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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: Sh. Saktijit DeyDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the Revenue against the order of the ld. CIT(A)-XXVI, New Delhi dated 21.09.2017.
The original return of income was filed on 04.11.2014 declaring income of Rs 22,75,080/-. The case was selected for scrutiny and the detailed questionnaire was issued requiring various information and explanation. All the information required by the Assessing officer has been duly filed during the course of assessment proceeding. The Assessing officer while passing the order made the addition of i) Rs.6,12,285/- under the head interest on loans and advances ii) Rs.10,15,875/- by disallowing expenses claimed under the head Brokerage and Commission expenses on adhoc basis iii) Rs.1,15,46,459/- by 2 Tinna Trade Pvt. Ltd. disallowing expenses claimed under the head other expenses on adhoc basis iv) Rs.56,83,585/- being 1/5th of the total advance received from customer on adhoc basis v) Rs.24,08,621/- being 1/10 of the other liabilities shown in the Balance sheet on adhoc basis ignoring the facts of the case, statutory provisions as well as explanation filed during the course of assessment proceeding and without giving the reasonable opportunity of being heard. The addition / disallowance so made are based on assumption and presumption and are not based on cogent material.
Disallowance of interest on loans and advances:
The Assessing officer disallowed the interest expenses on the ground that the advances have been given by the assessee for purposes unrelated to business activities and the assessee has given interest free loans and advances to related parties out of the interest bearing fund.
Schedule 12 and Schedule 17 of the Audited Balance sheet for the A Y 2014-15 in which details of loans and advances is as under:
Schedule 12 Long Term loans and advances Security Deposits 14,94,103 MAT Credit 12,02,165 26,96,268 Schedule 17 Short Term loans and advances Advance against material & services 97,05,029 Deposit towards forward contract & future trading option 1,07,28,922
3 Tinna Trade Pvt. Ltd. Security Deposit 1,20,86,646 Balance with statutory / government Authority VAT 12,75,702 Balance with port authorities 5,95,605 Income Tax refund 2,98,747 Other (prepaid expenses) 1,33,53,983 4,80,44,633
From the perusal of the above schedule it can be observed that all the loans and advances are in the nature of Advance against material & services, Security Deposits, MAT Credit, Balance with statutory / government Authority etc and are business advances and as such are related to business purposes. As such the observation made by the Assessing officer that advances are not for business purposes are contrary to the facts on record.
6. The Balance sheet of the assessee company for FY 2013-14 as per which the shareholder fund is Rs 16.12 crore and as such the appellant has sufficient non-interest bearing fund. Thus, the assessee has been found to be having enough own non-interest bearing fund.
Hence, we hold that no disallowance is called for on account of loans and advances given is called for.
Adhoc disallowance:
The Assessing officer without appreciating the evidences, explanations and details furnished during the course of assessment proceeding. The adhoc disallowance / additions
4 Tinna Trade Pvt. Ltd. have been made by the Assessing officer, without pointing out any defects. The learned Assessing officer made the adhoc disallowance under the following heads:- i) Brokerage & Commission expenses (10 % of total expenses) ii) Disallowance of expenses ( 10% of total expenses) iii) Advance from customers (20 % of total advances outstanding) iv) Other liabilities (10 % of total liabilities outstanding)
The Assessing officer while disallowing 10 % of total expenses under the head brokerage and commission and while disallowing 10% of expenses under various heads (like packing material consumed, electricity & water, equipment hire charges, communication expenses, freight & forwarding, business promotion expenses, legal & professional charges, stock handling & supervision charges, clearing & forwarding charges etc) observed that the assessee has not submitted the documentary evidence.
However said observation made by the Assessing officer that the assessee has not provided the documentary evidence in respect of expenses is contrary to the facts on record. In this regard the assessee submitted all the documentary evidence with the submission filed during assessment proceedings.
The ld. CIT(A) held that “the disallowances are simply made on adhoc basis without pointing out any defects in the books of the assessee or any other specific short coming. The expenses that are duly vouched and audited cannot be 5 Tinna Trade Pvt. Ltd. summarily disallowed. Such a disallowance cannot be sustained in absence of any valid basis. The disallowances are liable to be deleted.
In this regard the Co-ordinate Bench of Tribunal in the case of Tripat Kaur vs. ACIT, Cir 22(1), New Delhi / Delhi /2012 held as under:
We have heard the rival contentions in light of the material produced. We find that the addition on account of travelling expenses was totally based on surmises and conjectures. Assessing Officer has not brought on record any cogent basis as to why this expenditure was to be disallowed. It is not the case that expenditure was considered to be bogus or any shortcoming in the vouchers in this regard was observed by the Revenue. Under the circumstances, we hold that estimated addition without any basis cannot be sustained. In this regard, the case law relied upon by the Ld. Counsel of the assessee in the case of the ITO vs. Lake Palace Hotels and Motels (P) Ltd. 13 TTJ (JP) 216 is germane. In this case, it was held that the travelling expenses and salary expenses, addition made on estimate basis cannot be justified. Moreover, disallowance is also not justified merely on the ground that similar disallowance was made in the previous year. Accordingly, in the background of the aforesaid discussions and precedent, we hold that the addition on account of travelling expenses is liable to be deleted and hence, we set aside the orders of the authorities below and decided the issue in favour of the assessee.
6 Tinna Trade Pvt. Ltd. 12. In the case of M/s Vijay Infrastructure Limited Vs. ACIT (ITAT Lucknow) Income tax (Appeal) no. 254 of 2015 and Cross Appeal Nos. 12 & 13 of 2015 it has been held as under:
After considering the facts of the present case on this issue and the orders of the authorities below, we find no infirmity in the order of CLP (A) because on the basis of general observations, without pointing out even a single specific defect in the vouchers or books of accounts, ad hoc disallowance made by Assessing Officer is not justifiable and the same was rightly deleted by CIT (A). Hence, on this issue, we decline to interfere in the order of learned CIT (A). Accordingly, issue no. 2 is decided in favour of the assessee.
Keeping in view the judgments quoted above and the fact that the disallowances were made on adhoc basis, we decline to interfere with the order of the ld. CIT(A).
In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 09/03/2022.