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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI PRAMOD KUMAR, VP & SHRI AMIT SHUKLA, JM
O R D E R
Per Amit Shukla, Judicial Member:
The aforesaid appeal has been filed by the assessee against the impugned order dated 20.05.2019 passed by Ld. CIT(A)-25, Navi Mumbai for the quantum appeal of assessment passed u/s 143(3) for AY 2015-16. The sole issue raised in the grounds of M/s Reehal Roadlines appeal is that Ld. CIT(A) erred in confirming the adhoc disallowance of trip expenses of Rs. 3,20,638/-.
None appeared on behalf of the assessee despite various notices sent through RPAD, accordingly the appeal of the assessee is being decided on merits.
The facts in brief are that, the assessee firm is engaged in the business of transportation and owns 90 truck from which it earns freight /transport income. Ld. AO noted that assessee claimed trip expenses to the tune of Rs. 1,77,13,138/- and in response to show cause notice, it was submitted by the assessee that these trip expenses pertains to expenses given to the driver and cleaners in cash before the trip of transport for their miscellaneous use and toll expenses. From the perusal of the transport receipt, AO noted that 90% of the receipt is from one party, M/s Inox Air Products, whereas in terms of their agreement, M/s Inox Air Products will make reimbursement of expenses incurred by the assessee for Toll /Naka charges which assessee incurs during every trip.
Ld. AO after detail analysis and verification, made adhoc disallowance of Rs. 3,20,638/- after concluding as under:-
M/s Reehal Roadlines 6.3 In view of the above findings the expenses related to TRIP are worked out taking into consideration every possible aspect which comes to Rs. 1,73,92,500/- and the assessee has claimed on a very higher side i.e Rs. 1,77,13,138/-. In A.Y 2014-15, (immediate proceeding year) the trip expenses claimed was Rs.94,00,358/-against the turnover of Rs.14.70 Cr. However during the year, the assessee has claimed Rs.1,77,13,138/- against the turnover of Rs.18.30 Cr which seems to be very high. It is pertinent to mention here that all these expenses are always made in cash hence the correctness of these expenses cannot be fully verifiable. It is also pertinent to mention here that the above Trip expenses are worked out taking into consideration that, all the 90 vehicles are employed for 365 days which is a very rare factor. The above expenses worked out of the drivers & cleaners may be less than the worked out figure but purposely worked out on a higher side to cover the expenses which may be apart from the above. Hence after doing natural justice Rs.3,20,638/- of the TRIP expanses seen to be claimed in excess are disallowed as claimed on a higher side for proper check and verification.
Ld. CIT (A) has confirmed the aforesaid addition.
From the perusal of paper book available on record, we find that ITAT in assessee’s own case for AY 2013-14 (ITA No. 5523/Mum/2018) on exactly similar issue on adhoc disallowance of M/s Reehal Roadlines trip expenses have confirmed the disallowance up to Rs. 1 lakhs. The relevant observation of the Tribunal reads as under:-
I have considered rival submissions and perused the material on record. The fact that the assessee is in transportation business and has employed a fleet of vehicles in such business is beyond doubt. The doubt raised by the Assessing Officer regarding the quantum of expenses is due to incurring of such expenses in cash. However, the Assessing Officer in an arithmetic exercise undertaken by him has worked out the trip expenses at Rs. 84,51,300. Of–course, ultimately, he has restricted the disallowance to 5% of expenses claimed on a purely ad–hoc basis. As could be seen from the statements filed before learned Commissioner (Appeals). The trip expenses as a percentage of the transportation receipt worked out in the range of 11% to 13% in assessment years 2009–10 and 2010–11. However, in assessment years 2011–12 to 2013–14, such expenditure remained in the range of 8.5% of the transportation receipt. It is further evident, while considering the issue relating to similar disallowance made in the assessment year 2010–11, the Tribunal in ITA no.4424/Mum./2015, dated 17th May 2016, has restricted the disallowance to Rs. 50,000, as against the expenditure claimed of Rs. 83,79,427. Similarly, in the assessment year 2012–13, as against the expenditure claimed of Rs. 75,85,193, the Assessing Officer disallowed an amount of Rs. 75,000. Considering the quantum of expenditure claimed by M/s Reehal Roadlines the assessee in the impugned assessment year and past instances relating to such disallowances, I am of the considered opinion that the disallowance in the impugned assessment year should be restricted to Rs. 1,00,000 only. The Assessing Officer is directed to compute the disallowance accordingly. The ground raised
by the assessee is partly allowed.
7. Thus after following the aforesaid decision in assessee’s own case, we restrict the disallowance to Rs. 1 lakh out of disallowance of Rs. 3,20,638/.
In the result, the appeal filed by the assessee stands partly allowed.