Income Tax Appellate Tribunal

Alang Metal Exim Pvt. Limited. Vs. ACIT

MANU/IB/0242/2024

19.06.2024

Direct Taxation

Ad-hoc disallowance cannot be made in absence of any specific defect or irregularity

Present appeal is filed by the Assessee against the order passed by the Learned Commissioner of Income Tax (Appeals), in confirming the addition of Rs.7,00,00,000 under Section 68 of the Income Tax Act, 1961 and disallowance of Rs.3,30,000 out of loading and unloading charges made by the Assessing Officer ("AO") in his assessment order passed under Section 143(3) of the Act for the Assessment Year (AY) 2012-13.

The assessee has duly discharged the initial burden of proving the identity, genuineness, and creditworthiness of the share applicants by furnishing the necessary documentary evidence. The AO and the Learned CIT(A) did not make any adverse comments in the remand report regarding this evidence. Suspicion, however strong, cannot replace evidence, and the Learned CIT(A) should not have confirmed the addition merely based on suspicion. He was required to conduct the detailed inquiry and pass a reasoned order. The learned CIT(A) in his order has relied on some judicial pronouncements which are required to be distinguished on the basis of additional evidence produced by the assessee before the Learned CIT(A).

In the case of Tin Box Company vs. CIT, the Hon'ble Supreme Court has held that when the appellate authority has not decided the case on merits and additional evidence is submitted, the matter should be remanded back to the appellate authority for reconsideration.

Regarding the disallowance of loading and unloading Charges, the expenses were part of the duly audited books of accounts with no defects pointed out by the auditor. Neither the AO nor the Learned CIT(A) identified any specific defect in the claim of these expenses.

The ad-hoc disallowance is not justified in the absence of any specific defect or irregularity. Therefore, the disallowance of Rs.3,30,000 out of loading and unloading charges is deleted. Hence,

The matter restored back to the file of the Learned CIT(A) with a direction to decide the matter afresh on the basis of additional evidence submitted by the assessee. The Learned CIT(A) is directed to provide a fair opportunity of being heard to the assessee and to pass a reasoned order considering all the evidences on record. Appeal of the assessee partly allowed.

Tags : Assessment Addition Legality

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