2023 (6) TMI 266 - AT - Income Tax

Disallowance of expenses of diesel charges and loading unloading charges - as argued these expenses are properly supported by bills and vouchers and such expenses are allowed in earlier years - HELD THAT - Assessee has made a statement before the lower authority that these expenses are incurred during the course of business and considering the nature of the business of the assessee, he could not substantiate the said expenses with supporting evidences. AO has disallowed the expenses from the first day of financial year to the date of survey for the reason that the expenses have been subsequently booked post the date of survey but the expenses for the rest of the year have been allowed by the AO. We re unable to appreciate the view taken by the Assessing Officer that no expenses / the expenses incurred from first day of financial year to the date of survey are bogus when the expenses of similar nature that are booked post the date of survey are genuine and allowable according. Assessee is doing regular business throughout the year and there cannot a situation where no expenses are incurred from the first of the financial year till the date of search - Thus expenses booked by the assessee upto the date of survey cannot be treated as bogus only for the reason that the same are accounted in the books of account subsequent to the date of search - delete the disallowances made by assessee - Decided in favour of the assessee.

Summary

Issues involved:
The issues in this case involve the disallowance of expenses of diesel charges and loading unloading charges amounting to Rs.19,35,558, and the disallowance of expenses without appreciating the genuineness of the expenses supported by bills and vouchers.

Issue 1: Disallowance of expenses of diesel charges and loading unloading charges - Rs.19,35,558/-
The appellant, an individual and proprietor of two businesses, faced a discrepancy in cash balance during a survey under section 133A. The Assessing Officer observed a change in cash in hand as shown in the cash book found during the survey, resulting in the claiming of expenses in the financial year 2017-18 which were booked after the date of the survey. The Assessing Officer disallowed Rs.19,35,558/- as expenses, contending they were not genuine, despite the appellant's submission of vouchers and explanations. The Commissioner of Income-tax (Appeals) upheld this disallowance, citing the delay in producing vouchers and deficiencies in the submitted vouchers. However, the tribunal found that the expenses were in line with previous and subsequent years, and the nature of the business justified the lack of proper invoices for expenses like transportation and office charges. The tribunal concluded that the expenses booked up to the date of the survey were genuine and not to be treated as non-genuine due to timing delays, thus allowing the appeal.

Issue 2: Disallowance of expenses without appreciating genuineness
The Assessing Officer disallowed the claimed expenses as not genuine and made an addition under section 41(1) for certain creditors. The Commissioner of Income-tax (Appeals) sustained the addition towards expenses, emphasizing the importance of producing vouchers during the survey and pointing out defects in the vouchers submitted later. The tribunal, however, noted that the expenses were consistent with previous years, and the lack of immediate voucher production did not invalidate their genuineness. The tribunal found the expenses up to the date of the survey to be genuine, considering the nature of the business and the regular incurring of expenses throughout the year. Consequently, the disallowance made by the Assessing Officer was deleted, and the appeal was allowed in favor of the assessee.