2022 (7) TMI 1015 - AT - Income Tax

Disallowance of expenditure - assessee has not produced any supporting evidences for the expenditure debited in the P L account - HELD THAT - The assessee has admitted total sales which is not possible without incurring expenditure. The contention of the assessee is that the entire extent of land is about 30 acres and it is difficult to develop the entire land in one financial year. Therefore, the assessee developed certain portion of land and sold the plots. After completion of sale of certain plots, the assessee developed some plots and sold them. We are of the view that the AO is not correct in disallowing the entire expenditure. The Ld.CIT(A) has considered all these aspects and directed the AO to make disallowance of Rs.5,00,000/- due to deficiency of bills and vouchers by comparing the A.Y.2012-13. Therefore, we do not find any infirmity in the order passed by the Ld.CIT(A). So far as the violation of 46A is concerned, CIT(A) has categorically mentioned in the order that he has gone through the bills and vouchers which were submitted by the assessee for verification. CIT(A) has found that most of the vouchers were defaced and torn out due to HudHud cyclone, therefore, no useful purpose would be served by sending these bills and vouchers for verification of AO. Hence he has not called for remand report and the Ld.CIT(A) has examined the disallowances made by the AO for the A.Y.2012-13 and disallowed an amount - Therefore, we are of the view that there is no force in the arguments of the DR. Hence the grounds raised are dismissed.

Summary

Issues:
1. Disallowance of expenses claimed by the assessee for the Assessment Year 2014-15.
2. Discrepancy in expenditure disallowed by the Assessing Officer.
3. Consideration of vouchers damaged due to HudHud cyclone.
4. Application of Rule 46A of the IT Rules for verification of bills and vouchers.

Issue 1: The appeal filed by the revenue challenges the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of expenses claimed by the assessee for the Assessment Year 2014-15. The revenue contended that the assessee failed to produce supporting evidence for the expenditure debited in the Profit & Loss account.

Issue 2: The Assessing Officer disallowed a significant portion of the claimed expenditure, totaling Rs. 3,87,57,374, based on reasons such as the duration of business operations, artificial inflation of expenses, and lack of real expenditure in the final years. The Commissioner of Income Tax (Appeals) partly allowed the appeal of the assessee, leading to the revenue's appeal before the Tribunal.

Issue 3: The assessee faced challenges in providing intact vouchers and bills due to damage caused by the HudHud cyclone. The Commissioner of Income Tax (Appeals) acknowledged this issue and concluded that sending the damaged vouchers for verification by the Assessing Officer would not serve any useful purpose.

Issue 4: The revenue raised concerns about the application of Rule 46A of the IT Rules, arguing that bills and vouchers were not produced before the Assessing Officer during the assessment proceedings but were submitted only during the appellate proceedings. However, the Commissioner of Income Tax (Appeals) examined the vouchers and bills submitted by the assessee and made a decision based on the available evidence.

The Tribunal, after hearing both parties and examining the facts presented, upheld the decision of the Commissioner of Income Tax (Appeals). The Tribunal found that the Assessing Officer's disallowance of the entire expenditure was not justified, considering the nature of the business and the difficulty in developing the entire land in one financial year. The Tribunal also noted that the Commissioner of Income Tax (Appeals) had appropriately considered the circumstances and directed a reasonable disallowance of Rs. 5,00,000 due to deficiencies in bills and vouchers. The Tribunal dismissed the arguments raised by the revenue and upheld the order of the Commissioner of Income Tax (Appeals). The cross objections filed by the assessee were also dismissed as the appeal of the revenue was rejected.