CIT(A) Accepted Stereo-Typed Defences On Behalf Of Taxpayer In Perfunctory Manner Sans Any Preliminary Inquiry: Delhi ITAT Remits Matter

Explaining that proper examination of all materials are incumbent in law, the ITAT highlighted that the CIT(A) ought to have made suitable inquiries on the propriety of the expenses claimed in question in the light of the documentary evidences in corroboration instead of brushing aside the action of the AO in a loop sided manner.

The Bench of Kul Bharat (Judicial Member) and Pradip Kumar Kedia (Accountant Member) observed that “The CIT(A) merely accepted the mundane and stereotyped defences raised on behalf of the assessee in a perfunctory manner without making any preliminary inquiry himself despite total absence of corroboration before the AO and without traversing glaring facts”. (Para 9.3)

As per the brief facts of the case, the assessee filed Nil return and its case was selected for complete scrutiny. Observing that the assessee has provided part details, the AO issued a show cause seeking documentary evidences to support the expenses claimed on account of (a) purchase of spare parts, (b) employees benefit expenses & (c) other expenses. As the assessee failed to comply with the SCN, the AO disallowed Rs.4,26,79,864/ - towards 1/3 of such expenses. On appeal, the CIT(A) by a brief, cryptic and non-descript order adjudicated the issue in favour of the assessee.

The Bench found that assessee submitted before the CIT(A) that the documents and evidences are available to corroborate the expenses which could not be co-related in the assessment proceedings.

However, despite such willingness to corroborate the expenses, the Bench found that the CIT(A) surprisingly ignored such request and proceeded to dislodge the addition / disallowance finding fault with the AO that such ad hoc disallowances are not permissible without bringing any valid documentary evidences against the assessee and without conducting any independent inquiry on claim of such expenses.

The Bench pointed that the observations made by the CIT(A) are prima facie bizarre and self-defeating, and it is not understandable as to how and what inquiry can be conducted by the AO in the absence of basic documents made available to him and where the primary onus has not been discharged by assessee at the first place.

The Bench also explained that it is only when the documents are placed before the AO and he finds anything alarming in such claim, the burden is shifted to the AO to make inquiry and unearth real situation.

The ITAT therefore set aside the appellate order passed by the CIT(A) and restored the matter to the file of AO for fresh determination of the bonafides of the expenses in question in the light of the documentary evidences.

Counsel for Appellant/ Revenue: Tapas Ram Misra

Counsel for Respondent/ Assessee: Vivek Kumar Upadhyay

Case title: Assistant Commissioner of Income Tax verses Grass Valley India Private Limited

Case Number: I.T.A. No.2796/DEL/2023

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