Documents which are not under the control of the assessee could be summoned U/S 131: Karnataka HC
PCIT Vs Ennoble Construction (Karnataka High Court)
Appeal Number : Income Tax Appeal No. 383 of 2016
Facts:
1. The case revolved around the addition of ₹5.89 crore made by the Assessing Officer (AO) under transport creditors for the Assessment Year 2009-10.
2. The AO had questioned the genuineness of transport creditors as the assessee failed to provide supporting documents, citing the seizure of business records by the Central Bureau of Investigation (CBI).
3. The ITAT had ruled in favor of the assessee, leading to the Revenue’s appeal under Section 260A of the Income Tax Act, 1961.
4. The Revenue argued that the ITAT erred by setting aside the disallowance without properly assessing the creditworthiness of the transport creditors.
5. It relied on precedents such as CIT vs. Usha Stud Agricultural Farms (301 ITR 384) and CIT vs. Prameshwar Bohra (Rajasthan HC) to assert that the onus was on the assessee to prove the identity and genuineness of creditors.
Hon Karnataka High Court, held as below:
1. The AO had not undertaken necessary inquiries and had instead relied on an ad hoc estimate based on a past assessment year.
2. Furthermore, once the AO had accepted similar creditors as genuine in previous years, they could not be questioned anew without fresh evidence.
3. If an assessee fails to provide evidence due to circumstances beyond their control, the AO must assess the expenditure judiciously rather than outright rejecting the claim.
4. A “substantial question of law” must be debatable and materially affect the case outcome. In this instance, it was found that the Revenue’s appeal did not meet this criterion, as the AO had not exercised due diligence in collecting relevant records from the CBI before making the addition
5. Under Section 131 of the Income Tax Act, the AO has powers akin to a civil court to summon documents, including those held by investigating agencies.
6. The failure to invoke these powers led the High Court to conclude that the addition was unjustified.
7. The ITAT’s ruling is upheld, and the Revenue’s appeal is dismissed, reinforcing the principle that tax authorities must undertake comprehensive inquiries before making additions based on estimations.
The copy of the order is as under:
