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Income Tax Appellate Tribunal, JAIPUR BENCHE ‘A’ JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1315/JP/2018
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE ‘A’ 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. 1315/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2013-14 cuke M/s Om Metals Auto Pvt. Ltd., DCIT, Vs. Jaipur Circle-2, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAC07127K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri B. V. Maheshwari (CA) jktLo dh vksj ls@ Revenue by : Shri Ashok Khanna (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 15/07/2019 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 16/07/2019 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of ld. CIT(A)-1, Jaipur dated 28.09.2018 wherein the assessee has taken the following grounds of appeal:- “1. That the ld. AO grossly erred on Law & Facts in making disallowance of Rs. 7,17,430 on lump sum basis, without pointing out any defect in the book on accounts. Further the ld. CIT(A)-1, Jaipur have also erred in sustaining the said addition made by ld. AO on the premises that details not provided. That the ld. CIT(A) have over ruled his own decision on similar facts of early years.
2. That the ld. AO grossly erred on Law & facts in disallowing the ESI & PF deposit expenses Rs. 4,77,050/- and Rs. 74,022/- totalling Rs. 5,51,077/- further the ld. CIT(A)-1, Jaipur have also erred in sustaining the said addition. That ld. CIT(A)-1, have over ruled his own decision M/s Om Metals Auto Pvt. Ltd., Jaipur Vs. DCIT, Jaipur delivered in earlier years on the similar facts which is against the consistency of legal decision.”
2. In Ground No. 1, the assessee has challenged the sustenance of disallowance of Rs. 7,17,430/- on lump sum basis. Briefly stated, the facts of the case are that the during the course of assessment proceedings, the Assessing Officer observed that the assessee has debited expenses in the nature of Local Conveyance Expenses, Office Expenses, Telephone Expenses, Travelling Expenses, Printing & Stationary expenses, Misc. Expenses totaling to Rs. 71,74,316/-. On examination of vouchers of these expenses, the Assessing Officer noted that the assessee did not maintain proper and complete vouchers in respect of some of the entries in these heads of expenses. Even the vouchers are in shape of internal, self-printed Receipt Books and these expenses are not subject to verification. Accordingly, he disallowed 10% of these expenses and the same were brought on record in the hands of the assessee. On appeal, the ld. CIT(A) has confirmed the said disallowance and now the assessee is in appeal before us.
During the course of hearing, the ld. AR submitted that no specific defect in the books of accounts has been highlighted by the AO. Further, no specific instance of expense not supported by vouchers has been highlighted by the AO. It was submitted that all these expenses have been incurred for the purposes of business. It was further submitted that similar disallowance have been made by the Assessing officer in the earlier years and which have been deleted by the ld. CIT(A), however, for the year under consideration, the ld CIT(A) has sustained the said disallowance. In this regard, our reference was drawn to ld. CIT(A) order for AY 2012-13 wherein the relevant findings reads as under:-
ITA No. 1315/JP/2018 M/s Om Metals Auto Pvt. Ltd., Jaipur Vs. DCIT, Jaipur “3.1.2(iv) I have duly considered the submission of the appellant assessment order and the material placed on record. It is noted that the AO has made adhoc disallowance of various expenses without bringing on record any material which may justify such disallowance. The AO has not pinpointed any specific instance as to which expenses have been incurred for non-business purposes or inflated or bogus in nature. In the absence of any specific finding by the A.O the disallowance of the expenses on adhoc basis cannot be sustained. Further, the ld. CIT(A) vide order dated 07.02.2014 in in the case of the appellant itself has deleted the similar additions made by the AO. Hence, in view of the above discussion, the addition of Rs. 5,79,500/- made by the AO under different heads is hereby deleted.”
The ld DR is heard who has relied on the order of the lower authorities.
We have heard the rival contentions and perused the material available on record. We find that the disallowance has been made on purely adhoc basis without pointing out any specific defect in the vouchers so maintained by the assessee. Further, there is no finding that the expenses have not been incurred for the purpose of business or expenses are bogus in nature. Further, we find that there is a consistency practice of the Assessing officer since past many years in making such adhoc basis disallowance and which have been deleted by the ld CIT(A). In our view, unless and until the Assessing officer brings out specific defect or gives a specific finding that expenses claimed are bogus in nature or not incurred for the purposes of the business, there is no basis for making such adhoc disallowances for the sake of making such disallowances knowing full well that the same cannot be sustained during the appellate proceedings. We accordingly delete the addition so made by the Assessing officer and the ground of appeal
so taken by the assessee is allowed.
3. M/s Om Metals Auto Pvt. Ltd., Jaipur Vs. DCIT, Jaipur
6. In Ground No. 2, the assessee has challenged the disallowance of ESI/PF contribution totaling to Rs. 5,51,077/-. Undisputedly, the employees contribution has been paid during the financial year itself but after the due date of payment as per respective Acts.
This issue is covered in favour of the assessee by the various decisions of the Hon’ble jurisdictional High Court including the decision in case of CIT vs. State Bank of Bikaner & Jaipur 99 DTR 131 as well as decision in case of CIT vs. Jaipur Vidyut Vitran Nigam Ltd. 363 ITR 307 and in case of CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. 366 ITR 163.
We further note that the ld. CIT(A) though has not disputed the various decisions of Hon’ble High Court however, disallowance made by the AO are sustained as he misunderstood the decision of Hon’ble Jurisdictional High Court in case of PCIT vs. M/s Rajasthan Renewable Energy Corporation Limited in DB & 12/2018 dated 13.03.2018. In the said case, the Hon’ble High Court has considered this issue in para 4 to 6 as under:- “4. So far as question No. 1 is concerned, the same is now covered by the decisions of this Court in Principal Commissioner of Income-Tax V/s Rajasthan state seed Corporation Ltd. [2016] 386 ITR 267 (Raj) wherein it has been held as under:- “In so far as the expenditure incurred on State Renewal Fund is concerned, the said expenditure also goes to show that the renewal fund was set up by the State Government and was created with the object of providing a safety net for the workers likely to be effected by restricting in the State Public Enterprise and that a finding of fact has been recorded that the contribution made to the State Renewal fund is solely for the purposes of the welfare and benefit of the employees. In our 4 M/s Om Metals Auto Pvt. Ltd., Jaipur Vs. DCIT, Jaipur view, it is for the assessee to decide whether any expenditure should be incurred in the course of business and expenditure of this nature being for business expediency is certainly allowable deduction under section 37(1) of the Act. In our view any normal expenditure for the welfare and benefit of the employees is allowable expenditure under section 37(1), the Tribunal has come to a finding of fact that it was a legal obligation of the respondent-assessee towards contribution of the said amount to the State Renewal Fund and there being a legal obligation as well in our view the Tribunal has come to a correct conclusion.”
In view of the above, question No. 1 is answered in favour of the assessee and against the department.
With regard to issue No. 2 and 3 the controversy is pending before the Supreme Court in C.I.T., Jaipur Vs/ Ms State Bank of Bikaner and Jaipur in SLP© No. 16249/2014, therefore, subject to decision of SLP, for the present, these issues are decided on in favour of the department and against the assessee. It will be open for the department to recover the amount if the decision is in their favour.”
Thus, it is clear that the Hon’ble jurisdictional High Court has followed the earlier decisions in case of PCIT vs. Rajasthan State Seed Corporation Limited 386 ITR 267 as well as decision in case of CIT vs. State Bank of Bikaner & Jaipur (supra). All these decisions which were followed by the Hon’ble jurisdictional High Court are in favour of the assessee however, in the conclusion in para 6 there is a typographical mistake wherein it is stated “these issues decided in favour of the Department and against the assessee”. The whole decision of the Hon’ble High Court has to be considered in the context of the decision followed and the subsequent line which says “it will be opened for the Department to recover the amount” if the decision in their favour which M/s Om Metals Auto Pvt. Ltd., Jaipur Vs. DCIT, Jaipur means that in case of further appeal before Hon’ble Supreme Court if decision is delivered in favour of the department, it can recover the amount. Therefore, even the decision which is relied upon the ld. CIT(A) is in favour of the assessee though due to typographical mistake it was misunderstood by the ld. CIT(A) as in favour of the Revenue. Accordingly, in view of a series of decisions of the Hon’ble Jurisdictional High Court in favour of the assessee and further, in view of the fact that the Hon’ble Supreme Court in case of PCIT vs. Rajasthan State Beverages Corporation Ltd. 250 taxmann 16 has dismissed the SLP filed by the Department, this issue is decided in favour of the assessee and against the Revenue. Hence, disallowances/additions made by the AO on account of employees contribution to PF & ESI are hereby deleted.
In the result, appeal of the assessee is allowed.
Pronounced in the Open Court on 16/07/2019.