Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 694/JP/2019
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 694/JP/2019 fu/kZkj.k o"kZ@Assessment Years : 2015-16 cuke M/s Meghalaya Construction & Supply Co. The ACIT, Vs. Village-Patan, Tehsil- Neen Ka Thana, Circle, Sikar. Sikar. ToLFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAWFM 4433 D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Vedant Agrawal (Adv.) jktLo dh vksj ls@ Revenue by : Smt. Roonipal (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 16/12/2019 mn?kks"k.kk dh rkjh[k@Date of Pronouncement :19/12/2019 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of ld. CIT(A)-3, Jaipur dated 12.03.2019 for the Assessment Year 2015-16 wherein the assessee has taken the following sole ground of appeal:
On the facts and circumstances of the case and in law, Ld. lower authorities grossly erred in making and confirming lump sum addition of Rs. 2,00,000/- on account of Labour Charges, Repair and maintenance expenses, printing and stationery, office exp. vehicle fuel and maintenance exp. and vehicle repairing exp.
2 M/s Maghalaya Construction & Supply Co. ACIT
Briefly the facts of the case are that the assessee is engaged in the Civil Construction business and filed its return of income declaring total income of Rs. 1,02,82,840/- which was selected for scrutiny and the assessment was completed u/s 143(3) wherein an addition of Rs. 2,00,000/- was made by the Assessing Officer on account of disallowance of certain expenses claimed by the assessee in its profit and loss account. On the appeal, the same has been confirmed by the ld. CIT(A) and against the said findings, the assessee is in appeal before us.
During the course of hearing, the ld. AR submitted that the assessee is engaged in the Civil Construction activities and has reported gross turnover of Rs. 17,76,66,540/- and disclosed gross profit margin of 14.29% and net profit margin of 5.77%. It was submitted that the results so declared by the assessee are better than A.Y. 2014-15 wherein on turnover of Rs. 9,28,53,375/-, the assessee has disclosed gross profit margin of 14.27% and net profit margin 5.08%. It was submitted that the Assessing Officer has accepted the books results so declared by the assessee except the fact that certain expenses have been disallowed on an adhoc basis. It was submitted that no specific defects have been highlighted by the Assessing Officer and merely on account of certain vouchers were self made and certain expenses have been incurred in cash, he has disallowed the expenses on lump sum basis. It was submitted that it is clearly a case of adhoc disallowance of expenses and the addition so made may be directed to be deleted. Further reliance was placed on the finding of the Coordinate Bench in 3 M/s Maghalaya Construction & Supply Co. ACIT case of M/s Kumar & Brothers vs. ITO (ITA No. 656/JP/2018 dated 19.09.2019).
Per contra, the ld. DR relied on the findings of the lower authorities and submitted that where the assessee has failed to produce supporting evidence in support of the expenditure, the disallowance made by the AO amounting to Rs. 2,00,000/- is reasonable and proper and the same may be confirmed.
We have heard the rival contentions and perused the material available on record. The Assessing Officer has recorded a finding that on examination of bills and vouchers of expenses, it was noticed that the assessee did not maintain proper and complete vouchers of these expenses and some of the payments were made in cash. Further, it was noticed by the Assessing officer that some of the vouchers of these expenses are self made and without supporting bills and not verifiable fully, therefore, he has made a lumpsum disallowance of Rs. 2,00,000/-. In our view, in the absence of any specific findings that the claim of the expenditure are either bogus or not been incurred wholly and exclusively for the purposes of business, there is no basis for making any adhoc disallowance of expenses and the same cannot be sustained in the eyes of law. We find that similar issue has been examined by the Coordinate Bench in case of M/s Kumar & Brothers vs. ITO (supra) wherein the Coordinate Bench has held as under:-
“5. I have considered the rival submissions as well as relevant material on record. The A.O. has given reasons for making ad hoc disallowance of Rs. 1.50 lacs that too as a lump sum trading 4 M/s Maghalaya Construction & Supply Co. ACIT addition as the freight expenses were not fully supported by proper bills and vouchers. Though the term used by the A.O. in the assessment order being the trading addition is not justified when there is no rejection of books of account U/s 145(3) of the Act. However, in substance, the A.O. has made this addition on account of claim of expenses not verifiable. The A.O. has not given the finding that the claim of expenditure is either excessive or bogus having regard to the facts of turnover during the year under consideration and nature of business of the assessee. There is no dispute that in the business of the assessee, the freight expenses are inevitable and therefore, if the claim is not found to be excessive or bogus then merely because of the some of the expenses are not supported by proper vouchers, no ad hoc disallowance is called for. The ld. CIT(A) has confirmed the disallowance in para 5.4 and 5.5 of the impugned order as under:
“5.4 I have considered the above mentioned facts of the case. Any expenditure of the nature mentioned above is claimed under section 37 of the Act. In order to get the deduction under section 37 of the Act, primary onus lies on the assessee to prove that such expenditure are incurred wholly and exclusively for the purpose of business or profession.
5.5 In the instant case, the assessee has failed to provide supporting documents to prove that such expenditures are incurred wholly and exclusively for the purpose of business or profession. Therefore, in my considered view a disallowance of Rs. 1,50,000/- out of the expenses claimed on the above mentioned expenditure is reasonable to cover the 5 M/s Maghalaya Construction & Supply Co. ACIT discrepancies mentioned by the A.O. in the assessment order. Accordingly, the ground of appeal on this issue is dismissed.”
If certain claim of expenditure is not found to be incurred wholly and exclusively for the business purpose of the assessee then the same is liable to be disallowed. However, if the expenditure incurred by the assessee is found for the business purpose of the assessee then due to certain irregularity in maintaining the supporting evidence an ad hoc disallowance is not called for. Accordingly, without specifying the instance of the expenditure, which is either excessive or found not incurred for the business of the assessee, the action of the A.O. in making ad hoc disallowance and confirmed by the ld. CIT(A) is not justified. Hence, ad hoc disallowance of Rs. 1.50 lacs is deleted.”
In light of above discussions, the adhoc disallowance of expenses so made by the Assessing Officer is hereby directed to be deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 19/12/2019.