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Income tax scrutiny assessment

kunal mangal (Chartered Accountant) (160 Points)

06 December 2011

Dear All,

1. During proceedings, the assessee provided third party confirmation for a bill of Rs. 8 lakhs. The AO without considering it disallowed the whole amt. Are there any case laws on such issues?

2. The AO disallowed repairs charges explaining that the assessee didnot explain anything, and infact the AO didnt ask for any explanation with respect to repairs expenses. Are there any case laws on such issues?

3. Does HUF of the Assessee and HUF of assessee's father are included in the definition of relative for the purpose of section 40 A 2(b)?

Best Wishes,

Kunal Mangal

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1 Replies

CA Shraddha (Mcom, CS Exe.) (Service) (224 Points)
Replied 06 December 2011

Dear Kunal,

In my opinion the subject matter of your case are purely based on proper interpretation and understanding of provisions of the IT act. The outcome will be in favour of assessee if you establish following even without help of citations:

1. The action of the AO is not valid in law as the genuineness of the transaction can be best established by submitting following documents:

Accounting treatment by debiting the expenditure in books of accounts,
Contra confirmation of the party along with his PAN to establish his identity, and
Payment made through banking channel or any other mode of paymnet

2. The assessment cannot be completed by the AO without giving an opportunity of being heard to the assessee even in making assessment u/s. 144 opportunity of being heard has to be given to the assessee. If the assessee in a position to prove or he has any evidence on record that sufficient explanation or documentary evidences have been duly furnished to the learned AO but ha has failed to consider the same in proper perspective or has ignored them totally without any reasinable cause then this action of the AO can be surely challanged. I will try to find out case laws in this regard.

3. As per literal interpretation of the definition of relative your case will not be covered as it includes only a member of such HUF or relative of any such member of HUF so it will not be covered u/s. 40A(2)(b).