Mamta Pandey vs The Income Tax Officer

PER MADHUMITA ROY, JM:

The instant appeal filed by the assessee is directed against the order dated 08.10.2025 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre- Delhi arising out of the assessment order dated 30.12.2017under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2015-16.

For A.Y. 2015-16 the assessee filed her return declaring total income of Rs. 9,62,980/-. The case was selected for scrutiny assessment under CASS for limited reasons (i) contract receipts/business mismatch; (ii) other expenses claimed in the P&L A/c & (iii) tax credit mismatch. Statutory notices issued under Section143(2)/142(1) were responded by the assessee. During assessment proceedings the Assessing Officer noticed that during the assessment year under consideration the assessee had claimed other expenses amounting to Rs. 5,11,76,465/-out of which Rs. 4,96,90,247/- was car rent paid by the assessee. The Assessing Officer required the assessee to give list of top ten persons to whom car rent had been paid for verification under Section 133(6) of the Act. The Assessing Officer held that verification could not be done for want of correct list provided by the assessee and that the assessee had deliberately provided wrong details so that proper inquiry may not be done. The AO held that some of the payments of car rent were not genuine. Notices under Section 133(6) issued at the addresses furnished by the assessee were not responded which clearly showed that some of the amounts on car rent were not genuine. The learned AO on estimate basis disallowed 20% of the expenses claimed by the assessee at Rs. 99,38,049/- and added the same to the income of the assessee.

Aggrieved by the said order the assessee preferred appeal before the First Appellate Authority. The stand of the assessee before the NFAC was that no addition was ever made on this count in the assessee’s case in earlier years though the expenses were more than the current year. Earlier years assessments were completed under Section143(3) of the Act. The Ld. CIT(A) took note of the fact that in the three lists provided by the assessee of the persons to whom rent was paid varied considerably and the top recipients did not appear in one of the list and all addresses were not made available and the rest did not reply. According to the assessee all these persons had later on confirmed the details with their PAN details. However, the assessee failed to submit any evidence in respect of such claims during the appellate proceedings. He affirmed the action of the learned AO. The NFAC also rejected the assessee’s stand that time allowed was not adequate and the assessee was not given any show cause notice for non-compliance by the persons to whom notices under Section133(6) were sent.

Before us it is the contention of the assessee that all accounts were audited by the CA are verified and reliable. Books of account have not been rejected by the revenue authorities. Without rejecting the books of account or without pointing out any defect, the Learned AO made arbitrary and estimated disallowance with no justification. Earlier years assessments have been completed under Section143(3) and no such addition was ever made by the Learned AO though high percentage of car rent was claimed. The assessee had fully cooperated with the department and replied/complied all the statutory notices issued by the Learned Assessing Officer. On different dates the Assessing Officer asked for different details and accordingly the details were submitted and no adverse material was gathered by the Learned AO. Notices were sent to the outsiders and not to the assessee. The Learned CIT(A) never verified from the Assessing Officer about late response from all or some of them. All payments were after TDS and by cheques verifiable and genuine. It is further submitted that the confusion was created by the AO himself as he earlier sought the detail as per quantity TDS return and then himself tried to link this quarterwise TDS detail with the total sum paid in full year detail to each cab owner and found that yearly figures did not match with quarterly figures. What was needed that he should have added figures from each quarter relating to certain persons and the figures will match in every case. This required picking up of figures of an individual from each quarter, then added up and compare them with yearly figures. The AO failed to this simple exercise. The accounts are audited one and tax audit report is on AO’s file. The assessee has also filed quarterly TDS list for the period 1.04.2014 to 31.03.2015 in support of his contention available at page 13 of the compilation filed by her.

The Learned DR relied on the orders of the authorities below. He further submitted that the relevant documents never placed before the Ld. CIT(A) as reflecting from the order impugned.

Having heard the Learned representatives of the respective parties and having regard to the material available on record we find that the assessee had responded to the notices issued by the department. Undisputedly the accounts are duly audited, report whereof was on the AO’s record. No discrepancy has been pointed out therein. TDS has been duly deducted and the quarterly TDS statement was also filed for verification.

Under these facts and circumstances of the matter, the case of the Assessee that disallowance of expenses on ad-hoc basis that is not tenable is found to be acceptable. Thus, we have observed the Assessee has given all details before the authorities below. It is also observed that the Assessee has duly deducted tax at source while making payments for the car rent. We have also observed that the Ld. A.O. has issued notice under Section 133(6) to the suppliers at the fag end when assessment was getting time barred and it is the claim of the Assessee that the persons to whom notices under Section 133(6) were issued have duly replied but such assessment get time barred and notices under Section 133(6) were issued at the fag end of the limitation period, the A.O. has not taken cognizance of the same. We have observed that the Ld. CIT(A) has not called for the assessment record and has not verified the contentions of the assessee, no independent enquiry has been made by the Ld. CIT(A) also and all the contentions of the assessee were rejected. We have also observed that the assessee has claimed that all payments for cab rentals were made by banking channels and details were placed before the authorities below. We also observed that scrutiny assessments have been conducted by revenue for the earlier Assessment Years 2014-15 and no addition has been made by the Ld. A.O; the assessment order dated 07.12.2016 passed by the Ld. A.O. under Section 143(3) of the Act for A.Y 2014-15 is placed at Paper Book Page No. 11.

Under these facts and circumstances when the Assessee has placed all the facts, details and evidence before the Ld. A.O. as well as the Ld. CIT(A), it is not justifiable to make ad-hoc disallowances; the authorities below ought to have considered while making disallowances of the aforesaid expenses by pointing out specific deficiencies and defects in the replies submitted by the Assessee. Thus, under these facts and circumstances we do not hold any merit in the orders passed by the authorities below whereof the addition was made in the hands of the assessee which was later confirmed by the Ld. CIT(A). In the facts and circumstances of the present case, addition made in the hands of the Assessee on estimate basis is found to be not sustainable and therefore, deleted.

In the result assessee’s instant appeal is allowed