ITAT slams Revenue Officials for committing Mistakes [Read Order]

The Hyderabad bench of ITAT in ‘DCIT v. Shashikala Ramkumar’ slammed the Revenue officials for making additions erroneously and making an appeal on irrelevant grounds.

The assessee Shashikala Ramkumar, filed her return of income declaring total income of Rs. 43,58,580/-, pertaining to A.Y.2010-11. Upon the completion of scrutiny assessment, the AO noticed that assessee has received some un-secured loans stated to be from six persons to an extent of Rs. 29,50,000/-.  The assessee submitted that the cheques given by them were bounced and therefore no loan was taken from the above parties. The entries in the books of account were squared up entries made for cheque deposit and consequent bouncing off the same. AO observed that the bank had credited the amount in the bank account and accordingly, and they were to be considered as cash credits. The assessee could not be proved the identity of the creditors, therefore the amount of Rs. 29,50,000/- was added to her income of u/s. 68 of the Act. In addition to that, an amount of Rs. 27,91,627/-, out of total amount of Rs. 2,35,09,456/- claimed under ‘car hire charges’ were also disallowed out of the claim made in the P&L A/c u/s. 69C of the Act, stating that assessee has failed to prove the genuineness of expenditure. An amount of Rs. 38,26,873/- was treated as ‘unexplained investment’ u/s. 69C of the Act as the assessee could not furnish the necessary details. Another amount of Rs. 11,68,383/- was disallowed towards the addition of car hire charges out of total amount of Rs. 2,35,09,456/- on the reason that she did not prove the genuineness of the expenditure and this was also disallowed invoking the provisions of Section 69C of the Act.

Aggrieved by the addition the assessee filed an appeal before the CIT(A), where the CIT(A) deleted the additions bye AO. The Revenue department filed an appeal against the order of CIT(A) before the ITAT.

The ITAT observed that amount of 29,50,000 was the fund of the bank credited to the assessee’s account upon the cheques presented by her and the same cannot be treated as unexplained. since the cheques given to the assessee had bounced, the banks reversed their credits and the corresponding debits have been recorded in the books of account of the Assessee.

With regard to the other three issues, the ITAT observed that all the above-mentioned amounts were accounted expenditure. In case of any difficulty in verifying the same, the correct provisions to be applied is disallowances under section 37(1) and not classifying it as an unexplained expenditure under section 69C.

The ITAT criticised that the senior officers are not applying their minds while preferring appeals and the appeals are being filed on grounds that are not meritorious.

Before concluding, the bench added that “It’s disturbing to know that an important issue of assessment is left to the hands of the officers who cannot distinguish between the expenditure incurred in the books and the expenditure incurred outside the books and invokes wrong provisions so as to raise unnecessary demands. They should be trained properly, instead, the same mistake is committed by Senior Officer also, which reflects very badly on the Revenue. Without any further comments, we express our anguish and dismiss the grounds as there is no merit in the grounds at all.”