SHREE VINJHAN JAIN SANGH,MUMBAI vs. INCOME TAX OFFICER, INCOME TAX APPELLATE TRIBUNAL

The only ground raised by the assessee relates to challenging the order of the CIT(A) in upholding the disallowance of expenses made by the AO.

In this regard, I have heard the counsel for both the parties, perused the material placed on record, judgment cited before us and also the order passed by the Revenue Authorities. From the records, I noticed that while filing the return of income, the assessee had claimed certain expenses, but during the course of assessment proceedings, the assessee could not furnish any supporting documents in respect of expenses incurred on religious activities, advertisement expenses, and salaries paid to the employees. Thus, the AO disallowed the expenses incurred by the assessee, which was also confirmed by the Ld. CIT(A).

After having carefully considered the facts, I noticed that out of the total disallowance of expenses of Rs. 3,91,016/-, expenses worth Rs. 3,20,627/-, as per the assessee, were paid through bank, and the balance amount of Rs. 35,889/- was paid in cash. In this regard, a statement showing the same was attached by the assessee during the course of assessment proceedings.

Although, while making the disallowance, the AO mentioned that the genuineness of the vouchers could not be confirmed and that the cash expenses and vouchers submitted appeared fictitious, the important fact still remains that the AO has not considered the fact that the books of account of the trust were audited and the auditors had checked the bank statements. As far as the cash vouchers are concerned, the same were also duly signed and were of smaller value.

The AO has not considered the fact that the trust is operating in a small village of Kutch District in the State of Gujarat, where banking facilities are at quite a far distance. Although this fact was brought to the notice of the AO during the course of assessment proceedings, the said fact was neither verified nor disproved or found to be false by the AO.

The AO has made the disallowance only by holding that the assessee had failed to furnish the bank statement. In this regard, I am of the view that, as per the Income Tax Act, the AO is not only an adjudicator but also an investigator, and the AO had all the powers to get the same investigated and could have himself called for the bank statement from the bank, more particularly when the PAN of the assessee and the name of the bank of the assessee were available with the AO. Moreover, all the accounts of the assessee were duly audited, and the AO has not found any fault in the audited accounts submitted by the assessee. Therefore, in my view, making the disallowance merely by holding that the assessee could not submit the bank statement to verify the cheque payments is not enough.

Thus, considering these facts, I direct the AO to delete the disallowance. Accordingly, the ground raised by the assessee is allowed.

In the result, the appeal filed by the assessee stands allowed.