SKK STEEL ENTERPRISES PVT. LTD.,,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX,, RAIGAD

The crux of the grievance of the assessee in this appeal is with regard to ad-hoc disallowance of Rs.15,97,830/- @ 5% of the miscellaneous expenses claimed in the Profit & Loss account.

The brief facts in this case are that the assessee debited total expenditure of Rs.3,19,56,578/- under the head “ Miscellaneous Expenses”. During the course of assessment proceedings, the assessee was asked to furnish credible documentary evidences to substantiate the expenses claimed under this head. The assessee furnished requisite details and on perusal of the same, the Assessing Officer noticed that some of the expenses were incurred in cash, accounted through self made vouchers and some vouchers were unsigned. In order to prevent leakage of revenue, the Assessing Officer made ad-hoc disallowance of Rs.15,97,830/- i.e. 5% of total expenses of Rs.3,19,56,578/- debited under the head “ miscellaneous expenses” and added to the total income of the assessee.

The Ld. CIT(Appeals) as per detailed reasons as appearing in his order had upheld 5% disallowance of the total expenses made by the Assessing Officer.

At the time of hearing, the Ld. AR of the assessee reiterated the submissions placed before the Assessing Officer as well as before the Ld. CIT(Appeals). He further placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Sayaji Iron and Engg. Co. Vs. CIT, 2002 253 ITR 749 (Guj.) and submitted that in case of a limited company there cannot be anything as personal expenses because a limited company by its very nature cannot have any personal use. The Ld. AR, therefore, prayed for deletion of addition.

Per contra, the Ld. DR emphasized on the facts on record that on scrutiny of the details of expenses it was clearly found that some of these expenses were through self made vouchers while some vouchers were unsigned and made in cash, therefore, the genuineness of these expenses does not stand verified fully . Thus, Ld. DR prayed that 5% disallowance of the total expenses should be sustained.

We have perused the case records and heard the rival contentions. That on examination of the facts on record and from the order of the Assessing Officer as well as the Ld. CIT(Appeals), it is crystal clear that expenses were incurred which are not doubted by the Department. Regarding credibility of the documentary evidences furnished, some of the expenses were found to be incurred in cash, accounted through self made vouchers and some were unsigned.

In the result, appeal of the assessee is partly allowed.