In a recent ruling, the Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) found adequate allowed salary and rent claims made by the assessee due to adequate proof and upheld the addition of staff welfare made by the assessing officer ( AO ) due to insufficient evidence.
In this case, the assessee, M/s. Subhrashi Enclave Pvt. Ltd., had filed its income tax returns, declaring income at Rs. 33,560. The Assessing Officer (AO) scrutinized the assessee’s accounts to verify the genuineness of expenses claimed in the profit and loss account. Although efforts were made to summon the company’s principal officer and verify its physical existence through an inspector, the office could not be located.
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The AO issued a show cause notice regarding the disallowance of salary, bonus, rent, electricity, and staff welfare expenses, which went unanswered. The AO added Rs. 32,04,700 under these heads to the assessee’s income.
Although the assessee appealed before the Commissioner of Income Tax ( Appeals ), there were no responses to 4 notices sent to the assessee, and the action of the AO was upheld.
The counsel on behalf of the assessee argued that it is a registered company and it is not an entity where there would be no staff or business premises, as alleged by the AO. He submitted the details of staff salary and the daily attendance register.
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The counsel also stated that the appellant could not make a presentation before the CIT(A) due to nonreceipt of notices.
The Tribunal, after going through the documents submitted by the assessee, held that ‘the salary and bonus expenses, along with rent and electricity expenses, deserve to be allowed in full.’
The bench upheld the addition of Rs. 22,700 towards staff welfare expenses due to lack of evidence.
The ITAT, comprising of Sonjoy Sarma ( Judicial Member ) and Sanjay Awasthi ( Accountant Member ) partly allowed the appeal filed by the assessee.
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