If Assesse has not discharged the charge under Section 68 of the Income Tax Act, there is no escape from tax liability: ITAT


Assesse failed to meet the burden of proof - Section 68 - Income Tax Act - Tax Obligations - ITAT - Taxscan

The Income Tax Appeals Authority (ITAT) has ruled that if the assessee has not discharged the burden under Section 68 of the Act, there is no loophole for the assessed clutches of section 68 of the Act.

The appellant, M/s Anandtex international (P) Ltd is a company and filed the tax return for the tax year 2013-14 declaring income of Rs. 4,37,43,060/-. Assessment under Section 143(3) of the Income Tax Act 1961 was completed by adding Rs. 3.96 crores under Section 68 of the Act, Rs. 6 Lakhs due to denial of labor charges, loading and unloading charges, repair and maintenance of missionaries, etc., Rs. 19, 29, 050/-due to denial of festival, telephone, travel and sales promotion expenses and a sum of Rs. 7, 94, 315/- due to disallowance of repair and maintenance expenses. The assessee appealed to the CIT(A) challenging the four additions but the CIT(A), by contested order, upheld all the additions and dismissed the assessee’s appeal. Therefore, the assessee appealed to ITAT.

When the case was called, neither the assessee nor any authorized representative appeared. It was submitted by DR, Ms. Kirti Sankratyayan, that when the scholar AO found it necessary to verify things beyond the scope of the papers, it is the responsibility of the appraisee to cooperate with the scholar appraiser to dispel doubts, that the circumstances evoked in the mind of the scholar AO.

The orders of the authorities below reveal that the assessee failed to comply with the requirements of the learned appraiser in the satisfaction training exercise as to the creditworthiness of the plaintiffs of actions or the genuineness of the transaction. The assessee’s mere paperwork gets the authorities nowhere, as the scholar AO suspected the existence of the entities in question and insisted that a higher degree of proof was required in this regard.

The Coram of Judicial Member Sri K.Narasimha Chary relied on the decision of the Honorable High Jurisdictional Court and the Honorable Supreme Court in the case of NDR Promoters Pvt. ltd. (above) and the Supreme Court decision in the case of NRA Iron and Steel (P) Ltd (supra) ruled that “we are of the opinion that the action of the learned appraiser was legal and that the non-production of the persons summoned had rightly led to the inference that the appraised had funneled his own money into the books of account by the intermediary of investment companies. On this premise, we agree with the authorities below and confirm the addition made under section 68 of the Act”.

Coming to the addition of Rs. 6 Lakhs, it was done by the learned appraising officer by making a certain portion of labor charges, loading and unloading charges and repair and maintenance charges of the missionary, according to the learned evaluator

Officer, these payments were made in cash and the invoices were not properly justified and therefore these expenses remained unverifiable. Precisely for this reason, CIT(A) has also confirmed the same. The ITAT estimated that “We have no reason before us to adopt a different point of view. We therefore see no reason to interfere with the conclusions of the CIT (A)”.

The next disputed addition is for Rs. 1.19, 29, 050/- towards the denial of 1/8th part of the expenses covered by car expenses, transport, festival expenses, telephone expenses, travel expenses and sales promotion costs. On this aspect, AO noted that the car logs and full phone call details were not produced by the assessee and according to the assessee it is not possible to produce them because the vehicles are almost under the direct control of management. CIT(A) noted that the explanation provided by the assessee was only superficial and that logbooks are kept as a general rule in any business, regardless of size. On this aspect also, no submission is forthcoming from the side of the evaluated to take a different position. Therefore, ITAT does not propose to interfere with the findings of CIT(A) in the contested order.

Finally the addition of Rs. 7, 94, 315/-, it is the rejection of part of the expenses under the title repair and maintenance on the grounds that the invoices relating to the sums paid in cash were not duly justified . CIT(A) noted that the assessee sought shelter from the fact that some vendors do not keep printed invoices and expenses are justified internally. According to the CIT (A) in the absence of any unavailability of the expenditure, the refusal of a part of it is justifiable.

It was ruled by the ITAT that “In the absence of any element or reason before us to take a contrary position. We refuse to interfere with the same. Accordingly, the assessee’s appeal is dismissed.

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Anandtex international P.Ltd against ACIT, circle, Panipat

Counsel for the Respondent: Ms. Kirti Sankratyayan

CITATION: 2022 TAXSCAN (ITAT) 210

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