×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal by the assessee is directed against the order dated 14-08-2017 of ld. CIT(A), Ajmer for the Assessment Year 2013-14. The assessee has raised the following grounds:
‘’1. The ld. CIT(A) has erred on fats and in law in confirming the trading addition of Rs. 73,49,533/- by disallowing 25% of construction expenses of s 2,93,98,132/-.
2. The ld. CIT(A) has erred on facts and in law in disallowing Rs. 27,692/- being 20% of total indirect expenses of Rs. 1,38,490/-.
3. The ld. CIT(A) has erred on facts and in law in confirming the addition of Rs. 9 lacs u/s 68 of IT Act by incorrectly holding that assessee has failed to satisfactorily explain the nature and source of the credit.’’
2.1 The Ground No 1 is regarding trading addition made by the AO by disallowing 25% of construction expenses.
2.2 The assessee is engaged in the business of real estate and construction work. The assessee filed its return of income for the year under consideration declaring total income of Rs.4,93,870/-. The case was selected for scrutiny through CASS. The AO issued notices u/s 143(2) as well as u/s 142(1) of the Act. However, there was no compliance by the assessee despite the notices were served upon the assessee. Finally the AO issued show cause notice dated 29-02-2016 asking as to why selling prices of flats/shops/apartments may not be taken at prevailing market prices and further purchase and direct expenses should not be disallowed at 10% of the total claim for want of supporting vouchers. In response the assessee filed its reply dated 10-03-2016. The AO again asked the
assessee to produce the books of account including the Journal, Stock Register, Purchase and sale vouchers of all the expenses debited to the Profit & Loss Account. Since the assessee did not produce the books of account and supporting vouchers for the expenses, the AO invoked the provisions of Section 143 of the Act and rejected the book results. The AO the made disallowance @ 25% of the construction and direct purchase expenses amounting to Rs. 73,49,533/-.
2.3 The assessee challenged the action of the AO before the ld. CIT(A) who has restricted the disallowance to 10% of the total expenses as against 25% made by the AO.
2.4 Before us, the ld.AR of the assessee has submitted that the assessee is maintaining the complete books of account which are subject to audit u/s 44AB of the Act. The ld.AR further submitted that in the course of assessment proceeding, the assessee could not produce the books of account as the same were misplaced but in support of the claim of expenses, the ledger account of various expenses were filed before the AO. In the ledger account, the details of the expenses alongwith bill nos., names of the suppliers from whom purchases were made are duly recorded. Entries in the books of account are duly supported by bills and vouchers which were verified by the auditor. Thus the disallowance made by the AO and sustained by the ld. CIT(A) on account of purchase and direct expenses is unjustified and uncalled for. Alternatively, the ld.AR of the assessee has submitted that once the AO has invoked the provision of Section 145(3) of the Act then assessment ought to have been framed as per the provision of Section 144 of the Act for making best judgement assessment. The AO instead of framing the assessment by estimating the income has made disallowance of expenditure which is not permissible. Even in the case of best judgement assessment, the AO cannot act arbitrarily for which he is bound by judicial principles and assessment should be guided by rules of justice after taking into account all the materials available as well as gathered by the AO. The ld.AR of the assessee relied on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs K.N. Construction Co. (2015) 371 ITR 325.
2.5 On the other hand, the ld. DR has submitted that the assessee has not produced even the books of account before the AO but only ledger accounts were produced in support of the claim. Therefore, the claim of the assessee could not be verified from any supporting evidence. Hence,