SRI.PADMAKUMAR K.P.,ALAPPUZHA vs. THE ITO, WD-3, ALAPPUZHA

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ITA 395/COCH/2018Status: DisposedITAT Cochin28 November 2018AY 2014-155 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal directed the disallowance of expenses to be restricted to 5% instead of 10% to meet the ends of justice, considering the nature of the business. The disallowance of EPF/ESI contributions paid beyond the due date was confirmed, following the jurisdictional High Court's decision.

What were the facts?

The assessee, running a bar, hotel, and restaurant, claimed various expenses. The Assessing Officer disallowed 10% of certain expenses due to a lack of proper evidence, and the CIT(A) confirmed this. The assessee also appealed the disallowance of EPF/ESI contributions paid late.

What were the issues?

Whether a partial disallowance of expenses is justified due to lack of complete evidence, and whether late payment of employee EPF/ESI contributions attracts disallowance.

Which sections of the Income-tax Act were involved?

Section 36(1)(va),Section 69B

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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

For Appellant: Shri R. Srinivasan, FCA
For Respondent: Smt. A.S. Bindhu, Sr. DR
Hearing: 27/11/2018Pronounced: 29/11/2018

Per CHANDRA POOJARI, AM:

This appeal filed by the assessee is directed against the order of the CIT(A),

Kottayam dated 27/07/2018 and pertain to the assessment year 2014-15.

2.

The first ground is with regard to addition of 10% of selected expenditure for

deficiency in gross profit and net profit.

3.

The facts of the case are that vide notice u/s. 142(1) of the Act and

subsequent letters, the assessee was required to furnish supporting

documents/vouchers to substantiate the various expenses claimed other than that of purchase of liquor which was covered by TCS. According to the Assessing

Officer even after affording several opportunities, the assessee had not produced

any evidence in support of various expenses till date. Considering the very low

NP and possibility of inflated expenses under the head vegetables and fruits

(Rs.4,81,431), general purchase (Rs.1,34,752), repair and maintenance

(Rs.1,74,109), fish beef, egg etc. (Rs.7,51,319), provisions (Rs.7,33,308), the

Assessing Officer disallowed 10% of the above expenses in the absence of

proper complete evidence. Accordingly, the Assessing Officer disallowed the

amount of Rs.2,27,490/- and added to the returned income under the head

business.

4.

On appeal, the CIT(A) observed that during the appellate proceedings also

the assessee failed to produce any evidence in support of the expenses and

confirmed the addition made by the Assessing Officer. Against this, the assessee

is in appeal before us.

5.

We have heard the rival submissions and perused the record. The assessee

is engaged in the business of running a bar, hotel and restaurant which is an

unorganized sector. In our opinion, full fledged vouchers in respect of vegetables

and fruits, general purchase, repairs and maintenance, fish, beef, egg and other

provisions cannot be collected. Being so, the assessee maintains self made

vouchers with recipient signatures. Hence, there may be chances of inflating expenditure. In view of this, to meet the ends of justice, we direct the Assessing

Officer to restrict the disallowance to the extent of 5% instead of 10% made by

the Assessing Officer. Accordingly, this ground of appeal of the assessee is

partly allowed.

6.

Ground No. 2 regarding disallowance of medical expenses towards personal

use and Ground No. 4 regarding treatment of deposits with Federal Bank as

unexplained investment u/s. 69B of the Act, which were not pressed before us,

hence, these grounds are dismissed as not pressed.

7.

Ground No. 3 is with regard to disallowance u/s. 36(1)(va) in respect of EPF

and ESI paid beyond the due date.

7.1 The facts of the case are that the Assessing Officer disallowed an amount of

Rs.1,01,748 u/s. 36(1)(va) of the Act on the ground that the assessee had not

deposited the contribution of the employees towards EPF and ESI before the due

date, specified in those acts.

7.2 On appeal, the CIT(A) held that the issue is covered against the assessee

by the judgment of the Jurisdictional High Court in the case of Merchem Ltd. (61

taxmann.com 119). Hence, the CIT(A) dismissed the ground of appeal raised by the assessee on the issue of deduction of contribution of employees u/s.

36(1)(va) of the Act. Against this, the assessee is in appeal before us.

7.3 As rightly held by the CIT(A), this issue is squarely covered against the

assessee by the judgment of the Jurisdictional High Court in the case of

Merchem Ltd. (61 taxmann.com 119). Hence, we do not find any infirmity in the

order of the CIT(A) and same is confirmed. Hence, this ground of appeal of the

assessee is dismissed.

8.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on this 29th November, 2018.

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 29th November, 2018 GJ Copy to: 1. Shri Padmakumar K.P., Komalavilas, Zilla Court Ward, Thathampally, Alappuzha-688 013. 2. The Income Tax Officer, Ward-3, Alappuzha. 3. The Commissioner of Income-tax(Appeals), Kottayam. 4. The Pr. Commissioner of Income-tax, Kottayam. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order

(ASSISTANT REGISTRAR)

I.T.A.T., Cochin

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