2016 (12) TMI 1422 - AT - Income Tax

Disallowance of expenditure - paper companies who owned no physical assets - Held that - In the facts of the present case, it can be at best considered to be a written statement of facts voluntarily made by an affiance or deponent under an oath or affirmation administered by a person authorized to do so by law. Since the affidavits filed in the present case are at the instance of the tax payer and not mandated under any law, the Assessing Officer in order to highlight the serious consequences which may follow a false affidavit or statement under oath referring to sections 191, 193, 195, 199 of the India Penal Code which makes filing a false affidavit a criminal offence, may require the assessee in its own self interest to ensure that the deponents are aware that filing of false affidavits has serious consequences. The claim of any fact or knowledge known to the deponent to be false which he believe to be false and/or atleast did not know to be true is open to the challenge of perjury which though traditionally may not be invoked by the law enforcement agencies in every situation does not mean that it is legally acceptable to file irresponsible affidavits. Assertion of false facts knowingly is a criminal offence. Accordingly considering the submissions of the parties, the issue is set aside and restored back to the AO permitting the assessee for filing fresh evidences on support of the claim. - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of salary expenses claimed by the assessee.
2. Failure to provide reasonable opportunity to the appellant.
3. Consideration of fresh evidences by the CIT(A).

Issue 1: The AO disallowed the salary expenses claimed by the assessee, amounting to ?23,98,000, as the assessee could not produce supporting documents. The AO held the company to be a paper company without physical assets. The CIT(A) confirmed the addition, stating that no evidence was produced to substantiate the expenses. The CIT(A) dismissed the appeal, considering the company as a dummy concern and confirming the disallowance of salary expenses.

Issue 2: The appellant argued that the CIT(A) did not allow adjournment when key details were unavailable due to Mr. Tarun Goyal's absence. The appellant claimed that the evidences, including employee affidavits and PAN cards, were crucial and sought time to present them. The CIT(A) dismissed the appeal, stating that no new facts were presented despite various opportunities given to the appellant.

Issue 3: The appellate tribunal considered the submission of fresh evidences crucial for the case. The tribunal admitted the evidences in the interest of justice but restored them to the AO for further examination. The tribunal highlighted the necessity to establish the business activities of the company through independent third-party evidence and directed the AO to pass a speaking order after considering the new evidences provided by the appellant.

In conclusion, the appellate tribunal allowed the appeal of the assessee for statistical purposes, setting aside the issue and restoring it back to the AO for a fresh assessment based on the new evidences presented by the appellant.