Docs washed in 2015 floods: HC rejects plea seeking reduction of I-T

CHENNAI: A division bench of Madras High Court had dismissed an appeal petition preferred by a Chennai-based private company for quashing an order of the Income Tax department asking them to pay an additional tax of Rs.1.32 crore for the financial year 2014-2015 for not producing proper evidence for purchase expenses.

The appellant company claimed that documents related to the purchase expenses were washed away during the 2015 floods.

“The appellants themselves admitted that they were unable to produce the supporting evidence for purchases, since the relevant records pertaining to the assessment year in question, were washed away in the 2015 flood. The appellant/assessee filed the auditor's report, as per which, there was no adverse comment on books of accounts maintained by the appellant/assessee and the purchases debited into the Profit and Loss Account, which fact was not disputed by the assessing officer, ” the bench of Justice R Mahadevan and Justice J Sathya Narayana Prasad held.

The petitioner company prayed for a direction to quash an order passed by the Income Tax Appellate Tribunal (ITAT), Chennai asking the company to pay an additional tax of Rs.1.32 crores.

As per the tax department, for the assessment year 2014-15, the company filed its return on 29.11.2014 declaring a total income of Rs.14,21,370.

“Subsequently, the case was taken up for scrutiny and during the course of assessment proceedings, the appellant was called upon to file necessary documents in support of purchase expenses of Rs.35.55 crores. As the company did not submit any purchase details, the assessment officer passed the assessment order dated 30.11.2016, thereby estimating disallowance at 10% on total purchases on an ad-hoc basis and adding a sum of Rs.3.55 crores to the total income of the assessee, ” the IT department submitted.

When the appellant / assessee preferred an appeal before the Commissioner of Income Tax (Appeals) – CIT (A), who, sustained addition of Rs.1,32,85,764 under the purchase account, after adopting the gross profit rate at 2.5% on the sales turnover of Rs.53,14,30,550 and deleted the balance estimated disallowance of Rs.2,22,71,708. The same was confirmed by the ITAT.

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