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Facts
The assessee, engaged in trading of metal scrap, declared business income and claimed an expenditure of Rs. 3,43,450/- made through credit card. The Assessing Officer (AO) disallowed the entire credit card payment, making an addition of Rs. 7,09,500/-. The assessee failed to appear before the CIT(A) for the ex-parte proceedings, which dismissed the appeal.
Held
The Tribunal held that the AO disallowed credit card payments based on SFT information and that the assessee had provided credit card statements. The disallowance exceeding the total credit card payments made by the assessee was directed to be deleted. A disallowance of 25% of the total credit card payments was deemed appropriate on account of personal expenditure.
Key Issues
Whether the disallowance of credit card expenditure is justified and if so, to what extent, considering the assessee's claim of business expenditure and the AO's reliance on SFT information.
Sections Cited
44AD, 147, 148, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “SMC”, DELHI
(A.Y.2017-18) Gurpreet Singh, 20, Bharat Nagar, Near Ashok Vihar, Delhi 110052 ...... अपीलाथ�/Appellant PAN: AQJPS-0193-D बनाम Vs. Income Tax Officer, Ward-61(4), .... �ितवादी/Respondent Civic Centre, Minto Road, Delhi 110002 अपीलाथ� �ारा/ Appellant by : S/Shri Mukesh Jain & Samyak Jain, Chartered Accountants �ितवादी�ारा/Respondent by : Shri Manoj Kumar, Sr. DR सुनवाई क� ितिथ/ Date of hearing : 19/05/2025 घोषणा क� ितिथ/ Date of pronouncement : : 23/05/2025 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against an ex-parte order of Commissioner of Income Tax (Appeals)/Additional/Joint Commissioner of Income Tax (Appeals)-2, Chandigarh (hereinafter referred to as 'the CIT(A)') dated 26.12.2024, for assessment year 2017-18.
Shri Mukesh Jain, appearing on behalf of the assessee narrating facts of the case submits that the assessee is engaged in the business of trading of metal scrap under the name & style of M/s. India Metal Traders. The assessee declared his business income u/s. 44AD of the Act Income Tax Act,1961 (hereinafter referred to (AY 2017-18) as ‘the Act’) Rs.3,57,708/- and income from other sources Rs.2,37,477/-. The assessee had claimed expenditure of Rs.3,43,450/- made through credit card. The Assessing Officer (AO) made disallowance of credit card bills payment. Although the total expenditure during the relevant period was Rs.3,43,450/-, the AO made disallowance of Rs.7,09,500/-. During assessment proceedings the assessee had submitted credit card statements and had explained that cash paid towards credit card bills was out of cash available from the business income. He further submitted that payment made through credit card was for the purpose of business only.
Per contra, Shri Manoj Kumar representing the department vehemently defended the impugned order. The ld. DR submitted that assessee has failed to show that the expenditure made through credit card is relation to the business of assessee. The ld. DR thus prayed for upholding the order of CIT(A)/assessment order and dismissing appeal of the assessee.
Both sides heard, orders of the authorities below examined. The AO disallowed assessee's claim of expenditure with respect to cash payments towards credit card bills. The AO observed that the assessee could not furnish credit card statements but only produced credit card bills totaling to Rs.3,43,450/-. Therefore, in the absence of credit card statement it could not be ascertained whether the expenditure was incurred for the business or on personal account. Thus, the AO made addition of Rs.7,09,500/-. The assessee carried the issue in appeal before the CIT(A). The assessee failed to respond to the notices issued by CIT(A). The CIT(A), in ex-parte proceedings dismissed appeal of the assessee. Since, the assessee had filed return of income declaring business income u/s. 44AD of the Act there was no requirement for the assessee to maintain books of account. The nature of (AY 2017-18) expenditure could very well be ascertained from credit card statements for the relevant assessment year.
A perusal of the assessment order reveals that the AO has made disallowance of Rs.7,09,500/- on the basis of SFT information, whereas as per the assessee, he had made total payments of Rs.3,43,450/- in respect of credit cards during Financial Year 2017-18. Except for SFT information, there is reference to no other material by the AO. On the contrary, the ld. Counsel has placed on record monthly statements of credit cards used by the assessee. Therefore, disallowance if at all, could not be more than the aggregates of total payments made by assessee in respect of credit cards, used by the assessee. Therefore, disallowance in excess of Rs.3,43,450/- is directed to be deleted.
Further, the possibility of some expenditure through credit cards on personal account cannot be ruled out. Considering entire facts of the case, I am of the view that disallowance of 25% of the total credit card bill payment Rs.3,43,450/- on account of personal expenditure would meet the ends of justice.