DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-SHILLONG, SHILLONG vs. DHAR CONSTRUCTION COMPANY, SHILLONG

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ITA 39/GTY/2024Status: DisposedITAT Guwahati22 January 2025AY 2018-19Bench: SRI MANOMOHAN DAS, JUDICIAL MEMBER & SRI RAKESH MISHRA (Accountant Member)10 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while Section 69C might not be the most appropriate provision, the disallowance was partly justified as primary evidence for the expenditure was not produced. Therefore, 10% of the disallowed amount was sustained as an addition.

What were the facts?

The Assessing Officer (AO) disallowed an expenditure of Rs. 2,97,16,776/- under Section 69C as unexplained, primarily because the assessee failed to provide supporting bills for payments made to non-filers. The CIT(A) deleted this addition, stating the AO did not properly consider the assessee's submissions.

What were the issues?

Whether the disallowance of expenditure made to non-filers without sufficient supporting evidence is justified, and if so, under which section of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 69C,Section 143(3),Section 144B,Section 194C,Section 142(1),Section 133(6),Section 37(1)

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Income Tax Appellate Tribunal, GUWAHATI BENCH AT KOLKATA

Before: SRI MANOMOHAN DAS & SRI RAKESH MISHRA

order

: January 22nd, 2025 ORDER

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

1.

This appeal filed by the Revenue is against the order of the Ld. Commissioner of Income Tax-NFAC, Delhi [hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2018-19 dated 10.01.2024, which has been passed against the assessment order u/s 143(3)/144B of the Act, dated 10.09.2021.

4.1 Appeal Notices were issued to the assessee on 28.07.2022, 15.12.2023 fixing the case for 12.08.2022, 29.12.2023. The assessee has filed written submission on 03.08.2022 and 02.01.2024.

4.2 The main issue in all the grounds taken by the assessee is that the Learned Income Tax Officer has erred on the law as well as on the fact of the case in disallowing expenditures of Rs. 2,97,16,776 considering the same as bogus expenditure.

4.3 I have gone through the assessment order and record available. The scrutiny assessment under the E-assessment Scheme, 2019 for the assessment year 2018- 19 for M/s. Dhar Construction Company under the Computer-Assisted Scrutiny Selection (CASS) for the assessment year 2018-19 was completed with addition u/s 69C. The identified issues for scrutiny included the verification of the genuineness of expenses, refund claims, contract receipts or fees, and share capital/other capital. The case was selected due to large payments made to individuals under section 194C, who had not filed their income tax returns. The tax authorities sought details such as ledger information, names, PANs, and current addresses of these individuals. The assessee did not provide a satisfactory response to the initial notices and reminders regarding large payments made to individuals. Further notices were issued under section 142(1) to which the assessee responded, providing a list with PAN numbers, names, and TDS deductions. However, detailed confirmations, ledgers, bank statements, and ITR copies were not provided. Notices under section 133(6) were issued to a sample of individuals to verify the genuineness of expenses. Some individuals responded with the required details, while others did not. Payments made to certain individuals were considered bogus, and the AO added back these amounts to the income under section 69C of the Income Tax Act. Section 69C allows the deemed income of the assessee if there is no satisfactory explanation about the source of expenditure. Payments made to non-filers were identified, and the assessee was given the onus to prove the genuineness of these transactions. The assessee did not respond to the notice, and these expenditures were considered bogus, resulting in additional additions under section 69C. The assessee provided responses to the show cause notice, citing the pandemic's impact on individuals and emphasizing the deduction of TDS on payments. However, bills supporting the transactions were not provided, making it difficult to verify the genuineness of the expenses. The AO proceeded with the proposed additions under section 69C, resulting in a total assessed income of Rs. 4,01,29,666/- 4.4 The assessee has provided comprehensive explanation in form of written submission for the payments made towards business expenses. It is essential to Page 3 of 10

4.

Aggrieved with the order of the Ld. CIT(A), the revenue has filed the appeal before the Tribunal.

5.

Rival contentions were heard and the record and the submissions made have been examined. The Ld. AR stated before the Bench that with regard to the contention of the Ld. AO that the bills with respect to the expenditure were not produced for verification and without bills it is difficult to verify the claim made by the assessee, it was submitted that neither in the Show cause notice along with the draft assessment order nor in the subsequent notices has the Ld. AO asked for the bills or discussed the non-submission of bills. He made an addition in the final assessment order mentioning that the addition is made as no bills were produced for verification which is wholly in contradiction to the Page 4 of 10 Page 5 of 10 Page 8 of 10 Copy of the order forwarded to:

1. 1. Deputy Commissioner of Income Tax, Circle-Shillong.

2. Dhar Construction Company, Demseiniong, Maccabe Roads, Shillong, Meghalaya, 793003.

3. CIT(A)-NFAC, Delhi.

4. CIT- 5. CIT(DR), Guwahati Benches, Guwahati.

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