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Income Tax Appellate Tribunal, G BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER (Assessment Year: 2013-14) DCIT-17(1), Room No. 117, 1st Floor, G-Block, Kautilya Bhavan, Bandra Kurla Complex, Mumbai - 400051 ……………… Appellant Vs Sandeep Shukla, Flat No. A-200, 2nd Floor, Green Tower, CHSL, Gillbert Lane, Andheri, Mumbai - 400053 [PAN: BJDPS4569M] ……………. Respondent Appearances For the Appellant/Department : Shri Abdul Hakeem M For the Respondent/Assessee : Shri Bharat Kumar Date of conclusion of hearing : 27.10.2022 Date of pronouncement of order : 28.10.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Revenue has challenged the order, dated 28.06.2022, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [hereinafter referred to as „the CIT(A)‟] for the Assessment Years 2013-14, whereby the Ld. CIT(A) had partly allowed the appeal against the Assessment Order, dated 28.03.2016 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟).
Assessment Year: 2013-14 2. The Revenue has raised the following grounds of appeals:
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not considering that the assessee has not submitted any fresh documentary evidence in support of his claim though the expenses were incurred wholly in cash and no supporting bills produced for verification.
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in substituting the disallowance of expenses made on “Salary & Wages” and “Other Expenses” @ 60% & 50% by the Assessing Officer to 10% without any objective basis or ground reasoning.”
The relevant facts, in brief, the Assessee is an individual engaged in the business of collecting toll and parking charges as per contracts awarded to him under proprietorship concern with his family members also engaged in similar business through different proprietorship. The Assessee filed return of income on 28.09.2013 declaring total income of INR 31,62,590/-. The case of the Assessee was selected for scrutiny and assessment. During the assessment proceedings the Assessing Officer noted that the Assessee had debited to Profit & Loss Account the Salary and Wages aggregating to INR 3,61,36,485/- and other expenses aggregating to INR 1,08,22,178/-. The other expenses consisted of Conveyance Expenses (INR 8,81,463/-), Sundry Expenses (INR 22,34,856/-), Staff Welfare Expenses (INR 6,32,417/-), Repair & Maintenance Expenses (INR 32,21,023/-) and Printing & Stationery Expenses (INR 38,52,419/-). The Assessee was asked to furnish the break-up, details and supporting documents in relation to the aforesaid expenses claimed as deduction. Not being satisfied with the supporting documents furnished by the Assessee, the Assessment Year: 2013-14 Assessing Officer disallowed INR 2,16,81,891/- being 60% of Salary & Wage Expenses and INR 54,11,089/- being 50% of the Other Expenses vide order, dated 28.03.2016, passed under Section 143(3) of the Act, thus, assessing total income of the Assessee at INR.3,02,55,570/-. While doing so, the Assessing Officer placed reliance on the assessment framed in the case of M/s S.S. Enterprises, a proprietorship concern of the Assessee for the Assessment Year 2012-13.
In appeal preferred by the Assessee against the Assessment Order dated 28.03.2016 the CIT(A) reduced the disallowance from 60/50% to 10% vide order, dated 28.06.2022
Being aggrieved, the Revenue has preferred the present appeal.
When the matter was taken up for hearing, the Ld. Authorised Representative for the Assessee placed on record common order, dated 30.09.2022, whereby the appeal filed by the Assessee for the Assessment Year 2013-14 against the aforesaid order of CIT(A), dated 28.06.2022, was disposed off by the Tribunal by further reducing the rate of disallowance from 10% to 5% by placing reliance on the decision of co- ordinate Bench of the Tribunal [ITA No. 5592 & 5593/Mum/2018, dated 05.02.2019] in the case of the father of the Assessee who was also running a similar proprietorship concern. He submitted that in view of the aforesaid decision of the Tribunal, the present appeal by the Revenue be dismissed. Per contra, the Ld. Departmental Representative relied upon the assessment order has submitted that the rate of disallowance be restored to 60/50%.
Assessment Year: 2013-14 7. We have considered the rival submissions and perused the material on record including the aforesaid decision of the Tribunal [ITA No. 2063&2064/Mum/2022, pronounced on 30.09.2022] the appeal preferred by the Assessee the relevant extract of which read as under:-
“10. Aggrieved, assessee filed an appeal before ITAT raising following grounds in its appeal: - “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred confirming the addition made by Ld. A.O. of Rs. 36,13,648/- on account of adhoc expenses i.e. 10% of Expenses.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred confirming the addition made by Ld. A.O. of Rs. 10,82,217/- on account of adhoc expenses i.e. 10% of various Expenses.
3. The assessee craves leave to add, alter or amend the existing grounds of appeal on or before the date of hearing.”
11. Ld. Counsel for the assessee reiterated the submissions made before Ld.CIT(A) and submitted that the addition made by the Ld.CIT(A) is on higher side, thus requested to reduce the same. Ld. Counsel for the assessee relying on the decision of the Coordinate Bench in assessee‟s sister concern in ITA.No. 5592 & 5593/Mum/2018 dated 02.05.2019 submitted that Coordinate Bench has estimate the profit rate at the rate of 3% which is engaged in the same industry and prayed that the same may be adopted.
12. Ld. DR relied on the orders of the Authorities below.
13. Considered the rival submissions and material placed on record. It is observed in assessee‟s sister concern case in ITA.No. 5592 & 5593/Mum/2018 dated 02.05.2019 in which the Coordinate Bench held as under: - “34. We note that Ld. CIT(A) has found that the addition was to be limited to a fair estimate. The Ld. CIT(A) examined the profit ratio disclosed by the assessee and that in other units in the business. Thereafter, Ld. CIT(A) also noted that in the alternative contention that the 4 Assessment Year: 2013-14 assessee has offered 3% profit for taxation. Ld. CIT(A) on consideration of the overall facts made an estimate of profit at the rate of 5% of the turnover.
35. Now in this regard assessee is in appeal before us that the addition of estimate of profit made by the Ld. CIT(A) is on higher side and Revenue has also filed appeal against the Ld. CIT(A)'s order.
36. Upon careful consideration we note that the facts and circumstances of the average profit of the assessee for the period A.Y. 2009-10 to 2013-14 is as under: A.Y. Profit % 2009-10 1.78 2010-11 1.71 2011-12 2.53 2012-13 2.18 2013-14 1.90 The average of the profit of other two units in the same industry are 1.86% and 3.7% respectively. In these circumstances in our opinion the estimate of profit at the rate of 3% offered by the assessee before Ld. CIT(A) served the interest of justice. We also note that rate of profit is a matter of fact and it has been so admitted by the assessee before Ld. CIT(A). We direct accordingly."
14. Respectfully following the above decision and considering the similar facts on record, we are inclined to accept the fact that the profit is around 3%. However, the whole expenses including the salary and wages were incurred only in cash, it is difficult to cross verify the same. Considering the overall facts on record we deem it fit to direct Assessing Officer to disallow 5% of the expenses as reasonable. Therefore, the appeal filed by the assessee is partly allowed.
Coming to the appeal in ITA.No. 2064/Mum/2022 for the A.Y.2014-15, since facts in this appeal are mutatis mutandis, therefore the decision taken in ITA.No. 2063/Mum/2022 for the A.Y. 2013-14 is applicable mutatis mutandis to this appeal also. Accordingly, the appeal filed by the assessee is partly allowed.
Assessment Year: 2013-14 16. In the result, appeals filed by the assessee are partly allowed.”
On perusal of above, it is clear that the Tribunal was, after examining the facts and circumstances of the case, pleased to further reduce the rate of disallowance to 5% from 10%. Thus, in effect, rejecting the grounds raised by the Revenue in the present appeal whereby the Revenue has sought for increase of the rate/quantum of disallowance from 10% to 60/50% (as made by the Assessing Officer). In view of the decision of the Tribunal in the appeal preferred by the assessee arising from the order of CIT(A) impugned by the Revenue by way of the present appeal, Ground No. 1&2 raised by the Revenue are dismissed.
In the result, the present appeal by the Revenue is dismissed.
Order pronounced on 28.10.2022.