M/S. SHRI KRISHNA URJA PROJECT LTD,JAIPUR vs. INCOME TAX OFFICER, JAIPUR

ORDER

PER RAMESH C. SHARMA, AM

2.3 By impugned order, the ld. CIT(A) has sustained the disallowance of Rs. 10.00 lacs out of way and general expenses on the alleged ground that payments were made to RTO and Police Authorities on the way by the truck drivers.

2.4 During the course of hearing, it was argued by the ld.AR of the assessee that the way and general expenses are related to Toll Tax, entry fee/tax of trucks in other states, fixed DA of Driver for fooding expenses, RTO fees, on the way repairs and maintenance of Trucks, parking charges, octroi, transit pass and various other general expenses incurred on the way. There is no payment of any traffic police debited in the expenses because the driver always keep all the required document for transit and travel and follows traffic rules, if any, violation made they themselves remain responsible. The payments to various RTO are permit fee, entry fee for entry of vehicles in a State as per law. The assessee submitted details of way and general expenses before AO alongwith vouchers and allegation made that assessee debited RTO and police bribe expenses in head on the way expenses is wrong and on without even a which is not valid for every case. The A/R who appeared before A.O. in assessment proceedings never stated that it is not feasible to furnish total details of such expenses in fact what is stated is that there are no such expenses.

2.4.1 The ld.AR further stated that that assessee company has its office at Gurgaon from where all Transport Trolla vehicles start and stationed. The assessee company gives fixed allowance to drivers depending on distances and allowance are calculated on the basis of distance of trip including fixed DA of Driver for fooding expenses, RTO fees, on the way repairs and maintenance of Trucks, parking charges, octroi, transit pass and various other general expenses incurred on the way. The same accounting system for these expenses debited in the books of accounts under their head was adopted in all the earlier years including in A.Y. 2012-13 where appeal disallowance made by A.O. from these expenses was deleted in appeal.

2.5 On the other hand, the ld. DR submitted that out of total expenses so claimed by the assessee, the ld. CIT(A) has very reasonably upheld the disallowance of Rs. 10.00 lacs and the same should be upheld by the Hon'ble Tribunal. orders of the authorities below and found from the record that the assessee is mainly engaged in the business of transportation and contract work. As per general practice, the assessee company used to pay its truck drivers a sum of Rs. 12,100/- per trip which includes all the expenditures to be incurred by the drivers during transit. This allowance also depends upon the distance and calculated on the basis of fixed DA of driver for fooding expenses, RTO fees, on the way repairs and maintenance of truck, parking charges, octroi, transit pass and various other general expenses incurred on the way. The truck drivers used to give receipts for the amount so given to him and spent by him. The same accounting system for these expenses debited in the books of account under their head was adopted in all the earlier years including in Assessment Year 2012-13 wherein appeal disallowance made by the AO was deleted. Thus the Bench found that the adhoc disallowance made by the AO was without any basis. In the case of M/s Nishotech Systems Pvt. Ltd. Vs. ACIT, (ITA No. 6116/M/11 dated 8 August 2012) wherein the Hon'ble Mumbai ITAT has held that ‘'Looking at the issue from the assessee's point of view, once an expense has been incurred and booked in books of accounts, it pertains to the company's expense and wholly and exclusively for the purpose of business of the company, subject to being proved the expense has been incurred which is not wholly and exclusively for the purpose of business.'’ It was held by Hon'ble Mumbai Tribunal in the case of Arthur & Anderson & Co. Vs. Addl. CIT (2010 — TIOL-416-ITAT)

"that the very concept of token (lump sum) disallowance was bad in law, because such a disallowance was inherently based on surmises and conjectures and devoid of a legally sustainable foundation. It was a case where one accepted all the contentions but not the consequences flowing from accepting the same. This could not meet approval. No particular information had been called for by the AO nor had the AO pointed out any deficiency in the details furnished by the assessee. The AO had not given any justifiable reasons for making adhoc disallowances without sound basis or reason. This could not be permitted. The ld.CIT (A) had also not judiciously dealt with the matter. No disallowance could be made just for the sake of disallowance. Recently the Hon'ble ITAT, Jaipur Bench, Jaipur in M/s KGK Enterprises Vs. ACIT (ITA No. 567/JP/2016 and others) vide order dated 28-11-2017 in para 61 of appeal order considering the submission of assessee that disallowance purely on estimate basis without pin pointing any specific defects and books or vouchers maintained held that when 'disallowance has been made purely on adhoc basis such disallowance cannot be sustained in the eyes of law. contain any RTO and Police bribe expenses and finding of AO are not correct.

2.6.1 In view of the above discussions and keeping in view the totality of the facts and circumstances of the case, I restrict the disallowance to the extent of Rs. 1.00 lac. I direct accordingly.

3.0 In the result, the appeal of the assessee is allowed in part.

Order pronounced in the open court on 22 /11/2019.

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सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत