Our firm, having a turnover of more than Rs.3 crore was subjected to scrutiny assessment for the assessment year 2007-08. At the time of assessment, the assessing officer (AO) found that no transport charges were debited in the books of account. It was explained that the suppliers gave delivery of goods at their own cost and hence no expenditure was incurred towards transport charges. The AO however estimated the expenditure towards transport charges and made an addition under section 69C. Is he justified? |
Monday, August 10, 2009
Tax on unexplained expenditure
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No. The AO is not justified in estimating an item of expenditure without establishing a finding that your firm actually has incurred such expenditure. The pre-requisite is evidence of your firm having incurred such expenditure and thereafter estimating the probable amount. Section 69C comes into play when the expenditure is actually incurred but the source thereof is not explained. The AO hence in your case is not justified in making such addition. Please refer Shanti Ram Mehata v. Asstt. CIT (2009) 119 ITD 62 (Kol) (TM).
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