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2023 (2) TMI 123 - AT - Income TaxDifference in the liabilities as were shown in the Balance Sheet filed by assessee with return of income and the trial balance seized during search operations - HELD THAT - The seized document is recovered from the assessee during search operations carried out by Revenue u/s 132(1) - The presumption u/s 132(4A) and 292C shall apply and contents of the documents viz. seized trial balance shall be presumed to be true and correct ,and it is now for the assessee to rebut the same by cogent evidences/explanations. The presumption u/s 132(4A) and 292C is that the documents belong to the assessee, and the contents of the documents are true and correct. This presumption is rebuttable , but onus is squarely on the assessee. There is a difference in amounts as is reflected in the seized trial balance as on 31.03.2005 and the audited balance sheet as at 31.03.2005. The search was conducted on 27.08.2009, and the documents pertain to year ended 31.03.2005 i.e. 4 years prior to the date of search and there are difference between the balance as shown in the seized document i.e. seized trial balance , and the audited accounts for the year ended 31.03.2005, and it is for assessee to discharge onus to rebut the presumption u/s 132(4A) and 292C by cogent evidences/explanations. The onus is squarely on the assessee to rebut the presumption. In the interest of justice, one more opportunity needs to be granted to the assessee to prove its contentions, so that correct income is brought to tax. We are restoring the matter back to AO for re-adjudication on merits. Bogus expenses - difference between the seized trial balance during search operations and the Expenses as claimed in the audited accounts filed with Return of income - HELD THAT - There is a difference in amounts in the seized trial balance as on 31.03.2005 and the audited Profit and Loss as at 31.03.2005, of the expenses as per chart reproduced above, wherein audited accounts reflected higher expenses by Rs. 15,33,654/- vis- -vis expenses reflected in the seized trial balance. The search was conducted on 27.08.2009, and the documents pertain to year ended 31.03.2005 i.e. 4 years prior to the date of search and there are difference in the expense as shown in the seized document i.e.trial balance and the audited accounts for the year ended 31.03.2005, and it is for assessee to discharge onus to rebut the presumption u/s 132(4A) and 292C by cogent evidences/explanations. The onus is squarely on the assessee to rebut the presumption. We are restoring the matter back to the file of AO for re-adjudication on merits in accordance with law, after giving proper and adequate opportunity of being heard to the assessee. We clarify that we have not commented on the merits of the issue. Payments were made in cash by assessee without having cash balance in the cash book - HELD THAT - The search was conducted on 27.08.2009, and the seized documents being cash book pertain to year ended 31.03.2005 i.e. 4 years prior to the date of search and there are no cash balances or negative cash balances found in the cash book on a particular day, and still the assessee made cash payments, and it is for assessee to discharge onus to rebut the presumption u/s 132(4A) and 292C by cogent evidences/explanations which assessee fails to substantiate and the explanation of making entries of receipts from customer on the wrong dates is merely to come out of tax liability. The onus was squarely on the assessee to rebut the presumption, which assessee fails to do so. Thus, we hold that payments were made towards unexplained expenditure of which sources for making such payment could not be explained by the assessee, and the same is held to be made out of undisclosed income of the assessee. Thus, this ground of appeal is decided against the assessee. Addition @5% of the expenses claimed to have been incurred by the assessee under the head sale promotion expenses, telephone expenses, travelling expenses , freight, expenses conveyance expenses and vehicle running and maintenance expenses - HELD THAT - As it is equally true that no specific identification of the expenses which need to be disallowed keeping in view failure of the assessee to satisfy the mandate of the provisions of the 1961 Act , was pointed out by both ld. CIT(A) as well the AO, and disallowance was done on estimation on the grounds that cash expenses based on self made vouchers were incurred and claimed as deduction, which could not be verified. On the part of the assessee, was also the failure to furnish the complete details and to discharge onus cast on the assessee. In our considered view, in the interest of justice, one more opportunity is to be given to the assessee , as well to the AO for examination and verification of these expenses as these evidences were so far not produced before the AO, for its examination on merits by the AO. We are restoring the matter back to the file of AO for re-adjudication on merits. TDS u/s 194C - Assessee has claimed to have debited Marketing expenses AND payments were made to distributors for pushing up the sales - AO observed that payments were made under contract and no income tax was deducted at source on such payments - HELD THAT - Regarding contentions of the assessee for applicability of ratio of judgment and order of Hon ble Supreme Court in the case of Hindustan Coca Cola Beverages Private Limited. 2007 (8) TMI 12 - SUPREME COURT we are remitting the matter back to the file of AO for limited purposes to apply ratio of Hon ble Supreme Court in toto, for which the onus is entirely on the assessee to prove with cogent evidence that the payee s have duly included the said respective amounts paid by the assessee in their return of income and paid due taxes to Revenue. With these directions , for limited purposes as indicated above, we are remitting the matter back to the file of AO. This issue is allowed for statistical purposes, in the manner as indicated above. We order accordingly.
Issues Involved:
1. Legality of assessment orders under Section 153A and Section 132 of the Income Tax Act. 2. Validity of additions based on differences in creditors for goods. 3. Allegations of bogus expenses and their disallowance. 4. Additions based on unexplained expenditures. 5. Disallowance of expenses on a percentage basis. 6. Applicability of Section 40(a)(ia) read with Section 194C for marketing expenses. 7. Chargeability of interest under Sections 234A, 234B, and 234C. Detailed Analysis: 1. Legality of Assessment Orders under Section 153A and Section 132: The assessee contested the assessment orders dated 28.12.2011 under Section 153A(b) and the actions under Section 132 of the Income Tax Act, arguing they were illegal and without jurisdiction. However, the assessee chose not to pursue these grounds during the tribunal hearing, and thus, these grounds were dismissed as not being pressed. 2. Validity of Additions Based on Differences in Creditors for Goods: The AO made an addition of Rs. 27,76,936 based on differences in liabilities shown in the balance sheet and the seized trial balance. The CIT(A) reduced this addition to Rs. 5,07,352. The tribunal noted that the difference arose mainly due to the treatment of VAT/sales tax in the books of the assessee and Bhola Foods Private Limited. The tribunal restored the matter to the AO for verification, emphasizing the need for the assessee to rebut the presumption under Sections 132(4A) and 292C by providing cogent evidence. 3. Allegations of Bogus Expenses and Their Disallowance: The AO disallowed Rs. 15,33,654 of expenses, claiming they were bogus due to differences between the seized trial balance and the audited accounts. The CIT(A) upheld this disallowance. The tribunal restored the matter to the AO for verification, noting that the seized trial balance pertained to the Kanpur branch and did not include transactions from the head office. The tribunal emphasized the need for the assessee to provide evidence to rebut the presumption under Sections 132(4A) and 292C. 4. Additions Based on Unexplained Expenditures: The AO added Rs. 1,86,513 as unexplained expenditure, noting that cash payments were made without sufficient cash balance in the cash book. The CIT(A) upheld this addition. The tribunal found no merit in the assessee's contention that errors in recording cash receipts led to these discrepancies and upheld the addition, emphasizing the presumption under Sections 132(4A) and 292C. 5. Disallowance of Expenses on a Percentage Basis: The AO disallowed 10% of certain expenses, which the CIT(A) reduced to 5%. The tribunal restored the matter to the AO for verification, noting that the assessee failed to provide complete details to substantiate the expenses. The tribunal emphasized the need for the assessee to satisfy the mandate of Section 37(1) and other applicable provisions. 6. Applicability of Section 40(a)(ia) Read with Section 194C for Marketing Expenses: The AO disallowed Rs. 12,63,138 of marketing expenses for failure to deduct TDS, which the CIT(A) reduced to Rs. 3,98,526. The tribunal upheld the applicability of Section 194C and remitted the matter back to the AO to apply the ratio of the Supreme Court's decision in Hindustan Coca Cola Beverage Private Limited v. CIT, allowing the assessee to prove that the payees included these amounts in their returns and paid taxes. 7. Chargeability of Interest under Sections 234A, 234B, and 234C: The tribunal noted that the chargeability of interest under Sections 234A, 234B, and 234C is consequential and dismissed the ground, referencing the Supreme Court's decisions in CIT v. Anjum S Ghaswala, CIT v. Bhagat Construction Company Limited, and Kalyankumar Ray v. CIT. Conclusion: The tribunal partly allowed the appeals for statistical purposes, remitting several issues back to the AO for verification and fresh adjudication, while upholding certain additions and dismissing others as not being pressed.
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