No disallowance warranted if books of accounts could not be produced due to genuine reasons
There are various instances wherein assessee could not produce the books of accounts or bills, voucher before the assessing officer due to various unavoidable circumstances or situation. Non production results in disallowance or addition by the assessing officer in such cases.
Here is one important judgment in favour of the assessee wherein the addition was deleted by the ITAT. It was in the case of ITAT Hyderabad in the case of ITO Vs Richmond Vivek Laboratories P Ltd wherein it was held as under
- CIT (A) has erred in in deleting the impugned misc. expenditure disallowance of Rs.1,92,38,312/- despite the fact that the assessee had failed to prove the same by way of filing cogent supportive evidence before the Assessing Officer.
- There is no dispute qua the clinching fact that the assessee’s books had been duly audited and its Annual Report was also available. And that the Assessing Officer had disallowed assessee’s entire expenses in drug manufacturing business thereby enhancing its profit to the maximum level.
- The assessee has already explained the reason of non-production of audited books of account to the fact that there was a tenancy dispute culminating in locked up premises in the corresponding span of time.
- We therefore find no reason to revive the impugned disallowance going by the Revenue’s pleadings. Its sole grievance failed accordingly.
The copy of the judgment is as under:
ITO Vs Richmond Vivek Laboratories P Ltd
ITAT Hyderabad
[ITA No.1509/Hyd/2019 vide order Dated 09/04/2021]
This Revenue’s appeal for AY.2014-15 arises from the CIT(A)-3, Hyderabad’s order dated 22.07.2019 passed in appeal ITA No.0633/ITO-3(2)/Hyd/CIT(A)-3/2016-17 in proceedings u/s143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused. None appeared at the assessee’s behest. It is accordingly proceeded ex-parte.
2. The Revenue’s sole substantive ground pleaded in the instant appeal seeks to reverse the CIT (A)’s action deleting disallowance/addition of Rs.1,92,38,312/-on account of expenditure incurred vide following detailed discussion:-
“3. The contents of the remand report of the AO, i.e. the Income Tax Officer, Ward-3(3), Hyderabad, and the forwarding report of the Add.CIT, Range- 3, Hyderabad and the submissions of the appellant have been duly perused. It is surprising that in a tax audit case. where the Annual Report of the appellant company is available on record, the Assessing Officer had disallowed the entire expenditure claimed by the appellant on the ground of non production of substantiating evidences. It is a well established fact that in any business there cannot be income without expenditure. It is noted that the appellant expressed his inability of production of bills and vouchers as due to non-payment of rent to the owner of the appellant’s business premises and hence the appellant was not allowed to enter into its own business premises by the owner of business premises. This was brought to note in the remand proceedings as can be seen from the remand report and it was also brought to note during the course of appellate proceedings by the Authorized Representative of the appellant Company. It was also noticed during the appellate proceedings that the appellant was locked out of its own business premise by the land owners of the business premises and that the appellant submitted the reasons for non-furnishing of evidences was beyond the control of the appellant and there were compelling reasons due to which the appellant could not Produce the bills and vouchers. However, the appellant submitted that the books of the appellant Company were audited Under the provisions of Section 44AB of Income Tax Act, 1961 and that the annual report for F. Y.20 13- 14(A. Y.20 14- 15) was also available. Considering the facts and circumstances and that there is reasonable or sufficient cause on Part of the appellant Company, it is justified and reasonable to disallow the appellant’s claim of loss arrive at Rs.38,507/- in the return of income in the absence of proper justification for its claim of expenditure. It is also noted that in the computation of total income, the appellant had disallowed a sum of Rs.5,20,228/_towards non deduction of TDS etc. However, the Assessing Officer is directed to examine Whether any statutory Govt. dues such as TDS, GST etc. are not remitted by the appellant Company in time. In case of non remittance of statutory Govt. dues by the appellant Company, the Assessing Officer is directed to take appropriate action. Hence this Ground in appeal is partly allowed”.
- Learned CIT (DR) vehemently contended during the course of hearing that the CIT (A) has erred in law and on facts in deleting the impugned misc. expenditure disallowance of Rs.1,92,38,312/- despite the fact that the assessee had failed to prove the same by way of filing cogent supportive evidence before the Assessing Officer. We find no merit in Revenue’s instant grievance. There is no dispute qua the clinching fact that the assessee’s books had been duly audited and its Annual Report was also available. And that the Assessing Officer had disallowed assessee’s entire expenses in drug manufacturing business thereby enhancing its profit to the maximum level. The assessee has already explained the reason of non-production of audited books of account to the fact that there was a tenancy dispute culminating in locked up premises in the corresponding span of time. So far as the Revenue’s case that the CIT (A) deleted the impugned disallowance without verification, it has come on record that he had duly sought for a remand report from the Assessing Officer’s side. We therefore find no reason to revive the impugned disallowance going by the Revenue’s pleadings. Its sole grievance failed accordingly.
- This Revenue’s appeal is dismissed.
Order pronounced in the Open Court on 9th April, 2021.
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