SHRI RAMESH CHAND CHATURVEDI,KARAULI vs. INCOME TAX OFFICER, WARD, KARAULI

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES ”A”, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 770/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2013-14 cuke Shri Ramesh Chand Chaturvedi, ITO, Vs. Prop.- Jai Shiv Shankar Tirtha Yatra Ward- Karauli. Company, Vardhman Nagar, Hindaun City, Karauli. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABSPC 5329 D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Poddar & Ms. Isha Kanoongo (Adv) jktLo dh vksj ls@ Revenue by : Shri J.C. Kulhari (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 16/10/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 10/12/2018 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M.

This appeal by the assessee is directed against the order dated

16/03/2018 of ld. CIT(A), Kota for the A.Y. 2013-14. The assessee has

raised following grounds of appeal: “1. That under the facts and circumstances of the case, the ld. CIT(A) has erred in confirming of Rs. 49,27,778/- on account of Rail Fair Expenses supported by the respective tickets and receipts and most of the payments were made through cross account payee cheques.

ITA 770/JP/2018_ 2 Ramesh Chand Chaturvedi Vs ITO

expenses. The assessee is an individual and proprietor of M/s Jai Shiv

Shankar Tirtha Yatra Company. The assessee is engaged in the business

of Travelling agency business organizing the tirth yatra (religious trips)

specially for old age people and saints. The assessee filed his return of

income on 30/09/2013 declaring total income of Rs. 8,22,480/-. During

the year under consideration, the assessee has claimed train ticket

expenses of Rs. 2,84,27,813/-. The Assessing Officer asked the assessee

to produce the supporting evident in respect of claim of rail fair

expenditure. The Assessing Officer noted that the assessee has

produced the evidence to the extent of Rs. 2,35,000,35/- and

consequently the Assessing Officer has disallowed the balance amount

of Rs. 49,27,778/- for want of supporting evidence.

ITA 770/JP/2018_ 3 Ramesh Chand Chaturvedi Vs ITO

before the ld. CIT(A) and submitted written submissions. The ld. CIT(A)

has confirmed the action of the Assessing Officer on the ground that

the Assessing Officer has fairly allowed more than 80% of the claim for

which proper evidences were filed.

of account of the assessee are audited U/s 44AB of the Income Tax Act,

1961 (in short the Act) where the assessee has shown the total receipt

of Rs. 7,10,86,203/- on which net profit of Rs. 10.6 lacs were declared,

which is more in comparison to the last years. He has further submitted

that the turnover of the assessee has increased during the year from Rs.

4.61 crores to Rs. 7.10 crores. The net profit rate for the earlier year

was 1.10% whereas the net profit for the year under consideration is

1.50%, therefore, the assessee has declared better results for the year

under consideration on substantially higher turnover and hence there is

no reason for doubting the claim of expenditure. The ld AR has further

contended that the expenditure claimed by the assessee on account of

rail fair is only the rail fair and food expenses during the trips of pilgrims

which are more than 80% of the total expenditure. He has referred the

copy of ledger account of rail fair expenditure at page Nos. 31 to 42 of

ITA 770/JP/2018_ 4 Ramesh Chand Chaturvedi Vs ITO

the paper book and submitted that all the payments were made to the

railways which can be verified independently from the railways. The

most of the payments were made through cross account payee cheques

duly reflected in the bank account of the assessee as well as recorded in

the books of account of the assessee. The cash payment was made only

where it was urgently needed for booking the reservation on urgent

basis. The railway has issued the cash receipts in such cases which were

duly produced before the Assessing Officer. The ld AR has referred to

the receipts issued by the railways at page Nos. 31 to 154 of the paper

book and submitted that all these documents were produced before the

Assessing Officer. However, the Assessing Officer has disallowed the

claim without verification of the receipts issued by the railways. The

Assessing Officer during the assessment proceedings, conducted a test

check of account with all receipts and vouchers produced by the

assessee, however, in the assessment order, the Assessing Officer has

made the disallowance of Rs. 49,27,778/- for want of supporting

evidence and details which is contrary to the evidence produced by the

assessee. The ld. AR has contended that the assessee produced all the

details in support of the claim and therefore, there is no scope of not

production of any part of the bills of details. The assessee produced

complete books of account alongwith the ledgers as well as the bills and

ITA 770/JP/2018_ 5 Ramesh Chand Chaturvedi Vs ITO

receipts issued by the railways. Though the complete record was

available on the assessment record, the ld. CIT(A) has confirmed the

disallowance without considering the submissions or giving opportunity

to the assessee to make proper representation. Hence, the ld AR has

submitted that the Assessing Officer asked the assessee to produce the

books of account and relevant details and records which were produced

by the assessee and thereafter no show cause notice was given by the

Assessing Officer to make the disallowance of Rs. 49,27,778/-.

not produced any new material or record in support of the claim despite

sufficient opportunities were given by the Assessing Officer as well as

the ld. CIT(A). Only at the fag-end of the assessment, the assessee filed

the details sought by the Assessing Officer and therefore, the Assessing

Officer has passed the assessment order which was time barring. The

Assessing Officer has given the reasons for disallowance as the

supporting evidence and details were not furnished by the assessee. He

has relied upon the orders of the authorities below.

material on record. There is no dispute that the assessee is undertaking

tour trips of the pilgrims at various placed through Indian Railways as

ITA 770/JP/2018_ 6 Ramesh Chand Chaturvedi Vs ITO

well as road transports. The business activity of the assessee involved

the expenditure during the journey apart from railway fair, bus fair and

other sundry expenditure. The assessee claimed train ticket expenditure

of Rs. 2,84,27,813/- against the turnover of Rs. 7,10,86,203/-. There is

no dispute that that the turnover of the assessee is significantly higher

in comparison to the preceding year of Rs. 4.61 crores. Despite the

substantial increase in the turnover, the assessee’s G.P. and N.P. rte

declared for the year under consideration is much better than the

preceding years. The Assessing Officer has made disallowance of Rs.

49,27,778/- out of the total claim of Rs. 2,84,27,813/- on the ground

that the assessee has not filed the relevant details and supporting

evidence. It is pertinent to note that the train ticket expenditure claimed

by the assessee can be verified from the details of the tickets and

journey undertaken by the assessee and number of pilgrims taken to the

trips. The train ticket expenditure has a direct nexus with the

correspondence receipt as it can be compared from number of

passengers undertaken the journey for pilgrims trips. The Assessing

Officer has not pointed out or made any allegation about the inflated

expenditure or excess expenditure claimed by the assessee in

comparison to the preceding year in terms of the percentage of the

number of the pilgrims or the total turnover. The assessee has filed

ITA 770/JP/2018_ 7 Ramesh Chand Chaturvedi Vs ITO

complete details of expenditure alongwith supporting evidence which is

nothing but the receipts issued by the railways. Further the assessee

has also filed the receipt issued by the Indian Railway Catering (IRCTC)

giving all details of payments through cheques or in some cases though

cash. Even otherwise the Assessing Officer has not doubted 80% of the

claim of railway ticket expenditure. Once the assessee produced the

entire details alongwith ledger account or audited books of account

giving the details of the total number of passengers taken to the tips

then the corresponding ticket expenditure cannot be disallowed. The

ticket expenditure has a direct nexus with the corresponding receipts

and therefore, once the assessee has shown the receipt for all he trips

undertaken through railways then the ticket expenditure is essential

expenditure which can be verified from the record. We note that the

assessee has produced about more than 120 pages of documents

comprising of receipts issued by the railways and each receipt is in most

of the cases is for the entire lot of passengers travelling in a trip.

Therefore, when the assessee has filed the supporting evidence and the

Assessing Officer has not given any specific show cause notice for

making the disallowance of Rs. 49,27,778/- out of the total claim then

said disallowance at the back of the assessee and further the entire

record was available with the A.O., is not justified. Accordingly, we

ITA 770/JP/2018_ 8 Ramesh Chand Chaturvedi Vs ITO

delete the disallowance made by the Assessing Officer which is made in

a summary manner without proper verification of the record.

of various expenditure. The Assessing Officer has made disallowance of

5% to 50% of the various expenditure for want of supporting bills and

vouchers. The Assessing Officer has given the reasons that since the

assessee has not produced the complete bills and vouchers and some of

the vouchers are self made, therefore, 5% to 50% respectively of these

expenditure were disallowed by the Assessing Officer.

before the ld. CIT(A) but could not succeed.

assessee produced books of account, ledger accounts as well as all

supporting bills and vouchers in respect of the various expenditure,

however, the Assessing Officer has made ad hoc disallowances without

proper examination of the record produced by the assessee. He has

referred the details of the expenditure and submitted that the payment

of expenditure was made after deduction of TDS. Further all the

expenditures were duly recorded in the books of account as well as in

the ledger account and also supported by the bills and vouchers,

ITA 770/JP/2018_ 9 Ramesh Chand Chaturvedi Vs ITO

therefore, an ad hoc disallowance is not permissible. In support of his

contention, he has relied upon the decision of Kolkata Benches of the

Tribunal in the case of DCIT Vs. M/s Lexicon Auto Ltd. in ITA No.

1354/Kol/2016 order dated 19/02/2018 and submitted that the Tribunal

has held that the disallowance on account of ad hoc basis is not

permissible under the provisions of the Act. If the Assessing Officer is

not satisfied with the claim and explanation of the assessee then he has

to make the disallowance after making specific reference of such

documents/vouchers and particular expenditure. The Assessing Officer

cannot just make the disallowance on ad hoc basis without pointing out

any defect or error in the explanation and record submitted by the

assessee. The ld AR has then relied upon the decision of Hon’ble Gujarat

High Court in the case of CIT Vs. Vallabh Glas Works Ltd. (2014) 220

Taxman 129 (Guj). Hence, he has contended that when the majority of

the payment was made through cheque and only a friction of the

amount was paid in cash due to the necessity of the circumstances

during the journey, the same cannot be disallowed on ad hoc basis.

Officer has given the reasons for disallowance being the complete

details as well as the supporting evidence was not filed by the assessee

ITA 770/JP/2018_ 10 Ramesh Chand Chaturvedi Vs ITO

and even some of the vouchers were self made vouchers which were

not verifiable. He has relied upon the orders of the authorities below.

material on record. The assessee has claimed various expenses as

under:

Particulars Amount Advertisement expenses 25,07,666/- Bus hire charges 1,32,80,883/- Food and refreshment expenses 1,59,90,959/- Tour manager and staff salary expenses 32,96,000/- Sundry expenses 30,60,222/- Postage and courier expenses 8,99,990/- Printing and stationery expenses 15,17,818/- The Assessing Officer made the disallowance equivalent to 5% to 50%

of these expenditure, total amounting to Rs. 31,63,492/-. The details of

the disallowances made by the Assessing Officer are as under:

Particulars Amount Advertisement expenses 125383 Bus hire charges 664044 Food and refreshment expenses 799548 Tour manager and staff salary 329600 Sundry expenses 306012 Postage and courier expenses 179996 Printing and stationery 758909 Total 3163492 11.1 As regards the disallowance of advertising expenses of Rs.

1,25,383/-, the Assessing Officer has made the disallowance of 5% of

the total expenditure of Rs. 25,07,666/-. It is pertinent to note that the

ITA 770/JP/2018_ 11 Ramesh Chand Chaturvedi Vs ITO

total advertising expenses are 3.5% of the total receipts which were

paid to the news paper and advertisement agencies. The entire payment

has been made through account payee cheques except Rs.6,778/-. Thus

once the payment was made to the news paper and advertisement

agencies through cheques and after deduction of TDS then the claim of

the assessee cannot be doubted. Even if the Assessing Officer was not

satisfied with the claim then the same could have been verified from the

recipients but no such exercise has been done by the Assessing Officer

and the Assessing Officer has made ad hoc disallowance of 5% of the

total expenses. We further note that the Assessing Officer has not

doubted the genuineness of the expenditure as it was not found to be

excessive and further when almost the entire payment was made

through banking channels and full details as per the ledge accounts

were produced by the assessee with supporting bills number and name

of the recipient in the ledger account then the said ad hoc disallowance

is uncalled for. Accordingly in the facts and circumstances of the case

when the assessee has paid the entire amount except a negligible

amount of Rs. 6,778/- through cheque and after deduction of TDS and

particulars of the parties alongwith bill number and dates were also

given in the ledger account then the ad hoc disallowance is not

permissible. Hence, the same is deleted.

ITA 770/JP/2018_ 12 Ramesh Chand Chaturvedi Vs ITO

11.2 Disallowance of bus hire charges:- Out of the total

expenditure of Rs. 1,32,80,883/-, the Assessing Officer has made the ad

hoc disallowance of 5% amounting to Rs. 6,64,044/-. The sole ground

of the Assessing Officer is that the complete bills and vouchers were not

produced by the assessee. We note that the assessee has filed the

vouchers details and supporting documents which are placed at page

No. 164 to 213 of the paper book. Further when the payments are made

to the bus operators and details of the bus operators are given and

further when these expenditures are also explained trip wise then in

absence of any allegation about the excess claim or inflated claim of

expenditure, ad hoc disallowance made by the Assessing Officer is not

permissible. The assessee produced audited accounts with regard to the

expenditure and also given the complete details of expenditure which is

supported by the bills and vouchers then even if some vouchers are

handmade, the same cannot be a reason when the particulars in the

vouchers are proper and complete. We further note that the assessee

has declared net profit of 1.5% which is highest in comparison to the

preceding 2 years for the A.Y. 2012-13 and 2011-12 at 1.1% and .85%.

Considering all these details particularly in view of the fact that the

turnover of the assessee has increased substantially from 4.61 crores to

7.10 crores, the claim of expenditure cannot be doubted as it

ITA 770/JP/2018_ 13 Ramesh Chand Chaturvedi Vs ITO

commensurates with the corresponding receipts. Hence, the ad hoc

disallowance made by the Assessing Officer is deleted.

11.3 Disallowance of Food and Refreshment expenses:- The

Assessing Officer has made disallowance of 5% on the ground that the

bills and vouchers produced by the assessee were handmade and were

rejected by the Assessing Officer. It is not disputed by the Assessing

Officer that the expenditure claimed by the assessee was incurred in

connection with the business activity of the assessee as food and

refreshment are inseparable part of the tour trips undertaken by the

assessee. Therefore, once no allegation of excess claim or bogus claim,

having considering the number of pilgrims taken to the tour during the

year under consideration and number of days of journey, the ad hoc

disallowance is not justified. The Assessing Officer even otherwise not

doubted the allowability of claim of expenditure lend out wholly and

exclusively for the business purpose then if the claim of the assessee is

not excessive and has a direct nexus with the number of passengers and

duration of the tour trips then an ad hoc disallowance is uncalled for and

the same is deleted.

11.4 Disallowance of Tour management and staff salary @

10%:- The sole ground of ad hoc disallowance on the ground that the

ITA 770/JP/2018_ 14 Ramesh Chand Chaturvedi Vs ITO

some of the bills and vouchers were self made and no confirmation were

produced by the assessee. It is pertinent to note that the assessee has

claimed payment of the salary to the staff which is necessary for the

activity of Tour & Travels having a turnover of more than Rs. 7.00

crores. Therefore having peculiar nature of the business activity of the

assessee where without the service of the management and other staff,

the same is not possible then in absence of a bogus or excessive claim,

an ad hoc disallowance made by the Assessing Officer is not justified

and the same is deleted. Even otherwise in the case, the Assessing

Officer had doubted any particular payment of salary then he could have

undertaken a test check examination of the claim instead of resorting to

the ad hoc disallowance.

11.5 Disallowance of sundry expenses:- The Assessing Officer has

made disallowance of 10% of the sundry expenses on the ground that

the bills and vouchers produced by the assessee were self made. The ld

AR has pointed out that the expenditure claimed by the assessee is

regarding wages for cooking staff, accommodation expenses, helper and

attendant expenses, video and photograph expenses are incurred at the

spot and in connection with business activity of the assessee of taking

the pilgrims on tour. Therefore, the expenditure incurred at the spot of

ITA 770/JP/2018_ 15 Ramesh Chand Chaturvedi Vs ITO

the tour and in between is incurred in cash as the situation and nature

of the expenditure demands so. These expenditures are duly recorded in

the books and also supported by bills and vouchers though some of the

bills and vouchers are self made in respect of the wages paid to the

cooking staff. We find that once the expenditure is not excessive in

comparison to the earlier years to the total receipt of the year under

consideration then an ad hoc disallowance is not permissible. There is

no dispute that the expenditure claimed by the assessee is of such a

nature that these expenditures cannot be made other than cash at the

distant and remote places where these expenditures were incurred.

Accordingly having regard to the facts and circumstances of the case

when there is no allegation about the excessive or non-genuineness of

the expenditure, the ad hoc disallowance of 10% is deleted.

11.6 Disallowance of postage and courier expenses:- The

assessee has claimed postage and courier expenditure of Rs. 8,99,990/-.

The Assessing Officer disallowed 20% of the said expenditure on the

ground that all bills and vouchers produced were self made. We find

that the assessee has produced only details of the expenditure which is

mostly on account of postage stamp purchased by the assessee and

speed post and courier expenses. As far as the purchase of postage

ITA 770/JP/2018_ 16 Ramesh Chand Chaturvedi Vs ITO

stamp is concerned, since there is no receipt issued by the post office,

therefore, except self made vouchers no other supporting evidence can

be produced. However, as regards the registry/speed post as well as

courier expenses, there are proper receipts and bills issued by the postal

authorities as well as courier agencies. The assessee has not produced

those receipts, therefore, we find that the assessee has failed to

discharge his onus to prove that the entire expenditure has been

incurred wholly and exclusively for the purpose of business to the extent

of registry and speed post as well as courier expenditure. Hence, the

disallowance made by the Assessing Officer at 20% of the total

expenditure is found to be excessive which is restricted to 10% of the

total claim.

11.7 Disallowance of printing and stationary expenses:- The

Assessing Officer has made a disallowance of 50% of the expenditure

claimed by the assessee on the ground that all the bills and vouchers

were self made. We find that in support of the claim of the printing and

stationery expenditure of Rs. 15,17,818/-, the assessee has given only

details of the persons and bill numbers. Though, the assessee given

details of the persons and bill numbers, however, the bills were not

produced by the assessee in support of his claim. Therefore, the details

ITA 770/JP/2018_ 17 Ramesh Chand Chaturvedi Vs ITO given by the assessee remained unverified for want of the relevant bills.

The assessee though claimed to have produced bills and vouchers

however, what is produced on the record is only details and not the bills

and vouchers. Accordingly, in view of the facts and circumstances of the

case, we find that 50% of the disallowance made by the Assessing

Officer is excessive and therefore, the same is restricted to 20% of the

total expenses.

Sd/- Sd/- ¼foØe flag ;kno½ ¼fot; iky jko½ (VIKRAM SINGH YADAV) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 10th December, 2018 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Ramesh Chand Chaturvedi, Karauli. 1. izR;FkhZ@ The Respondent- The ITO, Ward- Karauli. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 770/JP/2018) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत