NAVKAR PETROLEUM,AHMEDABAD vs. THE INCOME TAX OFFICER,WARD-3(2)(3),, AHMEDABAD

This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order 30.09.2022 passed for Assessment Year 2017-18.

The Assessee has taken the following grounds of appeal:-

The brief facts of the case are that the assessee is having a dealership of petrol pump. The assessee filed return of income declaring total income at Rs. 5,31,270/- on 03.11.2017. On verification of Audit Report submitted by assessee, the Assessing Officer observed that assessee had shown unsecured loan of Rs. 2,26,22,046/- in it’s balance sheet. However, the assessee did not submit any contra confirmation, Income Tax Return and bank statement to justify these unsecured loans. In response to show-cause notice issued by the Assessing Officer, the assessee filed it’s reply vide letter dated 09.12.2019, in which he produced copy of ITR, confirmation of parties, bank statement of unsecured loans. However, the Assessing Officer observed that the assessee failed to provide contra confirmation, ITR and bank statement of three parties viz. J D Broker – Rs. 1,89,136/- (alongwith interest paid of Rs. 15,707/-), J D Shroff – Rs. 22,28,360/- (alongwith interest paid of Rs. 2,59,289/-) and Rajeshbhai H. Thakkar – Rs. 26,69,343/- (alongiwth interest of Rs. 3,33,296/-). The assessee stated that these three parties did not provide these details since the documents contained information / these parties do not want to divulge to the Tax Authorities. The Assessing Officer was of the view that the assessee has not been able to discharge the onus to prove the genuineness and creditworthiness of the parties from whom unsecured loan was taken. Accordingly, unsecured loans amounting to Rs. 50,86,389/- were added to the income of the assessee.

The assessee filed appeal before Ld. CIT(A), who dismissed the appeal of the assessee on account of non-appearance with the following observations:

The Counsel for the assessee submitted before us substantial documentary evidences in support of the genuineness of the claim. The Counsel for the assessee submitted that complete details of expenses could not be submitted to the Assessing Officer. The Counsel for the assessee submitted before us a detailed Paper Book containing voluminous supporting documents, in support of the genuineness of aforesaid expenses. With respect to unsecured loans, the Counsel for the assessee submitted that so far as unsecured loan with respect to J B Broker is concerned, the amount was repaid back by the assessee in the succeeding year (Page 93 of the Paper Book). So far as J D Shroff is concerned, the Counsel for the assessee submitted that TDS has been duly deducted by the assessee at the time of interest payment which demonstrates that unsecured loan was not genuine. Further, the Counsel for the assessee also submitted details like PAN card, Aadhar card and also ITR of this party to prove the genuineness of this unsecured loan. Further, with respect to the third party Rajeshbhai H. Thakkar, the Counsel for the assessee submitted that out of a sum of Rs. 26.69 lakhs, a sum of Rs. 7 lakhs has been repaid back to the party (Page 138 of the Paper Book). Further, the Counsel for the assessee also submitted that the assessee had also deducted taxes on the interest amount paid to such party. Accordingly, the assessee submitted that so far as unsecured loans are concerned the assessee has adequate documentation to prove the genuineness of the claim.

With respect to the ground regarding disallowance of bad debts, the Counsel for the assessee drew our attention to Page 145-153 of the Paper Book and submitted that sales amounting to Rs. 17 lakhs approximately were made to Santosh Roadlines in F.Y. 2012-13 (which constitutes a substantial portion of the bad debts written off) and therefore, since substantial sales had been made to this party in the earlier year, the write off of such amount was not bogus as alleged by the Assessing Officer.

With regards to excess claim of expenses made in cash, the Counsel for the assessee submitted a comparative chart of expenses as compared to the previous year and gave a comparison of increase in sales during the impugned assessment year as well as the increase in cash expenses, with a view to support the genuineness of such expenses. The Counsel for the assessee submitted that in this line of business, the assessee was required to make cash payments and hence, the Assessing Officer erred in facts and in light in disallowing the expenses.

In response, Ld. D.R. submitted that assessee was given ample opportunities to submit various documents / details / supporting evidences to prove the genuineness of expenses, but the assessee failed to submit these documents before the Tax Authorities. Secondly, the Ld. D.R. submitted that so far as bad debts are concerned, the bills submitted by the assessee were apparently not genuine and hence the claim cannot be allowed. Further, the Ld. D.R. submitted that the assessee has not furnished any comparative chart to show the reason for increase in expenses during the impugned assessment year. The Ld. D.R. submitted that the entire salary of Rs. 50 lakhs has been paid in cash by the assessee which itself shows that these expenses are not genuine. Further, the Ld. D.R. submitted that even the salary paid to permanent employees was paid in cash and such salary was also paid in installments. Further, the Ld. D.R. submitted that the assessee has also not submitted any comparative chart of cash expenses as compared to the previous year, which also throws a serious shadow of due on the genuineness of such expenses incurred by the assessee in cash, amounting to Rs. 78,57,432/-.

We have heard the rival contentions and perused the material on record. We observe that the Counsel for the assessee has submitted voluminous details and supporting documents to prove the genuineness of expenses in respect of additions which were made by the Assessing Officer. Accordingly, we are of the considered view that the assessee has been able to make out a prima facie case in support of expenses claimed by the assessee in the return of income. The Counsel for the assessee is also submitted a comparative chart, seeking to justify the reason for increase in expenses during the impugned assessment year. Further, we observe that the assessee could not produce these documents either before the Assessing Officer or before the CIT(A) for their consideration. Accordingly, in the interest of justice, the matter directed to be restored to the file of Ld. A.O. for de-novo consideration and with a view to analyze the details of these expenses alongwith supporting documents and thereafter, after taking into consideration the evidences / supporting documents filed by the assessee, pass appropriate orders in accordance with law.

In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 12/08/2024