Disallowance of payment made to M.s Girish and Sons (HUF) - Held that - The appellant has failed to explain the nature of services rendered for which such commission is claimed to have been paid. On being asked he is not even able to show as to whether there is any evidence for work done for such payment of commission claimed as an expenditure. For lack of evidence for services rendered, disallowance of expenses so made is found justified. Against assessee.

Summary

Issues Involved:

1. Addition of Rs. 4,63,960/- on alleged undisclosed income for payment of registry charges.
2. Disallowance of Rs. 16,549/- out of Repair and Maintenance Expenses.
3. Disallowance of Rs. 42,000/- under the head Commission Expenses.
4. Disallowance of Rs. 23,442/- out of Telephone Expenses.

Issue-wise Detailed Analysis:

1. Addition of Rs. 4,63,960/- on Alleged Undisclosed Income for Payment of Registry Charges:

The appellant purchased agricultural land through two sale deeds registered on 27/12/2003, which stated that the stamp duty of Rs. 4,63,960/- was paid by the seller. During the assessment, the Assessing Officer (AO) issued summons to the seller, who denied making the payment and filed an affidavit confirming this. The AO treated the amount as undisclosed income of the assessee due to the failure to produce the seller for cross-examination.

The CIT(A) upheld the AO's decision, stating the burden shifted to the assessee, which was not discharged. The assessee argued that the sale deed confirmed the payment by the seller and that the AO's reliance on oral evidence without cross-examination violated natural justice principles. The assessee cited various legal precedents emphasizing the importance of cross-examination and the inadmissibility of oral evidence contradicting written documents.

The Tribunal found that the AO failed to provide an opportunity for cross-examination, rendering the seller's statement of no evidentiary value. The Tribunal cited Supreme Court judgments supporting the precedence of documentary evidence over oral statements. Consequently, the addition of Rs. 4,63,960/- was deleted.

2. Disallowance of Rs. 16,549/- out of Repair and Maintenance Expenses:

The CIT(A) sustained the disallowance of Rs. 16,549/- for non-business use of repair and maintenance expenses. The Tribunal upheld this decision, noting that reasonable estimates for disallowances are permissible, citing the jurisdictional High Court's judgment in Kanhaiya Lal Jangid Vs. ACIT (2008) 217 CTR (Raj.) 354. The ground raised by the assessee was rejected.

3. Disallowance of Rs. 42,000/- under the Head Commission Expenses:

The CIT(A) disallowed the payment of Rs. 42,000/- to M/s Girish and Sons (HUF), finding the payment unjustified. The Tribunal observed that the appellant failed to explain the nature of services rendered or provide evidence of work done for the commission claimed. Due to the lack of evidence, the disallowance was found justified, and the ground raised by the assessee was rejected.

4. Disallowance of Rs. 23,442/- out of Telephone Expenses:

The CIT(A) sustained the disallowance of Rs. 23,442/- for non-business use of telephone expenses. The Tribunal upheld this decision, agreeing that reasonable estimates for disallowances are permissible. The ground raised by the assessee was rejected.

Conclusion:

The appeal was partly allowed. The addition of Rs. 4,63,960/- was deleted due to procedural lapses and the precedence of documentary evidence. However, the disallowances of Rs. 16,549/- for repair and maintenance, Rs. 42,000/- for commission expenses, and Rs. 23,442/- for telephone expenses were upheld.

Order Pronounced:

The order was pronounced in the open court on 29/05/2013.