Shri Mehul Prakash Mehta Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that expenses booked upto the date of survey cannot be treated as bogus only for the reason that the expenses were accounted in the books of account subsequent to the date of search.
Facts- On perusal of cash book, AO noticed that the assessee had claimed Rs.19,35,558/- as expenses pertaining to the period upto the date of survey which were not recorded in the cash book found during the course of survey and the same have been booked and thereafter in the cash book produced during the assessment proceedings.
The assessee submitted that the cash book was not updated as on the date of survey though the assessee had incurred expenses from the first date of the financial year upto the date of survey and that post the survey, the assessee had updated the cash book. The assessee also submitted that these are genuine expenses incurred by the assessee during the course of business in relation to mainly transportation expenses, petrol charges and other office related expenses. The assessee also produced vouchers with regard to these expenses.
AO did not accept the submissions of the assessee and made an addition of Rs.19,35,558/- towards the expenses booked in the cash book upto the date of survey treating the expenses as not genuine and that the evidences produced in the form of vouchers could not be accepted.
Aggrieved, the assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) sustained the addition made towards expenses.
Conclusion- The assessee is doing regular business throughout the year and there cannot a situation where no expenses are incurred from the first of the financial year till the date of search. Considering the details submitted and the nature of business of the assessee, in our considered view, the expenses booked by the assessee upto the date of survey cannot be treated as bogus only for the reason that the same are accounted in the books of account subsequent to the date of search. We, therefore, delete the disallowance made by the Assessing Officer and allow the appeal in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is against the order of the Commissioner of Income-tax (Appeals)-51, Mumbai dated 28/12/2022 for the assessment year 2019-20. The assessee raised the following grounds of appeal:-
1. On facts and circumstances of the case and in law Ld.CIT(A) erred in confirming Disallowance of expenses of diesel charges and loading unloading charges – Rs.19,35,558/-
2. On facts and circumstances of the case and in law Ld.CIT(A) erred in confirming Disallowance of expenses of Rs.19,35,558/- without appreciating the fact that these expenses are properly supported by bills and vouchers and such expenses are allowed in earlier years and also after date of survey and were in conformity of gross profit rate of business of earlier years and subsequent year and trade practice in assessee’s line of business.”
3. The assessee is an individual, filed the return of income for A.Y. 2019-20 on 09/10/2020 declaring an income of Rs.14,76,240/-. The return was processed under section 143(1) of the Income-tax act, 1961 (in short, ‘the Act’). The assessee is proprietor of M/s Tirupati Enterprises and M/s Tradein Logistics. There was a survey under section 133A that was carried out in the business premises of the assessee on 27/09/2018. During the course of survey proceedings, on examination of cash book maintained by the assessee, discrepancies were noticed in the cash in hand as per books as on 27/09/2018 and the physical cash available with the assessee. The cash balance as per cash book as on the date of survey was as under:
