Section 37 of the Income Tax Act, 1961- Business Expenditure - Amount incurred as expenditure in transportation charges represents the inflation of transportation expenses, accordingly, transportation expenses have not been incurred for the purposes of business carried on by the assessee and are not allowable under section 37(1).

Facts: Whether the Tribunal was correct in holding that a sum of Rs. 1,53,32,679/-and Rs. 35,68,815/- expenses claimed towards transportation charges were not allowable despite the transporters adducing evidence that they did not execute these transactions and the payments received were only book entries which evidence was not taken into consideration in the proper perspective and consequently recorded a perverse finding?

Held, that in order to claim deduction the assessee has to prove that payment was incurred wholly and exclusively for the purpose of business. AO after considering the statements of proprietor of held that the aforesaid individuals did not carry any identity to prove themselves. It was further admitted by them in their statement that they did not maintain books of accounts. They further stated that they have not done any transportation work for any other person except the assessee. AO therefore, came to the conclusion that genuineness of the transportation done by the aforesaid persons is doubtful and the expenditure cannot be considered as incurred wholly and exclusively for purposes of business. CIT (A) has held that payments made to transporters were made in cash and are not reflected in the return of income, confirmations and in the affidavits filed in the course of the proceedings. Thus, it was held that amount incurred as expenditure in transportation charges represents the inflation of transportation expenses. Accordingly, it was held that transportation expenses have not been incurred for the purposes of business carried on by the assessee and are not allowable under section 37(1). The Commissioner of Income-tax (Appeals) enhanced the income of the assessment under appeal to the extent of Rs. 2,15,84,704/-. It is evident that Tribunal has neither assigned any reasons nor has disclosed any basis for directing deletion of additions made by assessing authority as well as CIT (A) except confirming the addition of Rs. 31 Lakhs made by the assessing authority. It is also pertinent to mention here that Tribunal has not assigned any reasons on the issues raised before it and has not given any reasons in support of its conclusion. The order passed by the Tribunal is cryptic and suffers from the vice of non application of mind. - CIT V/s RAJMAHAL SILKS - [2020] 29 ITCD Online 013 (KARN)