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Income Tax Appellate Tribunal, “SMC - B” BENCH : BANGALORE
Before: SHRI VIJAY PAL RAO
O R D E R Per Vijay Pal Rao, Judicial Member These two appeals by the assessee are directed against two separate orders of CIT(A) both dated 08.09.2016 for the assessment years 2007-08 and 2008-09. The assessee has raised the common grounds in these appeals except the difference of quantum of addition / disallowance. The grounds raised for the assessment year 2007-08 are reproduced as under.
Ground nos. 1 to 3 as well as additional grounds are regarding validity of reassessment. At the time of hearing the ld. AR of the assessee has stated at bar that the assessee does not press ground nos. 1 to 3 and additional grounds and the same may be dismissed as not pressed. The ld. DR has raised no objection in ground nos. 1 to 3 are dismissed as not pressed. Accordingly, ground nos. 1 to 3 as well as additional grounds of the assessee’s appeal are dismissed being not pressed. & 25/Bang/2017 Page 5 of 12 3. Ground no. 4 is general in nature and does not require any specific adjudication.
Ground no. 5 is regarding the addition made by the AO of Rs. 24,320/- on account of horticulture income. The Assessing Officer while completing the assessment has made an addition of Rs. 24,320/- on estimated basis as income from M/s. Indian Horticulture Consultancy. The assessee challenged the action of the AO before the CIT(A) but could not succeed.
I have heard the ld. AR as well as the ld. DR and considered the relevant material on record. The AO has not discussed in the assessment order either any facts or material as to how this income of Rs. 4 Lakhs was estimated by the AO as against the income declared by the assessee at Rs. 3,75,680/-. It is pertinent to note that except the one sentence in the computation of income the AO has not given any reason or discussed any surrounding circumstances which had led to him to estimate and enhance the income by Rs. 24,320/-. In the absence of any adverse or incriminating evidence or facts detected by the AO to support this addition, the action of the AO is arbitrary and unjustified. Accordingly this addition of Rs. 24,320/- is deleted. & 25/Bang/2017 Page 6 of 12 6. Ground no. 6 is regarding the addition in respect of the income from Kalyana Mahal. The AO has estimated the income from Kalyana Mahal at Rs. 44,164/- and further enhanced the income at estimated basis to Rs. 50,000/- and thereafter the AO has made an addition by clubbing the two amounts i.e. Rs. 44,164/- + Rs. 50,000/-. The assessee challenged the action of the AO before the CIT(A) but could not succeed.
Before the Tribunal, the ld. AR has submitted that the AO has passed a cryptic arbitrary order without discussing anything and thereby made an addition of Rs. 94,164/- to the income of the assessee on estimate basis. Thus he has contented that in the absence of any material to support such estimation of income the addition made by the AO is not justified. On the other hand, the ld. DR has relied upon the order of the authorities below and submitted that the case was discussed with the AR of the assessee and thereafter the AO estimated the income of the assessee.
Having considered the rival submissions as well as relevant material on record it is noted that the assessment order is a non-speaking order wherein the AO has just given the amounts of addition in the final computation of income without discussing any material or fact. It is manifest from the assessment order that the assessment was framed by & 25/Bang/2017 Page 7 of 12 the AO in a cryptic manner and the addition in question was mere an estimation of the AO without any basis. It is also not discussed by the AO as what is the basis of such estimation of income of the assessee. Thus in view of the facts and circumstances of the case, where the AO has not brought on record any fact or material to justify his action of estimation of income, the addition made by the AO is not sustainable and the same is deleted.
Ground nos. 7 & 8 regarding disallowance of expenditure to the extent of Rs. 3 Lakhs. The AO has made disallowance of Rs. 3 Lakhs on account of expenditure claim in the Profit & Loss Account in the absence of vouchers. The assessee challenged the action of the AO before the CIT(A) but could not succeed.
Before the Tribunal, the ld. AR of the assessee has submitted that the disallowance of this amount has been made by the AO on adhoc basis without discussing the reasons and only one word has been mentioned as reason of disallowance. The AO has not pointed out any particular item of expenditure for which the assessee has not produced the vouchers. He has referred to the notice issued by the AO asking the details for the assessment year 2008-09 and submitted that the assessee has duly replied & 25/Bang/2017 Page 8 of 12 the said notice by giving all the details as required by the AO. Thus, the ld. AR has submitted that the AO has made a disallowance in arbitrary manner without even affording an opportunity to the assessee. Hence, the ld. AR has submitted that the disallowance made by the AO is not sustainable and the same may be deleted.
On the other hand, the ld. DR has submitted that the assessee did not produce the vouchers in respect of the expenditure booked in the Profit & Loss account. Therefore there is failure on the part of the assessee to discharge its onus of proving the claim of expenditure. He has relied upon the orders of the authorities below.
Having considered the rival submissions as well as relevant material on record it is noted that the AO has passed the assessment order dated 28.03.2012 u/s. 143(3) r.w.s. 147 which is a non-speaking order. It is appropriate to reproduce the assessment order as under.
As it is clear from the assessment order that the AO has not conducted any enquiry or investigation but has completed the assessment in a & 25/Bang/2017 Page 11 of 12 summary manner which is a highly arbitrary and cryptic in nature.
Except the one sentence written by the AO regarding the disallowance of expenditure as “in the absence of voucher” the AO has even not discussed the nature of expenditure and the enquiry conducted by the AO before making such disallowance. It is also pertinent to note that in response to the notice u/s. 148 the assessee submitted that the original return filed by the assessee on 05.02.2009 may be treated as return filed in response to notice u/s.
148. Therefore, there is no relevancy of the delay in filing the original return when it was filed prior to the notice issued u/s. 148 and the assessee has duly stated that the said return may be treated as return filed in response to the notice u/s.
Therefore, the observation of the AO that the return was filed belatedly is not at all relevant in framing the assessment u/s. 143(3) r.w.s.
The AO has even not mentioned that the assessee was asked to submit the vouchers and further which off the expenditure booked in the Profit & Loss account was doubted by the AO.
Thus it is apparent from the assessment order that the AO has acted in highly arbitrary manner and without conducting the necessary enquiry and investigation. Therefore, the disallowance made by the AO is not sustainable in law and accordingly deleted. & 25/Bang/2017 Page 12 of 12 14. For the assessment year 2008-09, identical additions were made by the AO. Therefore in view the finding of these issues for the assessment year 2007-08, the additions / disallowances made by the AO are deleted. As regards the issue of validity of reassessment, the assessee has not pressed these grounds for the assessment year 2008-09 also. Accordingly, the same are dismissed being not pressed.
In the result the appeals of the assessee are partly allowed.
Pronounced in the open court on this 24th day of March, 2017