M/S JANKI SONS,JALANDHAR vs. ASSISTANT COMMISSIONER OF INCOME TAX, JALANDHAR

Earlier this appeal was disposed of in ITA No. 550/Asr/2016 vide order dated 29.8.2016 which was recalled on the issue relating to the sustenance of disallowance out of forwarding and delivery expenses by observing in order dated 29.5.2018 in M.A. No. 47/Asr/2017 that the Coordinate Bench inadvertently escaped to decide the ground no. 1. Accordingly the appeal was fixed for hearing.

The facts related to this issue in brief are that the assessee filed the return of income declaring an income of Rs. 32,55,250/- which was processed under section 143(1) of the Income Tax Act, 1961. Later on the case was selected for scrutiny. The AO noticed that the assessee had claimed forwarding and delivery expenses amounting to Rs. 20,82,277/-. The AO considered it reasonable to disallow 20% of the said expenses and made the disallowance of Rs. 4,16,515/-.

The learned CIT(A), however, did not find merit in the submissions of the assessee and observed that there was force in the contention of the assessee as the expenses claimed under this head in a proportion to sales had declined in this year as compared to the preceding year and that as regards to the non production of supporting vouchers before the AO the assessee has justified the same could not be produced on the ground that the supporting vouchers for such expenses could not be obtained from some of the small vendors. He, therefore, restricted the disallowance to Rs. 2,00,000/-.

Now the assessee is in appeal.

The learned counsel for the assessee reiterated the submissions made before the learned CIT(A) and further submitted that the assessee produced all the vouchers and that the books of accounts were duly audited in which no specific defect was pointed out by the

In his rival submissions, the learned DR supported the orders of the authorities below.

I have considered the submissions of both the parties and perused the material available on the record. In the present case, the learned CIT(A) himself accepted this contention of the assessee that the expenses claimed under this “head” on proportion to the sales had declined in the year under consideration. He also accepted that non production of the supporting vouchers in certain cases was on account of smallness of the expenses involved. In my opinion, when the expenses incurred by the assessee were on the lower side under this head in comparison to the preceding as well as succeeding year and the books of accounts were duly maintained in regular course of business, there was no justification in sustaining the addition sustained of Rs. 2,00,000/-. In that view of the matter, the addition sustained by the learned CIT(A) is deleted.

In the result, appeal of the assessee is allowed.