Tribunals
Summary and Review of Case Laws Decided by Income Tax Appellate Tribunals
Wednesday, 05 August 2015 11:59

Section 69C - Unexplained expenditure deserves to be deleted if explained. Freight Charges - Reasonableness is important Featured

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Gist

  • Freight charges claimed by the assessee are reasonable and thus the adhoc disallowance can not be justified
  • When convincing explanation in respect of major entries in the pocket diary are given the addition of all entries are not justified and will be restricted only to the entries unexplained.

Facts

  1. Assessee is in the business of transport
  2. During search proceedings u/s 132 a pocket diary was also seized
  3. Assessment proceedings completed u/s 153C
  4. AO made additions of all the entries recorded in the pocket diary u/s 69C
  5. AO also made adhoc addition in the freight charges
  6. Assessee took the matter before CIT(A)
  7. CIT(A) observed that there were factual errors and thus called for the remand report
  8. In the remand report AO submitted that several opportunities were given to the assessee and he failed to explain the entries in the pocket diary
  9. Assessee submitted before the CIT(A) that AO has submitted remand report without doing any kind of enquiries and verifications from the appellant
  10. Assessee submitted detailed explanation of every entry in  the pocket diary
  11. The Ld. CIT(A) was convinced that all the figures noted in the pocket diary cannot be treated as unexplained expenditure, particularly when the assessee has given convincing explanation in respect of major entries in the pocket diary
  12. The addition was restricted only to the extent it was not explained
  13. Addition towards freight it was observed by the CIT(A) that the expenses claimed by the assessee is reasonable and adhoc addition without any specific instance of any bogus expenditure is unjustified. The addition was thus deleted.
  14. The Honb. Tribunal agreed with the CIT(A) and dismissed the appeal by the AO

Adjudication

  • For Freight - A perusal of the aforementioned chart clearly shows that the freight charges claimed by the assessee are reasonable. We, therefore decline to interfere with the findings of the Ld. CIT(A). Ground No. 2 is accordingly dismissed.
  • For addition u/s 69C - It is an undisputed fact that the assessee has filed explanation to each and every entry recorded in the alleged pocket diary. The additions made by the AO are mechanical for example on page-10 of the seized diary marked as A-1, there is no transaction of Rs. 52,000/- on 3.8.2006 or otherwise. Thus the addition made by the AO is without any substance. Further, the allegation of the AO that the payments are without any supporting evidence is also not correct, for example payment of Rs. 28,000/- made to Shree Krupa Roadlines is supported by FAPS, which is part of the paper book filed before the Revenue authorities. We have also gone through the remand report of the AO dt. 8.2.2013 which is exhibited at pages 153 and 154 of the paper book. We find force in the contention of the Ld. Counsel that the AO has submitted the remand report without any verification. Considering all these facts in totality and also considering the fact that at the time of search, Rs. 10 lakhs were surrendered in the name of the assessee which has been accepted by the Revenue. Restriction of the impugned addition to Rs. 5 lakhs is justified and therefore we decline to interfere. Ground No. 1 is accordingly dismissed.

 

 

 

 

Additional Info

Read 5433 times Last modified on Saturday, 13 February 2016 16:58
Amit

Amit is a Chartered Accountant and a part of Taxpundit's Support Team. He has experience in various industry sectors including manufacturing, power and utilities, financial services, alternative investments etc. He is a passionate blogger and keep writing articles on Income Tax for various publications.

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1 comment

  • Comment Link shailendra Wednesday, 05 August 2015 12:31 posted by shailendra

    This is a landmark judgement of Bombay Tribunal. This will help lot of people who were facing this issue where the additions were made on account of unexplained expenditure even when the entries were explained to the A.O. The department presumes that everything mentioned and entered other than accounts book are bogus and this decision will make them think again.
    shailendra

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