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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश / O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)–6, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)-6/110/15-16 dated 21.03.2017 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961(hereinafter referred to as "the Act") dated 24/03/2015 relevant to Assessment Year (AY) 2011-12.
The assessee has raised following grounds of appeal:- 1. The learned CIT Appeals erred in conformed the addition made by the assessing authority Rs.1,11,080/- out of administrative and Sundry expenses and vehicle running and
ITA No.1478/Ahd/2017 Lion Tapes Pvt.Ltd. vs. ITO Asst.Year - 2012-13 - 2 - freight and carriage out ward expenses and add to the total income of the appellant. 2. The learned CIT Appeals erred conformed the addition made by the assessing authority Rs.111115/-out of foreign travel expenditure. 3. Order of CIT Appeals-XX been received by the appellant on 15 April 2017 hence this appeal is in time.
At the outset, we found that the appeal filed by the assessee is barred by limitation by one day. The Ld. DR did not object for the condonation of the delay, considering the length of delay. Therefore, we decided to condone the delay of one day in filing the appeal by the assessee.
At the outset, we find that at the time of hearing there was nobody appeared from the side of the assessee as well as no adjournment application was filed. However, we find that the amount involved in the appeal is of small value. Therefore we decided to adjudicate the issue after hearing the Ld. DR.
The first issue raised by the assessee is that the Ld. CIT(A) erred in confirming the disallowance made by the Assessing Officer for Rs. 1,11,080/- on an estimated basis.
The assessee in the present case is a Private Limited Company and engaged in the business of manufacturing of Narrow Fabrics Tapes. The
ITA No.1478/Ahd/2017 Lion Tapes Pvt.Ltd. vs. ITO Asst.Year - 2012-13 - 3 - assessee in the Profit & Loss account has claimed certain expenses under the head of ‘other expenses’ as detailed under:
Sl.No. Particulars Amount (Rs.) 1. Administrative and Sundry expenses 44,378/- 2. Vehicle running expense 22,190/- 3. Freight & Carriage Outwards expenses 4,75,047/- � Total 7,40,515/-
6.1. The assessee in support of these expenses has produced the vouchers to the Assessing Officer during the assessment proceedings. However, the Assessing Officer found certain defects in the vouchers filed by the assessee. Therefore, the Assessing Officer doubted on the genuineness of the expenses and accordingly held that the possibility of overstatement of the expenses could not be ruled out. Accordingly, the Assessing Officer disallowed the expenses of Rs.1,11,080/- being 15% of the total expenses and added to the total income of the assessee.
Assessee preferred an appeal to the Ld.CIT(A). The assessee before the Ld.CIT(A) submitted that all the necessary supporting evidence were filed before the Assessing Officer during the assessment proceedings. But the Assessing Officer without pointing out any specific defect and affording any opportunity by way of issuing show-cause notice has made the disallowance on an estimated basis.
ITA No.1478/Ahd/2017 Lion Tapes Pvt.Ltd. vs. ITO Asst.Year - 2012-13 - 4 - 8. The assessee regarding the administrative and sundry expenses submitted that it has already made disallowance of Rs.1,500/- on account of charity and donation. Most of the expenses claimed under this head were paid through ‘Account Payee’ Cheque. Some of the expenses represent the office welfare, such as, tea, refreshment, etc. for which necessary vouchers were maintained. These vouchers were also duly signed by the recipient. The assessee also filed the ledger copy in support of such expenses.
8.1. The assessee regarding the vehicle expenses did not raise any objection. As such the assessee did not press this disallowance.
The assessee regarding freight and carriage outwards expenses submitted that this cost was incurred for purchasing and selling the goods from outside the Bhavnagar where its factory was located.
9.1. The assessee on many occasions has imported the goods from foreign countries and incurred the cost for the transportation of the same to the factor. The carriage outwards was also incurred by transferring the products in a small transport vehicle to the bigger transport to make the delivery of the goods to the parties.
9.2. Most of the time, the payment for freight and carriage outwards expenses was made through ‘Account Payee’ cheque. The assessee in support of its claim filed the copies of the vouchers and ledger.
ITA No.1478/Ahd/2017 Lion Tapes Pvt.Ltd. vs. ITO Asst.Year - 2012-13 - 5 - 9.3. However, the Ld.CIT(A) disregarded the contention of the assessee by observing that there was no application filed by the assessee for the admission of additional pieces of evidence under Rule 46A of the Act. Accordingly, the Ld.CIT(A) confirmed the disallowance made by the Assessing Officer.
Being aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.
The Ld.DR before us vehemently supported the orders of the lower authorities.
We have heard the Ld.DR and perused the materials available on record. It is not in dispute that the assessee has filed additional evidence to the Ld.CIT(A), but the same were not admitted as the application for Rule 46A of the Act was not filed by the assessee. In this regard, we note that if there was no request letter filed by the assessee for the admission of the additional documents, then the Ld.CIT(A) should have afforded the opportunity to the assessee to rectify the same.
12.1. We also note that the assessee has filed supporting vouchers which were found defective by the authorities below. Therefore, the disallowance was made @ 15%. From the preceding discussion, we note that the supporting vouchers were available with the AO. Thus in our considered view, it was the duty of the Assessing Officer to point out the
ITA No.1478/Ahd/2017 Lion Tapes Pvt.Ltd. vs. ITO Asst.Year - 2012-13 - 6 - specific instances where the supporting vouchers were defective. But the AO did not so.
12.2. We also note that the assessee has not pressed the disallowance of the vehicle running before the Ld.CIT(A). But on perusal of the ground of assessee’s appeal, we note that it has challenged the same before us, therefore, we find the contradictory statement in the claim of the assessee.
12.3. As the amount involved in the issue is very nominal, therefore we are inclined to take the lenient view. Thus after considering the facts of the case in totality, in our considered view the justice will be served upon the assessee if the disallowance is reduced from 15% to 10% for all the expenses. Hence, the ground of appeal is partly allowed.
The second issue raised by the assessee is that the Ld. CIT(A) erred in confirming the disallowance of foreign traveling expenses for Rs.1,11,115/- only.
The assessee during the year has claimed foreign traveling expenses amounting to Rs. 5,55,777/- only. But the assessee failed to produce the documentary evidence in support of his claim. Therefore, the Assessing Officer made the disallowance of Rs.1,11,115/- being 20% of the foreign traveling expenses and added to the total income of the assessee.
ITA No.1478/Ahd/2017 Lion Tapes Pvt.Ltd. vs. ITO Asst.Year - 2012-13 - 7 - 15. The aggrieved assessee, preferred an appeal to the Ld. CIT(A). The assessee before the Ld.CIT(A) submitted that the Directors of the company have traveled to foreign countries for exploring the new development in the machinery as well as the contacts. The assessee also claimed to have been filed the detailed ledger copy with supporting evidence to the Assessing Officer during the assessment proceedings. The assessee further claimed that there were no personal cost involved in foreign traveling expenses.
15.1. However, the Ld.CIT(A) disregarded the contention of the assessee by observing that there was no supporting evidence filed to justify the foreign traveling expenses. Therefore, he confirmed the order of the Assessing Officer.
Being aggrieved by the order of Ld.CIT(A), the assessee is in appeal before us.
The Ld.DR before us vehemently supported the order of authorities below.
We have heard the Ld.DR and perused the materials available on record. From the preceding discussion, we note that the assessee has not filed sufficient documentary evidence in support of its claim. Therefore, the disallowance was made by the Assessing Officer @ 20% of foreign traveling expenses. The Ld. CIT(A) subsequently confirmed the view of the Assessing Officer.
ITA No.1478/Ahd/2017 Lion Tapes Pvt.Ltd. vs. ITO Asst.Year - 2012-13 - 8 -
18.1 We also note that the assessee has also not filed any supporting documentary evidence before us in support of the expense. However, taking a lenient view, we are inclined to restrict the disallowance @ 10% of the foreign traveling expenses. Thus, to meet the ends of justice, we direct the Assessing Officer to make the disallowance of foreign traveling expenses @ 10% of the foreign traveling expenses.
In the result, the appeal of the assessee is partly allowed. This Order pronounced in Open Court on 01/02/2019
Sd/- Sd/- ( RAJPAL YADAV ) ( WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 01/02/2019
ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad