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Facts
The assessee appealed against the CIT(A)'s order for AY 2015-16, challenging disallowance of Rs. 31,17,973/- under section 40A(3) for cash expenditure, a 20% ad-hoc disallowance of Rs. 23,57,144/- on salaries, wages, and electricity expenses, and an addition of Rs. 22 lakhs under section 68 for unexplained cash credits. The assessment order was passed under section 143(3) of the Income-tax Act, 1961.
Held
For the section 40A(3) disallowance, the Tribunal remanded the matter to the Assessing Officer for fresh verification regarding the threshold limit for goods carriage payments. For the 20% ad-hoc disallowance of salaries, wages, and electricity, it was restricted to an estimated 5%. The section 68 addition for unexplained cash credits was also remanded to the Assessing Officer for fresh adjudication, with the onus on the assessee to provide proof.
Key Issues
Disallowance of cash expenditure under section 40A(3); ad-hoc disallowance of salaries, wages, and electricity expenses under section 37(1); and addition of unexplained cash credits under section 68.
Sections Cited
143(3), 40A(3), 37(1), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI M. BALAGANESH
This assessee’s appeal for assessment year 2015-16 is directed against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”], Ghaziabad’s order dated 31.05.2019 passed in case no. 376785631280118, involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
We advert to the first and foremost issue between the parties wherein the assessee’s case is that the learned lower authorities have erred in law and on facts in invoking section 40A(3) cash expenditure disallowance of Rs. 31,17,973/- in the course of assessment dated 28.12.2017, as upheld in the lower appellate discussion.
Learned counsel’s sole substantive argument before us is that once the payments herein are made for plying/hiring or leasing goods carriage, admittedly, pre-revise the threshold limit of Rs.35,000/- which has nowhere been considered in the Assessing Officer’s tabulation to this effect at page 2 in para 4 of the assessment discussion. The Revenue could hardly dispute that the assessee’s instant limited prayer more requires a factual reconciliation than our substantive adjudication once it has chosen not to press for the instant first and foremost substantive ground except to this limited extent. We thus deem it appropriate to direct the learned Assessing Officer to verify all the relevant facts afresh as per law in very terms, subject to a rider that the assessee shall plead and prove its case within three effective opportunities at its his own risk and responsibility in consequential proceedings.
2 | P a g e Ordered Accordingly. This first substantive ground is treated as partly accepted for statistical purposes to the above limited extent.
We come to assessee’s second substantive ground that both the learned lower authorities have erred in law and on facts in invoking 20% disallowance of its salaries, wages and electricity expenses; coming to Rs. 23,57,144/- in question. We find that neither the assessee has been able to plead or prove its corresponding explanation all along thereby satisfying the rigor of section 37(1) of the Act nor the department could pinpoint any specific defect at its behest going by the corresponding entries in the audited books of account. We thus deem it appropriate in these peculiar facts that an estimated ad-hoc disallowance at the rate of 5% herein only would be just and proper subject to a rider that the same shall not been treated as a precedent. Ordered accordingly.
Lastly comes section 68 unexplained cash credits addition of Rs.22 lakhs which allegedly represents assessee’s unsecured loans received from M/s. Shashi Metals Pvt. Ltd. It’s case before us is that it had not availed any such loans as per its books of account from M/s. Shashi Metals Pvt. Ltd. Learned counsel takes us to the assessee’s stand adopted to this effect which has nowhere been 3 | P a g e specifically rejected either in the assessment or in CIT(A)’s detailed discussion. We thus deem it appropriate in these peculiar facts to restore the assessee’s instant last sole issue for afresh adjudication of the learned assessing authority in very terms subject to a rider that it shall be the taxpayer’s risk and responsibility to plead and prove all the relevant facts within three effective consequential proceedings in above terms.
No other ground or argument has been pressed before us.