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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
O R D E R
Per Kuldip Singh, Judicial Member:
The appellant, Shri Gurudut Rajdev Mishra (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 01.04.2021 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] on the grounds inter alia that:
“I. NO PROPER AND EFFECTIVE OPPORTUNITY OF BEING HEARD:
1.1 The learned Commissioner of Income - tax (Appeals) - 41, Mumbai ["the Id. CIT (A)") erred in confirming the assessment order passed by the Assessing Officer ["the A.O."] in breach of the principles of natural justice, in as much as no sufficient, proper and effective opportunity of being heard was given to the Appellant.
1.2 It is submitted that in the fact and circumstance of the case and in law, the action of the Id. CIT (A) was bad and illegal.
II. ADDITION OF RS.8,91,160/- BEING SUNDRY CREDITORS:
2.1 The CIT(A) erred in confirming the addition of Rs.8,91,160/- being/the Sundry Creditors outstanding at the end of the year without any reason and sufficient cause.
2. While confirming the addition, the CIT(A) erred in acting on surmises, suspicion and conjecture while ignoring relevant considerations like Ledger A/c, subsequent payment made to the creditors through cheques, thus, totally ignoring and by-passing the cogent evidences brought on record by the Appellant.
2.3 The CIT(A) failed to appreciate that the A.O. while issuing the notice u/s. 133(6) of the Income tax Act, 1961 to the sundry creditors had treated the purchase transactions as loan transactions.
A DISALLOWANCE OF RS.47,213/- BEING 10% OUT OF THE TOTAL EXPENSES OF RS.4,72,134/-.
3.1 The CIT(A) erred in confirming the ad hoc disallowance of Rs.47,213/-being 10% of Conveyance/Vehicle Expenses, Welfare Expenses, General Expenses and Business Promotion Expenses aggregating to Rs.4,72,134/- on the ground that the same has been incurred in cash.
3.2 The Id. CIT(A) failed to appreciate that some amount of the above mentioned expenses had to be incurred in cash as they were very small amounts and they have been incurred wholly and exclusively for the purpose of the Appellant's business.
3.3 It is submitted that in the facts and circumstances of the case and in law, no such disallowance is called for.
3.4 Without further prejudice to the above, it is submitted that the ad hoc disallowance of expenses is arbitrary and excessive and needs to be scaled down.
IV.DISALLOWANCE OF RS. 8,05.899/- BEING THE SALARIES PAID TO EMPLOYEES. 4.1 The CIT(A) erred in confirming the disallowance of Rs.8,05,899/- being the payment of salaries to employees u/s. 40A(3) of the Income tax Act, 1961 on the ground that the same has been paid in cash. The CIT(A) failed to appreciate that the Appellant had submitted employee-wise details like name, address and amount paid along with the copy of the ledger account. 4.3 While confirming the disallowance the CIT(A) erred in ignoring relevant material and considerations as submitted by the Appellant. The appellant craves for, leaves to add, alter or vary any of the ground or grounds of appeal set out hereinabove.”
2. Briefly stated facts necessary for adjudication of the controversy at hand are : assessee derives income from trading of textile business being run as proprietorship concern M/s. Arav Enterprises. During the scrutiny proceedings Assessing Officer (AO) noticed that there is an entry of sundry creditor in the balance sheet to the tune of Rs.8,91,160/-. To verify the genuineness of the transactions notice under section 133(6) of the Income Tax Act, 1961 (for short ‘the Act’) was issued to the concerned person which was returned by the postal authority with remarks ‘unserved’ except a notice sent to Navnath Leather amounting to Rs.23,100/-. Assessee was called upon to produce aforesaid parties, but on his failure to discharge the onus AO added back an amount of Rs.8,91,160/- to the total income of the assessee as unexplained credit. AO also disallowed Rs.47,213/- being 10% of the conveyance/vehicle expenses, welfare expenses, general expenses and business promotion expenses of Rs.4,72,134/-. AO also made /M/2021 4 Shri Gurudut Rajdev Mishra disallowance of Rs.8,05,899/- being the salary paid to the employee as the assessee has failed to furnish the detail of the person to whom salary was paid. AO consequently, framed the assessment at the total income of Rs.22,64,380/- under section 143(3) of the Act.
3. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has upheld the disallowance/addition made by the AO by dismissing the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A), the assessee has come up before the Tribunal by way of filing present appeal.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Ld. A.R. for the assessee challenging the impugned order contended inter alia that the assessee has furnished party-wise detail of sundry creditors, now available at page 1 to 3 of the paper book, party-wise ledger account of sundry creditors available at page 4 to 19, copy of bank statement available at page 20 to 32; that assessee has also furnished ledger account of salary available at page 33 to 37 and ledger account of conveyance expenses available at page 38 to 43 but all these documents have not been examined by the AO and requested that one opportunity may be granted to the assessee to examine all these documents by the AO.
Bare perusal of the order passed by the AO and Ld. CIT(A) it has come on record that issues involved have been decided by /M/2021 5 Shri Gurudut Rajdev Mishra returning generic findings and documents have not been examined in entirety. So far as adhoc disallowance of conveyance/vehicle expense, welfare expenses etc. of Rs.47,213/- being 10% of the total expenses is concerned, no basis has been given by the AO or the Ld. CIT(A) as to how these expenses are being disallowed. When the AO has accepted the accounts book of the assessee adhoc disallowance on estimation basis is not sustainable, hence ordered to be deleted.
So in view of what has been discussed above, two issues viz. addition of Rs.8,91,160/- by way of unexplained creditors and issue as to making payment of the salary in cash to the employee by the assessee to the tune of Rs.8,05,899/-, are remitted back to the AO to decide afresh by considering all the documents brought on record by the assessee and by providing opportunity of being heard to the assessee. Consequently, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 31.05.2022.