What did the Tribunal hold?

The Tribunal acknowledged the difficulty in maintaining third-party bills for such expenses and the absence of doubt regarding the genuineness of expenditure. Considering the totality of facts, the Tribunal estimated the disallowance at 5% of the claimed expenses.

The Assessing Officer disallowed 15% of certain expenses due to lack of documentary evidence. The CIT(A) restricted this disallowance to 10%. The assessee argued that similar expenses were allowed in preceding and succeeding years and their books were not rejected.

What were the issues?

Whether ad-hoc disallowance of expenses is justified without rejection of books of account and when similar expenses were allowed in other years.

Binod Kumar Agarwalla, Bhubaneswar vs DCIT | s.143(3) | ITAT Cuttack 2018

Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK

Before: S/SHRI N.S SAINI & PAVAN KUMAR GADALE

For Appellant: Shri S.K.Agarwalla, AR

For Respondent: Shri Suvendu Datta, DR

Hearing: 08/08

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.375/CTK/2017 Assessment Year : 2013-2014

Binod Kumar Agarwalla,Plot Vs. DCIT, Circle -4(1), No.87, Kharavel Nagar, Bhubaneswar. Bhubaneswar. PAN/GIR No.AAOPA 1368 L (Appellant) .. ( Respondent)

Assessee by : Shri S.K.Agarwalla, AR Revenue by : Shri Suvendu Datta, DR

Date of Hearing : 08/08/ 2018 Date of Pronouncement : 9 /08/ 2018

O R D E R Per N.S.Saini, AM This is an appeal filed by the assessee against the order of the

CIT(A)-2, Bhubaneswar dated 28.6.2017 for the assessment year 2013-

2014.

The assessee has raised the following grounds of appeal:

“That the AO erred in facts in circumstances in disallowing the 20% of the expenses debited under different heads in ad hoc manner amounting to Rs.4,63,010/- and the CIT(A) is wrong in confirming the disallowance to the extent of 10% of the expenses in adhoc manner amounting to Rs.2,31,505/- which are liable to be deleted.”

The brief facts of the case are that the Assessing Officer has

disallowed 15% of repair and maintenance, shop expenses, telephone

expenses, travelling & conveyance expenses totalling to Rs.23,15,050/-

2 ITA No .375/ CTK/ 2017 Asse ssment Year : 20 13- 201 4

on the ground that the assessee failed to furnish any documentary

evidence in support of claim of expenses.

On appeal, the CIT(A) restricted the disallowance to 10% for the

reason that the very nature of these expenses is such that third party bills

and vouchers are difficult to maintain and sustained the addition to

Rs.2,31,505/-.

Being aggrieved by the said order of the CIT(A), the assessee is in

appeal before us.

Before us, ld A.R. of the assessee submitted that the assessee has

incurred the expenses on normal course of business of the assessee. Ld

A.R. submitted that in the preceding assessment year 2012-13 and in the

succeeding assessment years 2014-15, in an assessment u/s.143(3) of

the Act, the Assessing Officer has not disallowed any such claim of

expenses under the above heads. He submitted that there is no rejection

of books of account. Therefore, he prayed for allowing the appeal of the

assessee.

Ld D.R. supported the order of the CIT(A).

We have heard the rival submissions, perused the orders of lower

authorities and materials available on record. In the instant case, we find

that as the assessee failed to furnish any documentary evidences in

support of the expenses incurred under the head “repair and

maintenance, shop expenses, telephone expenses, travelling &

3 ITA No .375/ CTK/ 2017 Asse ssment Year : 20 13- 201 4

conveyance expenses totalling to Rs.23,15,050/-, the Assessing Officer

disallowed 15% of the expenses claimed of the assessee.

On appeal, the CIT(A) restricted the disallowance to 10% as against

15% made by the Assessing Officer.

10.

We find that the CIT(A) has observed that the very nature of

expenses is such that third party bills and vouchers are difficult to

maintain It has also been argued and submitted by ld A.R. that the

genuineness of the expenditure is not doubted and it is not the case of

the revenue that the assessee has claimed bogus expenditure to reduce

its income. On perusal of assessment order para 2 page 1, we find that

the assessee appeared from time to time and filed details. The Assessing

Officer has not mentioned which details have been furnished by the

assessee. Ld A.R. submitted that in the preceding assessment year 2012-

13 and in the succeeding assessment years 2014-15, in an assessment

u/s.143(3) of the Act, the Assessing Officer has not disallowed any such

claim of expenses by the assessee under the above heads. Considering

the totality of the facts and circumstances of the case, we are of the

considered opinion that it would meet the ends of justice, if the expense

is estimated at 5% of the expenses claimed by the assessee. We order

accordingly. This ground is partly allowed.

4 ITA No .375/ CTK/ 2017 Asse ssment Year : 20 13- 201 4

11.

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

Order pronounced on 9 /08/2018.

Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 9/08/2018 B.K.Parida, SPS

Copy of the Order forwarded to : 1. The Appellant : Binod Kumar Agarwalla,Plot No.87, Kharavel Nagar, Bhubaneswar. 2. DCIT, Circle -4(1), The Respondent. Bhubaneswar 3. The CIT(A)-2, Bhubaneswar 4. Pr.CIT-2, Bhubaneswar 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack

BINOD KUMAR AGARWALLA,BHUBANESWAR vs. DCIT, CIRCLE-4(1), BHUBANESWAR

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

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