2017 (11) TMI 998 - AT - Income Tax

Allowable business expenses - non furnishing of the primary details at any stage of proceedings and infirmities in the documents that were produced at the appellate stage, created a reasonable doubt as to the authenticity of the provision and the expenditure - Held that - Assessee failed to plead before us any reasons for their inability in securing such evidence at least by now in support of their contentions. All these facts put together, do not inspire any confidence in our mind to believe that when the goods were delivered for a sum of ₹ 20,49,100/-, the assessee does not know the probable value thereof and went on to create the provision for a sum of ₹ 51 lakhs, could not secure the primary evidence even in respect of the expenditure that was booked, and unable to explain why the balance provision for ₹ 30,50,900/- had to be created. All these things show that at the end of the relevant financial year the assessee did not have even the faintest idea as to the probable expenditure that may have to be paid for which the provision has to be created. We, therefore, find that the plea taken by the assessee does not seem to be believable ex facie, as such. With this view of the things, we do not propose to interfere with the findings of the Ld. CIT (A) while dismissing the appeal. We, therefore, find the appeal devoid of merits and accordingly, the same is liable to be dismissed. Appeal of the assessee is dismissed.

Summary

Issues:
1. Disallowance of expenses incurred for business.
2. Rejection of expenses based on invoices and lack of details.

Issue 1: Disallowance of expenses incurred for business:
The assessee appealed against the addition of ?51,00,000 made by the AO, claiming it as expenses for business. The AO disallowed the expenses due to lack of response from the assessee regarding the clarification sought. The Ld. CIT (A) upheld the disallowance of ?51 lakhs and dismissed the appeal. The AR argued that the expenses were provisioned for a project that spanned multiple years and countries, with delayed billing and expenses matching revenue. However, the Ld. CIT (A) dismissed the appeal citing lack of details and justification for expenses, leading to the dismissal of the appeal by the ITAT.

Issue 2: Rejection of expenses based on invoices and lack of details:
The Ld. CIT (A) rejected expenses of ?20,49,100 covered by invoices from Tridonic Atco and Nesma Trading Company due to discrepancies in delivery timelines and lack of proof of business relationship. Additionally, expenses of ?30,50,900 were disallowed as the assessee failed to provide details. The ITAT concurred with the Ld. CIT (A) that the delay in securing invoices and lack of supporting documentation raised doubts on the authenticity of the expenses. The ITAT found the explanations provided by the assessee unconvincing and upheld the decision to dismiss the appeal, emphasizing the importance of providing verifiable evidence for expenses claimed.

In conclusion, the ITAT upheld the disallowance of expenses and dismissed the appeal, emphasizing the necessity of providing detailed and verifiable evidence to support business expenses claimed during assessment proceedings.