2015 (9) TMI 1230 - AT - Income Tax

Addition towards disallowance of expenses for earning the commission receipts - Held that - The assessee has not placed necessary evidence for support of the claim. Whenever the assessee incurs any expenditure, it is the duty of the assessee to prove that expenditure was incurred wholly and exclusively for the purpose of business and also the assessee shall produce relevant evidence for the same. Since, the assessee has not produced required evidence, the lower authorities are justified in disallowing the claim of the assessee. - Decided against assessee. Addition towards investment in Spny Stones Pvt. made out of income and savings - Held that - The assessee has pleaded that the amount was contributed from own capital and reserve and surplus. However, the assessee has not filed a copy of the balance sheet for my consideration. Hence, not in a position to appreciate the argument of the assessee counsel. Accordingly, this issue is remitted back to the file of the Assessing Officer for fresh consideration with a direction to the assessee to file the balance sheet as on 31.03.2007 before the Assessing Officer explaining the investment and the Assessing Officer would decide the issue afresh. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Disallowance of expenses towards earning commission receipts.
2. Addition towards investment in a private company.

Issue 1: Disallowance of expenses towards earning commission receipts:

The appellant contested the disallowance of expenses amounting to C42,188 for earning commission receipts of C1,29,450. The Assessing Officer found the expenses were not incurred for the purpose of earning income and made the addition. The appellant failed to provide sufficient evidence to support the claim. The Commissioner of Income Tax (Appeals) upheld the decision, stating that the appellant did not prove the expenses were wholly and exclusively for business purposes. The appellant's argument that expenses were related to booking orders for other fireworks factories was deemed insufficient as no evidence was presented. The Commissioner referred to legal precedents emphasizing the burden on the assessee to prove business expenditure. The Tribunal dismissed the appellant's ground due to lack of evidence supporting the claim.

Issue 2: Addition towards investment in a private company:

The appellant invested C8 lakhs as share capital and C5 lakhs as advances in a private company. The Assessing Officer examined the sources of investment and found discrepancies in the explanation provided by the appellant. The Commissioner of Income Tax (Appeals) upheld the addition of C3 lakhs as unexplained investment due to lack of evidence supporting the sources of funds. The appellant claimed the amount was from own capital and reserves but failed to provide a balance sheet for verification. The Tribunal remitted the issue back to the Assessing Officer for fresh consideration, directing the appellant to submit the necessary balance sheet for clarification. This ground of the appellant was partly allowed for statistical purposes.

In conclusion, the appeal by the assessee was partly allowed for statistical purposes. The Tribunal's decision highlighted the importance of substantiating expenses claimed for business purposes and providing clear evidence of the sources of investments to avoid additions to the total income.