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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI S. RIFAUR RAHMAN & SHRI RAVISH SOOD
ORDER PER S. RIFAUR RAHMAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2014-15. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-4, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’). The appeal was filed by the assessee with a delay of 78 days. At the time of hearing the assessee filed an affidavit before us admitting the delay and explained the reason for such delay. After considering the submissions, we condoning the delay and proceeded to hear the appeal.
Babaji Shivram 2 ITA No. 5948/M/2019
Brief facts of the case are, the assessee filed return of income on 30.11.2014 declaring total income of Rs.17,14,27,570/-. The case was selected for scrutiny under CASS Statutory notices u/s 143(2) and 142(1) were issued and served upon the assessee. In response to the above said notices, the Ld. AR of the assessee filed the relevant information as called for. The assessee is a Custom House Agent engaged in the business as an agent on behalf of the client while getting the custom clearance. The facts relevant to the grounds raised by the assessee are, during the assessment proceedings, the Assessing Officer observed from the previous assessment order and profit and loss account that the assessee has debited staff welfare expenses to the extent of Rs.32,90,908/- conveyance expenses at Rs.40,58,630/-, general expenses at Rs.11,25,644/- and office maintenance expenses at Rs.24,86,099/-. The total of the above expenditures works out to Rs.1,09,61,281/-. When the assessee was asked to justify the expenses and why disallowance as made in earlier assessment year should not be continued in this assessment year also. In response, AR of the assessee submitted that all the said expenses are incurred for business purpose and the same are audited by the auditors of the assessee and the auditors have not found any discrepancies. Thus, the AR of the assessee also produced bills for verification. After verification of the above details, the Assessing Officer observed that the most of the expenses are booked by way of self-made vouchers and in some of the cases payments were made in cash and not supported by proper bills. Therefore, the AO disallowed 10% of the above expenses. Aggrieved with the above order, the assessee preferred an appeal before CIT(A)-4, Mumbai, at the time of appellate proceedings, the assessee was asked Babaji Shivram 3 to produce all bills and vouchers for verification. However, the assessee could not submit the same before first appellate authority even though several opportunities were given to assessee. Since no detail were submitted in appellate proceedings, Ld. CIT(A) sustained the addition made by the AO.
Aggrieved with the above order, the assessee is in appeal before us raising following ground of appeal :
On the facts and circumstances of the Appellant’s case and in law the Ld. CIT(A) erred in confirming the action of AO in making ad-hoc disallowance of Rs.10,96,128/- being 10% of expenses in nature of staff welfare expenses conveyance expenses, general expenses and office maintenance expenses.
3. Before us, the Ld. AR submitted that the case of the assessee is covered in assessee’s own case for assessment year 2013-14 in dated 09.08.2019 which is reproduced below:
5. After hearing both the parties and perusing the material on record, we observe that the authorities below have made ad-hoc disallowance of expenses incurred under the various heads to the extent of 10% of the total claim of the assessee. The only reasons attributed by the authorities are that these expenses were incurred in cash and booked on the basis of self-made vouchers. In our opinion, the disallowance was purely made on the basis of presumptions and surmises and ad-hoc in nature without pinpointing any specific defects or deficiencies. Therefore, we deem it fit to restrict disallowance to 5%. The AO is directed accordingly.
He prayed that the case of the assessee may be decided as per the above order.
Babaji Shivram 4 ITA No. 5948/M/2019
On the other hand, the Ld. DR relied on the order passed by the lower authorities.
Considered the rival submissions and material on record. We notice that the Assessing Officer disallowed the various expenses incurred by the assessee by observing that all the expenses were incurred by the assessee are booked by way of self-made vouchers and in some cases payments are made in cash and not supported by proper bills. Accordingly, he disallowed 10% of the total expenses. This issue was already considered by the Co-ordinate Bench and reduced the disallowance from 10% to 5% in assessee’s own case in assessment year 2013-14 (ITA No. 3931/M/2018). By respectfully following the above decision we are also inclined to direct the Assessing Officer to disallow only 5% of the total expenses. Accordingly, the amount raised by the assessee are allowed. 6. In the net result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 08/06/2021.