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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘SMC’, LUCKNOW
Before: SHRI T. S. KAPOOR
This appeal has been filed by the assessee against the order of learned CIT(A)-I, Kanpur dated 09/05/2017 pertaining to assessment year 2014-15. In this appeal the assessee has raised the following grounds:
“1. That the Ld.CIT(A) has erred in confirming the addition of Rs.3,73,215/- u/s 41(1) of IT Act, 1961.
That the Ld.CIT(A) has erred in confirming the ad-hoc disallowance of Rs.40,796/- out of various expenses.
That the Ld.CIT(A) has erred in confirming the ad-hoc disallowance of Rs.15,638/- on account of freight outward expenses.
That the adhoc disallowance made by the AO and confirmed by the Ld.CIT(A) are highly excessive.
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That the Ld.CIT(A) has erred in not providing proper and adequate opportunity to the appellant.”
At the outset, Learned A. R. submitted that during the course of assessment proceedings, the assessee was required to file confirmed copy of account of creditors, which he had filed. However, the Assessing Officer observed that creditor amounting to Rs.3,73,215/-, in the form of 30 creditors, were not confirmed by the creditors and therefore, the Assessing Officer treated the same as bogus liability and made the addition. In this respect, Learned A. R. submitted that all the creditors were running creditors and in this respect invited our attention to pages 50 to 79 of the paper book where the copy of accounts of such creditors were placed and where there were transactions in many of the accounts during the current year also. It was submitted that the Assessing Officer, without any basis, made the addition u/s 41(1) of the Act, which is not justified specifically in view of the fact that copy of account of creditors were filed and the payments to these creditors were made in the succeeding years also and in this respect, Learned A. R. filed a chart showing the names of such creditors and payments made to them in succeeding year and therefore, it was prayed that the addition sustained by learned CIT(A) was not justified.
2.1 Arguing the other grounds, Learned A. R. submitted that the Assessing Officer had made additions on account of ad hoc disallowance without rejection of books of account, which is not justified in view of various decisions of Tribunal. Specific reliance was placed on the order of Lucknow Bench of the Tribunal in the case of Bajaj Auto Centre in I.T.A. No.722/Lkw/2017, where vide order dated 19/09/2018, the Tribunal had deleted the ad hoc disallowance. Therefore, it was prayed that the disallowance sustained by learned CIT(A) be deleted.
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Learned D. R., on the other hand, relied on the orders of the authorities below and submitted that the first addition was confirmed by learned CIT(A) as the assessee had not pressed this ground of appeal before him. As regards the second addition, Learned D. R. submitted that the assessee was asked to produce books of account and vouchers for verification by learned CIT(A) which the assessee did not submit and therefore, the learned CIT(A) has dismissed this ground also as not pressed. Therefore, it was argued that at this stage the assessee cannot argue these grounds.
We have heard the rival parties and have gone through the material placed on record. We find that as regards the first issue, the Assessing Officer has made the addition u/s 41(1) of the Act without considering the creditors accounts, placed at pages 50 to 79 of the paper book. The analysis of the creditors accounts demonstrate that in majority of the accounts, the transactions were done during the year though they were opening balance also. Learned A. R. also filed a chart showing that the payments to these creditors were made in the succeeding year. Therefore, we deem it appropriate to remit this issue back to the file of the Assessing Officer who should decide the issue afresh after keeping in view the payments made by the assessee to these creditors in the succeeding years.
4.1 As regards the issue of ad hoc disallowance, I find that though the Assessing Officer cannot make such ad hoc addition without rejecting the books of account or without pin pointing any specific defect in the books of account or vouchers, but in view of specific findings of learned CIT(A) that assessee had not filed books of account or vouchers for verification, I deem it appropriate to remit this issue back to the file of the Assessing Officer, who should decide the issue of disallowance of expenses keeping in view
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the facts and circumstances and the judicial precedents in this respect. Needless to say, the assessee will be provided proper and sufficient opportunity of being heard.
In the result, the appeal of the assessee stands allowed for statistical purposes.
(Order pronounced in the open court on 17/05/2019)
Sd/. ( T. S. KAPOOR ) Accountant Member Dated:17/05/2019 *Singh
Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow