The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the assessing officer (AO) cannot make any estimated addition without pointing out specific defects in the audited book.
Priyamda Media & Infotainment Private Limited, the Appellant assessee is engaged in the business of News Network, broadcasting and telecasting. The return for the year was electronically filed on 29.11.2014 declaring a loss of Rs.4,47,68,848/-.
While scrutinizing the return of income the AO noticed sundry payables in the balance sheet and asked the assessee to file confirmation of sundry creditors. The assessee showed its inability to file the confirmation. Notice under section 133(6) of the Income Tax Act was issued.
The AO found that the assessee has made payments to contractors on which tax has been deducted at source but the same has not been deposited before the due date. Invoking the provisions of section 40a(ia) of the Act the AO made the addition of Rs.8852509/-. Since the assessee could not produce the books of account and vouchers invoking the provisions of section 145 (3) of the Act the AO disallowed 20% of the expenditure totalling Rs.25401898/- and made the addition of Rs.5080380/-.
It was found that in the entire financial statements the Tribunal couldn’t find out of any liability in the name of Axom Communication where the AO has picked up this figure is not known since it is not part of the financial statement. There is no logic/reason for making the impugned addition.
Without pointing out any specific defect in the audited books of accounts the AO cannot and should not make any estimated addition. The two bench members of Kul Bharat (Judicial Member) and N. K. Billaiya (Accountant Member) directed the AO to delete the impugned addition of Rs.5080380/-.
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