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Did your tax officer do his job before ordering disallowance?
Did your tax officer do his job before ordering disallowance?
Has Income tax officer selected your case for scrutiny? Is he asking you to show him proofs of expenses you did? You can submit expense bills as proofs. You can also point out amounts getting out of your bank in your bank statements. You can provide many other pieces of evidence. Believe me; you can do only this much. But do you know about duties of tax officer? Let me tell you through this case; it will help you if tax-officer orders expense disallowance.
You can read the case history below.
1. Varsa Buildwell India Pvt Ltd filed its return of income of Rs 50 lakhs.
2. The tax officer (AO) selected Varsa's case for scrutiny.
3. AO asked Varsa to produce proof of some purchases it did.
4. Varsa produced bills of purchases, bank statements, copies of issued account payee cheques, delivery challan and many other shreds of evidence.
5. In other words, Varsa diligently did its job.
6. AO did his job too. He asked Varsa to call the sellers (i.e., people from whom Varsa purchased goods) before him.
7. Varsa could not present the sellers before the AO.
8. AO declared the purchases as bogus purchases. He said that as Varsa couldn't produce sellers, so the purchases are bogus.
9. AO completed the assessment at an income of Rs 5.3crores after adding the fraudulent purchases.
10. Varsa appealed against AO order before Commissioner of Income tax - Appeals. [CIT(A)]
11. CIT(A) deleted the addition.
Point number 12, 13 and 14 describe duties
12. CIT(A) said that it is the duty of AO to use other means of confirmation in case parties didn't turn up.
13. CIT specifically said AO must prove that the evidence cited by the assessee is unreal. And he should record all the steps he took. Otherwise, he can't deny assessee's claim.
14. CIT(A) referred to Apex court's holding in Daulat Ram's case 87 ITR 349.
15. Department went on appeal to ITAT. ITAT upheld CIT(A) order.
One piece of advice:
Don't sign on minutes of AO until:
- he uses and mentions all means of confirmation he has used.
- he writes that you cited Supreme Court holding in Daulat Ram's case.
