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2020 (12) TMI 1036 - AT - Income TaxUnverified purchases from related parties - verification of the fixed assets added during the year under consideration - HELD THAT:- Books of accounts and bills/vouchers were not produced before either the Assessing Officer or the Ld. CIT(A). The assessee has only produced Tax Auditor Report in Form No. 3CD which contains a list of the items of fixed asset added during the year alongwith the amount, that too in respect of Visicoolers and bolltes only. Before us, also the assessee has only referred to few sample copies of the invoices for purchase of the fixed assets and no complete invoices have been produced. In absence of bills/invoices or vouchers for the purchase of the fixed assets, purchase of those assets cannot be verified. For proper verification, it is required that each entry of fixed assets added need to be seen along with the relevant bill/invoice of purchase, installation, delivery note etc. In absence of any such details produced before us, we are not in position to verify purchase of the fixed assets - we feel it appropriate to restore this issue to the file of the Assessing Officer for examining and verifying in view of our observation above. Disallowance of operating expenses @ 10% - HELD THAT:- Without pointing out any such defect in the books of account or vouchers relating to operating expenses, the action of the Assessing Officer in disallowing 10% of the expenses on ad-hoc basis by way of following earlier years and simply mentioning that expenses being of unverified, unreasonable and excessive, is not justified. The action of the Ld. CIT(A) in simply upholding the finding of the Assessing Officer following the finding of his predecessor in earlier years, without noticing the change in facts and circumstances in the year under consideration, is also not justified. In view of the above discussion, we are of the opinion that without pointing out any defects in the bills and vouchers of operating expenses, the ad-hoc disallowance at the rate of the 10% out of the operating expenses cannot be sustained. We also note that in assessment year 2007-08, the Assessing Officer while verifying the operating expenses in compliance to the direction of the Tribunal, has not made any disallowance and accepted the claim of the assessee of the operating expenses. Accordingly, the ground of the appeal of the assessee is allowed.
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