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Karnataka HC: IT Act Vests Civil Court’s Power in IT-Assessing Officer

2 min read

Shashwati Chowdhury

Published on: August 8, 2022 at 18:36 IST

The Dharwad Bench of the High Court upheld the decision of the Income Tax Appellate Tribunal (ITAT), Bengaluru, in respect to a Ballari-based corporation, noting that Section 131 of the Income Tax Act, 1961 grants an assessing officer (AO) the authority of a civil court.

In response to an AO order disallowing around Rs 5.9 crore in claimed transportation expenses paid to transportation creditors in connection with the IT returns submitted for the assessment year 2009–10, Messrs Ennoble Construction of Ballari moved to the ITAT.

The assessee, who had claimed an exemption for 70.7 crore rupees, stated that he was unable to provide the documents sought by the AO since the CBI had raided the assessee’s entire business office and seized all of its records.

 The AO rejected the justification, noting that a similar addition was made for the assessment year 2008-2009 based on the assessee’s declaration of excessive trade liability, which worked out to about 8.4%, and that the same ratio should be used for the assessment year in question as well. Using that information, he calculated the sum to be Rs. 5.9 crore and added it to the assessee’s income for the purpose of levy.

The Bench further remarked that the AO may summon records from any public authority under section 131 of the IT Act. There is absolutely no justification for the AO’s decision not to use this provision in the circumstances. Nothing prohibited him from summoning the documents or at least a number of them from the CBI’s custody.

The Bench said, “The AO could not have recorded a finding that the assessee’s claim about transportation expenses was not substantiated since he had not performed his duty.”

The assessee’s case was one of a lack of evidence to support the claim. The Court stated, adding:

“if the assessee fails to present compelling evidence to support the entirety of the claim, it is the AO’s responsibility to determine the allowable part of the expenditure to the best of his ability.”