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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: SRI MANISH BORAD & SRI SONJOY SARMA
order
: June 10th, 2022 ORDER
Per Manish Borad, Accountant Member:
This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2014-15 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-2, Kolkata [in short ld. “CIT(A)”] dated 05.04.2019 arising out of the assessment order framed u/s 143(3) of the Act dated 31.03.2016.
I.T.A. No.: 1225/Kol/2019 Assessment Year: 2014-15 M/s. MKJ Tradex Ltd.
The assessee is in appeal before the Tribunal raising the following grounds: “
1. That, the Ld. A.O. erred and the CIT(A) wrongly confirmed the disallowance of Rs.6,76,226/- made on estimate basis, being 10% of misc. expenses of Rs.67,62,257/- incurred for business purposes on the alleged ground that the expenditure were through cash vouchers and in absence of verifiable bills and vouchers, the expenses were presumed to be not incurred wholly and exclusively for the business purposes.
2. That, the Ld. CIT(A) further erred in not considering that the misc. expenses of Rs.67,62,257/- were incurred in normal course of business on account of advertisement, office expenses, electricity charges, postage etc. which were duly supported by bills, vouchers, ledger account and recorded in the P/L Account and the Ld. A.O. without questioning the veracity of the documents made ad hoc disallowance @ 10% on surmise and conjecture.
3. That, therefore, the Ld. CIT(A) was not justified in upholding the ad hoc disallowance of Rs.6,76,226/- under the head ‘misc. expenses’ without considering that the appellant has fulfilled all the conditions laid in sec.37(l) of the Act for claiming deduction of Rs.67,62,257/- and the A.O. has disallowed the same without pointing out any actual instance of an expense which was not allowable.
4. That, as the order of Ld. C.I.T.(A) on the above issue suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for.
5. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds.”
3. At the outset, ld. Counsel for the assessee submitted that the sole issue relates to ad-hoc disallowance at the rate of 10% of the miscellaneous expenses of Rs. 67,62,257/- and ld. CIT(A) erred in confirming the said disallowance of Rs. 6,76,226/-. It was submitted that since the disallowance is ad-hoc in nature, the same deserves to be deleted.
I.T.A. No.: 1225/Kol/2019 Assessment Year: 2014-15 M/s. MKJ Tradex Ltd.
Per contra, ld. D/R vehemently argued supporting orders of both the lower authorities.
We have heard rival contentions and perused the records placed before us. The grievance of the assessee is against the disallowance of 10% of miscellaneous expenses at Rs. 6,76,226/- confirmed by the ld. CIT(A) which was made by the ld. AO on estimated basis at the rate of 10% of the miscellaneous expenses of Rs. 67,62,257/-. On perusal of the records, we note that the assessee is a limited company and financial statements are duly audited. During the course of assessment proceedings ld. AO called for the details of expenses incurred under the head “miscellaneous expenses”. Since most of the supportings were in the shape of cash vouchers and the assessee was not able to substantiate that these expenses were incurred only and exclusively for the purpose of business, ad-hoc disallowance at the rate of 10% was made by the ld. AO and subsequently confirmed by the ld. CIT(A). 6. Before us also ld. Counsel for the assessee has not filed any details of miscellaneous expenses. However, looking to the fact that books of account are audited and genuineness of expenses claimed by the assessee has not been doubted by ld. AO and no specific defect has been pointed out by the ld. AO and disallowance being purely ad-hoc in nature, we in the interest of justice and being fair to both the parties, restrict the disallowance to the extent of 5% of the miscellaneous expenses at Rs. 3,38,113/- and partly allow the grounds raised by the assessee.
I.T.A. No.: 1225/Kol/2019 Assessment Year: 2014-15 M/s. MKJ Tradex Ltd. In the result, appeal of the assessee is partly allowed. 7. Kolkata, the 10th June, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 10.06.2022 Bidhan (P.S.) Copy of the order forwarded to:
1. 1. M/s. MKJ Tradex Ltd., Sagar Estate, Unit-1, 3rd Floor, 2, Clive Ghat Street, Kolkata-700 001.
2. DCIT, Circle-4(2), Kolkata. 3. CIT(A)2, kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata.