MEASAGE WORLD VISION,SRINAGAR vs. INCOME TAX OFFICER WARD-3, SRINAGAR

ORDER Per:Anikesh Banerjee, JM:

The instant appeal of the assessee is directed against the order of the ld. Commissioner of Income Tax(Appeals)-1, Amritsar, [in brevity the CIT(A)] bearing appeal No.100/2016-17, date of order 22.03.2019, the order passed u/s 250(6) of the Income Tax Act 1961, [in brevity the Act] for A.Y. 2013-14.The impugned order was emanated from the order of the ld. Income Tax Officer,Ward- 3(3), Srinagar, (in brevity the AO) order passed u/s 143(3) of the Act date of order 25.03.2016. The assessee raised the following ground which are reproduced as under: “01) That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) has not been justified in retaining and upholding an addition of Rs. 158,518/- + Rs. 32,949/-( aggregating to Rs, 191,467/-). The addition, so retained and upheld is unjustified, unwarranted and bad in law and may kindly be deleted.

02) That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) has not been justified in retaining and upholding the addition of Rs. 596,500/- which represents the income received by the partners and deposited in their personal accounts. The income, so received by the firm from the partners on account of their agricultural income and added back by the Ld. A.O. and retained by the Ld. CIT (Appeals) is unjustified, unwarranted and bad in law and may kindly be deleted.

03) The assessee appellant reserves the right to add, withdraw, amend or alter the grounds of Appeal, before it is heard and disposed of by the Hon’ble ITAT.”

&the addition was made related to the payment of interest related to loan for purchase of asset and payment of the insurance of the same asset. As per the ld. AO the disallowance was called for the said asset was not put to use during claiming of expenses benefit. So, the 25% of the interest of loan related to this asset amount to Rs.1,58,518/- u/s 36(iii) and the insurance premium amount to Rs.32,949/- u/s 30 were added back with the total income of the assessee. The assessee claimed the documentation charges related to processing of bank loan.

The 100% of the documentation charges or Rs.95,000/- was added back with the total income of the assessee. The assessee claimed agricultural income Rs.5,96,500/- &directly added with the capital account of the assessee. But as per the ld. AO the assessee had no agricultural land so the entire income is unjust for &the addition was made u/s 68 of the Act with the total income of the assessee.

Being aggrieved, the assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) upheld the order of the ld. AO.

against loan can be entertained. Moreover no supporting evidence from the bank was furnished.

The AO disallowed 20% of trade expenses as the explanation furnished by the assessee that this expense represents loading, unloading, carriage forward, packing, winter expenses is not supported by any evidence. Decision- In the assessment proceedings the appellant has not produced any vouchers of expenses in respect of expenses claimed under heads printing and stationery, vehicle running and maintenance, travelling and air ticket, shop repairs, and trade expenses therefore disallowance of 10% of the expenditure claimed under these heads is justified and upheld. The disallowance out of trade expenses at 20% of trade expenditure for want of vouchers is considered excessive and reduced to 10% of the trade expenses claimed. As regards disallowance of 100% of documentation charges, AO disallowed 100% of documentation charges on the ground that amount is paid to the bank for obtaining secured loan. However, this is wrong as secured loan is carried forward from the preceding assessment years hence no fresh charges against loan can be entertained. Moreover, no supporting evidence from the bank was furnished. I agree with the above reasoning of the AO and accordingly the disallowance of Rs.95,000/- or 100% of documentation charges is confirmed.”

Related to disallowance ofdocumentation charges of bank loan was assessed @100% or Rs. 95,000/-. But the said charge was paid for the bank loan which was utilized for the business for purchase of machinery. In case of agricultural income which was added back u/s 68 was duly explained by the assessee as per his submission. But the relevant partnership deed and the accounts of the firm was not placed before the ITAT. We set aside the matter to the ld. CIT(A) for further adjudication of the issues raised by the assessee. Needless to say, that assessee should get a reasonable opportunity for hearing and the documents which will be filed by the assessee should be accepted and considered by the ld. CIT(A) during the hearing proceeding.

Order pronounced in the open court on 29.09.2022