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Income Tax Appellate Tribunal, “DB” BENCH, JABALPUR
O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed this appeal against the orders of the National Faceless Appeal Centre, Delhi / CIT(A) and passed the order u/sec 143(3) and 250 of the Act.
At the time of hearing, the Ld.AR of the assessee has not pressed the grounds of appeal No. 3 and 4, hence they are treated as withdrawn and are dismissed. The effective
Sudhir Chandra Datt, Jabalpur. - 2 - grounds of appeal of the assessee are No. 1, 2, 5 & 6 as under:
1. AO had made addition of 6,24,198/- on account of salary Addition and wages for construction and wine business. Assessee had debited Rs. 34,20,000/- in liquor business and 56,43,965/- in construction business. During the course of assessment proceedings vouchers / bills were produced which were verified by the AO and without pointing out any specific instance disallowed 10% salary of liquor business and 5% from construction business which is not correct by making adhoc disallowances. During the course of assessment salary / attendance register were produced before AO in which name of employee along with there attendance and amount paid to employee along with the receipt has been mentioned for verification. AO during the course of examination has not pointed out any single mistake and made the addition as per his own understandings which is not correct, same facts were submitted before the CIT(A) but he also not accepted the reply of assessee. Disallowance of salary expenses made by AO and CIT (A) may kindly be deleted.
2 AO had made addition of 1,18,683/- on account of Telephone, Diesel and Petrol expenses in construction business. Assessee had debited 3,93,370/- as Diesel and Petrol expenses and 2,00,49/- as Telephone Expenses. AO had disallowed 20% adhoc of these expenses by giving the reason that log book and call register were not maintained. It was informed to the AO that that it is notpossible to do so as the telephone, petrol and diesel expenses apart from the assessee are also reimbursed to the employees for which it not possible to maintain the details, same facts were submitted before the CIT(A) but he also not accepted the reply
Sudhir Chandra Datt, Jabalpur. - 3 - of assessee. Disallowance of Telephone, Diesel and Petrol expenses made by AO and CIT (A) may kindly be deleted.
5 Keeping the above facts that the assessee has produced books of accounts along with the bills and vouchers for verification before AO the addition confirmed by the CIT ( A) may be deleted and appeal be allowed.
The assessee craves leave to add alter any grounds of appeal before or at the time of hearing.
3. The brief facts of the case are that, the assessee is engaged in the real estate business as a builder and contract ship as Government Excise Contract. The assessee has filed the return of income for the A.Y 2013-14 on 30.09.2013 disclosing a total income of Rs.47,33,220/-. Subsequently the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and furnished the details and the case was discussed. The AO on verification of the financial statements found (i) the assessee has debited expenses on account of Govt Challans and interest on TDS and they are penal in nature and cannot be allowed as business expenditure and the same was disallowed of Rs. 19,550/- (ii) The AO found that the assessee has debited the expenses in respect of salary and Sudhir Chandra Datt, Jabalpur. - 4 - wages for wine business of Rs. 34,20,000/- and salary and wages for Builders business of Rs. 56,43,965/- claimed in the profit and loss account and most of the expenses are not duly signed and are self made vouchers. Therefore the AO considering the facts and circumstances has disallowed salary paid for wine business@10% of the claim i.e Rs.3,42,000/- and salary &wages of construction business i.e @5% i.e.Rs.2,82,198/- both aggregating to Rs. 6,24,198/- (iii) the AO found that some penalty payments are claimed and disallowed Rs.50,000/- (iv) The AO find that the assessee has debited telephone charges of Rs. 2,00,049/-and Diesel and Petrol expenses of Rs. 3,93,370/- aggregating toRs.5,93,419/-.Since the assessee has not produced the ledger accounts and failed to prove that the expenses are incurred wholly and exclusively for the purpose of business, the A.O made the disallowance @ 20% of the expenses i.e Rs. 1,18,683/- (v) the AO has made the addition on account of short fall of withdrawals of Rs 1,40,000/-.Finally the AO has assessed the total income of Rs. 56,85,650/- and passed the order u/s 143(3) of the Act dated 18.03.2016.
Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) considered the Sudhir Chandra Datt, Jabalpur. - 5 - grounds of appeal, submissions of the assessee and findings of the AO and has confirmed the disallowance in respect of salary and wages of wine and construction business and further sustained the disallowance of telephone expenses and petrol expenses and whereas granted relief in other grounds of appeal and partly allowed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon'ble Tribunal.
5. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the adhoc additions made by the AO in respect salary & Wages and telephone &vechile expenses irrespective of the fact that the assessee has substantiated with the evidences before the lower authorities. Further the Ld.AR emphasized that the assessee is maintaining books of accounts and are audited and the disallowance is on the higher side. The Ld.AR substantiated the submissions with the paper book and prayed for allowing the appeal. Per Contra, the Ld. DR supported the order of the CIT(A).
6. We heard the rival submissions and perused the material on record. The crux of disputed issues envisaged by the Ld. AR that the CIT(A) has erred in sustaining the additions
Sudhir Chandra Datt, Jabalpur. - 6 - made by the AO overlooking the submissions , evidences and nature of the business transactions of the assessee. The Ld.AR mentioned that the assessee is in the business of real estate and wine business and the books of accounts are Audited U/sec44AB of the Act and the assessee has produced evidences in support of expenditure claimed in the profit & Loss account in assessment proceedings. The Ld.AR emphasized that the assessee has submitted the details of nature of expenditure incurred in respect of the disputed issues. The contentions of the Ld.AR are that the A.O has not identified any particular transaction of expenditure but has made adhoc disallowance which is very much higher side. Prima-facie the Assessing Officer has not doubted the genuineness of expenditure incurred wholly and exclusively for the purpose of business and the A.O has not referred to any particular transaction of claim but made an adhoc disallowance of expenses due not to non maintenance proper vouchers. We considering the overall facts, turnover and nature of business of the assessee and to meet the ends of justice direct the Assessing officer to restrict the disallowance of salary &wages of Wine business @5%(ii) disallowance of salary & wages of construction business @2% and (iii) disallowance of Telephone & Vehicle
Sudhir Chandra Datt, Jabalpur. - 7 - expenses @5%. Accordingly we partly allow the grounds of appeal of the assessee.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 21.09.2023