What did the Tribunal hold?

The Tribunal deleted ad hoc disallowances of expenses due to lack of basis. It also set aside the additions for undisclosed income and capital gains, remanding them to the AO for fresh examination due to the assessee being denied a proper opportunity of being heard.

The assessee challenged several additions made by the AO and confirmed by the CIT(A) for AY 2005-06. These included disallowances of expenses and additions on account of undisclosed income and capital gains.

What were the issues?

Whether ad hoc disallowances of expenses are permissible without proper basis, and whether the assessee was denied a proper opportunity of being heard on issues of undisclosed income and capital gains.

Mr Prithviraj Das, Howrah vs ITO | ITAT Kolkata 2015

This appeal by assessee is arising out of order of CIT(A)-XXXII, Kolkata in Appeal No.240/XXXII/13-14/Wd-54(4)/R&T/Kol dated 28.10.2014. Assessment was framed by ITO, Ward-54(4), Kolkata, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2005-06 vide its order dated 28.12.2007.

At the outset, from the grounds it is noticed that the assessee has challenged the following additions confirmed by CIT(A): “i) On account of Interest of loan Rs. 32,495/- ii) On account of part disallowance of telephone expenses Rs. 1,757/- iii) On account of Advertisement Expenses Rs. 1,700/- iv) On account of part disallowance of stamp and court fees expenses Rs. 2,541/- v) On account of alleged undisclosed source of income Rs.1,28,000/- vi) On account of Long term Capital Gains Rs. 83,136/- Rs.2,49,629/-”

Ld. Counsel for the assessee first of all bifurcated these additions into two parts. First, the disallowance of expenses i.e. interest on loan, telephone expenses, advertisement expenses and part disallowance of stamp and court fee expenses which constitute in total a sum of Rs.38,493/-. Ld. Counsel for the assessee drew my attention to the order of AO wherein without deliberating anything on facts simply the AO has disallowed on ad hoc basis.

I have gone through the assessment order and noticed that there is no basis for this disallowance. Even the CIT(A) has just summarily rejected the claim of the assessee and confirmed the addition. I find that ad hoc addition is not permissible unless and until there is reason. Accordingly, I delete this addition and allow this issue of assessee’s appeal.

Coming to second aspect as argued by Ld. Counsel for the assessee that the addition of undisclosed source of income amounting to Rs.1,28,000/- and long term capital gain at Rs.83,136/-. Ld. Counsel for the assessee stated that neither the AO nor the CIT(A) has allowed 2 Prithviraj Das, AY 2005-06 proper opportunity of being heard to the assessee and accordingly, he requested that let the issue be reexamined by AO afresh. On this, Ld. Sr. DR has not objected to the same.

I have gone through the facts and circumstances of the case and noticed from the orders of the lower authorities that assessee was denied proper opportunity of being heard on the above issues. Accordingly, I set aside these two issues to the file of AO and this issue of assessee’s appeal is allowed for statistical purposes.

In the result, the appeal of assessee is partly allowed for statistical purposes.

Order is pronounced in the open court.

MR PRITHVIRAJ DAS,HOWRAH vs. ITO, WD-54(4), KOLKATA, KOLKATA

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