| The Tax Publishers2020 TaxPub(DT) 2089 (Del-Trib) INCOME TAX ACT, 1961
Section 69C
Considering the nature of business of assessee i.e. trading in fabric estimate made by AO of Rs. 10 lakhs towards unexplained expenses was wholly unjustified that AO on the mere reasoning that assessee had only claimed audit fee expenses. However, in view of the fact that assessee had not claimed any expenditure of routine business expenses, electricity expenses, fuel expenses which are necessary for running of business addition was restricted to Rs. 3 lakhs as against Rs. 10 lakhs made by AO.
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Income from undisclosed sources - Addition under section 69C - Unexplained expenses - Assessee engaged in trading of fabric claimed no routine expenses
Assessee was engaged in trading of Fabric. AO noticed that as per profit and loss account assessee achieved sales of Rs. 9,37,98,738 against which purchases have been made at Rs. 9,37,50,576. Fixed assets schedule of assessee showed value of fixed assets at Rs. 1.41 crores as on 31-3-2012 which included plant and machinery added during the year at Rs. 12,94,658. The fixed assets include furniture & Fixtures, computer, vehicles, Copier machine, Plant & Machinery and Air Conditioners etc. But assessee in P & L a/c had claimed expenses of Rs. 22,472 on audit fee only and no other expense have been claimed in P & L A/c. AO took the view that it was not understood as to how assessee was running a business without incurring expenses necessary in a normal course of business. The assessee was showing huge list of fixed assets, but, no electricity charges had been claimed by assessee. Also, several vehicles were in business, but no fuel/maintenance expenses had been claimed. No staff expenses had been paid. In the absence of any explanation and non-production of books of account, AO made addition of Rs. 10 lakhs on account of unexplained expenditure under section 69C. Held: Considering the nature of business of assessee and that no evidence had been brought on record by AO of incurring alleged expenses, estimate made by AO of Rs. 10 lakhs expenditure was wholly unjustified. Further, it is a fact that assessee had not claimed any expenditure of routine business expenses, electricity expenses, fuel expenses which are necessary for running of business. Therefore, considering the totality of facts and circumstances of case, addition was restricted to Rs. 3 lakhs as against Rs. 10 lakhs made by AO further, AO was directed to allow depreciation to assessee being statuary deduction in nature.
REFERRED :
FAVOUR : Partly in assessee's favour.
A.Y. : 2012-13
INCOME TAX ACT, 1961
Section 68
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