M/S. LILA TRADING COMPANY,SRI GANGANAGAR vs. ITO, WARD-1, SRIGANGANAGAR

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ITA 71/JODH/2020Status: DisposedITAT Jodhpur08 August 2023AY 2015-164 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The tribunal upheld the disallowance of expenses, stating the assessee failed to produce documentary evidence. However, it directed the deletion of the notional interest addition on the interest-free loan, as there is no provision for such an addition in the Income Tax Act.

What were the facts?

The assessee claimed various expenses, including car, telephone, and shop expenses. The Assessing Officer disallowed 10% of these expenses due to lack of substantiation. The assessee also advanced an interest-free loan to a sister concern, leading to a notional interest addition.

What were the issues?

Whether the disallowance of expenses for lack of substantiation was justified, and whether notional interest can be added on an interest-free loan to a sister concern.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 36(1)(iii),Section 37,Section 234D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR

Before: SHRI PAVAN KUMAR GADALE & DR. DIPAK P. RIPOTE

For Respondent: Ms. Nidhi Nair, JCIT-DR
Hearing: 07.08.2023Pronounced: 08.08.2023

ORDER

PER DR. DIPAK P. RIPOTE, AM:

1.

This is an appeal filed by the Assessee against the order of ld. Commissioner of Income Tax (Appeals), Bikaner dated 31.12.2019 emanating from the order of Income Tax Officer, Ward-1, Sri Ganganagar under section 143(3) of the Act for A.Y. 2015-16. The grounds of appeal

raised by assessee are as under:- “1. In facts and circumstances, Ld. CIT (A) was not justified in sustaining 10% disallowance of Rs.53,220 made out of aggregate claim of Rs.5,32,209 under five heads of expenses on the grounds that some of vouchers were produced and most of the vouchers being self- made verification of possibilities of personal use or their correctness could not be ascertained but the AO did not point out specific instance despite detailed account copies was filed and claim of expenses was reasonable in light of its nature of business having huge commission receipts of Rs.23,66,620.

2. In facts and circumstances, Ld. CIT (A) was not justified in sustaining addition of Rs.1,82,400 as notional income for non- charging of interest on Rs.15.20 Lac given to M/s Govindam Colonizers Pvt. Ltd. and found to be interest free nor it was justified by disallowance of claim for interest u/s 36(1)(iii) or u/s 37 because no interest bearing funds was used this year for such interest-free advance/loan and adequate interest-free creditors worth Rs.1,25,86,893 also were available.

3. Charging of interest U/s 234D is against law & facts.”

Findings & Analysis 4. Heard the Ld. DR and perused the records. None appeared on behalf of the assessee. However, the assessee had filed the paper book on record. Ground No. 1 5. It is observed from the assessment order that the assessee had claimed following expenditures:

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