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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, AM: This appeal filed by the assessee is directed against the order of the CIT(A), Trivandrum dated 10/07/2018 and pertains to the assessment year 2013-14.
The assessee has raised the ground regarding sustenance of addition of Rs.2,19,537/- out of the total seaport expenditure of Rs.1,22,28,989/-.
The facts of the case are that the AO disallowed an amount of Rs.2,19,637/- at 20% out of the total expenditure of Rs.10,98,186/- incurred towards seaport
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expenses stating that they are supported only by self made vouchers and further paid in cash.
On appeal, the CIT(A) confirmed the addition made by the Assessing Officer.
Against this, the assessee is in appeal before us. The Ld. AR submitted that that there is no prohibition under the Income Tax Act, 1961 to incur cash expenses so long as each such expense is less than Rs. 20,000/- and all such cash expenditure were below such limit. It was submitted that the Assessing Officer had not mentioned anywhere in his order that the possibility of personal expenses in Seaport expenses A/c cannot be ruled out. Considering the nature of the expenditure, the place of expenditure (Seaport) and the recipients of such expenditure (staff, tempo drivers, workers etc), it was submitted that the possibility of such expenses taking the character of personal expenditure is very remote. It was submitted that considering the nature of business, the assessee could not have carried on her business without incurring such cash expenditure.
5.1 Further, the Ld. AR submitted that the Assessing Officer had not mentioned anywhere in his order that all self-generated vouchers were not duly signed by recipients of the money, but the fact is that all self made vouchers bear the signature of the recipients and the genuineness of expenditure was not questioned by the Assessing Officer. It was submitted that all seaport expenses
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were supported either by third party or self made vouchers signed by the recipients. It was submitted that since the Assessing Officer had confirmed that out of the total seaport expense of Rs. 1,22,28,989/-, the assessee had made TDS on Rs, 1,11,30,803/-, therefore there is no dispute on the genuineness of seaport expenses amounting to Rs. 1,11,30,803/-. According to the Ld. AR, the dispute is only with regard to the balance amount of Rs. 10,98,186/- and the Assessing Officer had disallowed an amount of Rs, 2,19,637/- which comes to 20% on the aforesaid amount merely based on conjectures and surmises and not based on facts or evidences. Therefore, it was submitted that the observation of the CIT (A) that it is only 1.79% of the total expenditure cannot be a ground for confirming the addition made by the AO. It was submitted that the assessee had deducted tax at source wherever it is applicable on all seaport expenses. It was submitted that the assessee could not have bothered to evade tax for a meagre amount of Rs 2,19,637/- compared to the total income of Rs. 6,89,09,450/-
5.2 The Ld. AR relied on the judgment of the Gujarat High Court in the case of CIT vs. Om Bhole Transport and Construction (ITA No. 309 of 2013) which is very much relevant in this case. The Court in the aforesaid decision observed as follows: “———Taking up firstly question (C), which pertains to addition of Rs.3,04,257/- and Rs.62,320/- respectively towards disallowance of labour charges and repairs and expenses, we notice that the Tribunal deemed it fit not to entertain this question of the revenue holding that the
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payment had been made by the cash and self made vouchers were presented. Nothing was brought on record to indicate that the payments were not made to the recipient, who signed the vouchers. This issue requires no further consideration as it raises no substantial question of law,......." Hence, it was prayed that the addition may be deleted.
The Ld. DR relied on the order of the lower authorities.
We have heard the rival submissions and perused the record. In this case, the total expenditure incurred by the assessee was Rs.1,22,28,989/- towards seaport expenses. Out of this expenditure, the assessee deducted TDS on an amount of Rs.1,11,30,803/-. The balance amount of Rs.10,98,186/- was not subject to TDS. This expenditure was supported by self made vouchers and not supported by third party evidence like bills and receipts and the entire amount was paid in cash. Considering these aspects, 20% of the same amounting to Rs.10,98,186/- was disallowed by the Assessing Officer. Even before us, the assessee was not able to substantiate the expenditure by way of proper bills and vouchers. In our opinion, there is every chance of inflating the expenditure by way of self made vouchers as the control over preparation of self made vouchers was with the assessee. Hence, in our opinion, there should be certain disallowance on this count. The disallowance made by the Assessing Officer at 20% of all the payments supported by self made vouchers is very excessive. Considering this, the Assessing Officer is directed to restrict the disallowance to the extent of 10% of the amount supported by self made vouchers. Thus, the
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addition is sustained at Rs.1,09,819/- instead of Rs.2,19,637/-. This ground of appeal of the assessee is partly allowed.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open Court on this 25th October, 2018.
sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Kochi Dated: 25th October, 2018 GJ Copy to: 1. Mrs. Zohra Aboobacker Sait, T.C. 9/328/9, LA-4, LA Street, Trivandrum. 2. The Assistant Commissioner of Income-tax, Circle-1(2), Trivandrum. 3. The Commissioner of Income-tax(Appeals), Trivandrum. 4. The Pr. Commissioner of Income-tax, Trivandrum. 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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