VINAY KUMAR AGARWAL,MUMBAI vs. ACIT 18 (3), MUMBAI

आयकरअपील सं./ (िनधा�रण वष� / Assessment Year: 2013-14) & आयकरअपील सं./ (िनधा�रण वष� / Assessment Year: 2014-15) Shri Vinay Kumar Agarwal ACIT-18(3) 1st Floor, Aaykar Bhavan, C/o M/s. Shankarlal Jain & Associates LLP (Chartered Accountants) Queen’s Road बनाम/ Vs. 12, Engineer Building, Mumbai-400 020. 265, Princess Street Mumbai-400 002. PAN: AAIPA 3078 L (अपीलाथ�/Appellant) (��थ� / Respondent) : Assessee by : Shri Shankar Lal Jain-Ld. AR Revenue by : Ms. Samantha Mullamudi -Ld. Sr.DR सुनवाई की तारीख/ : 29/09/2020 Date of Hearing घोषणा की तारीख / : 29/09/2020 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): - 1. The grievance of the assessee in the aforesaid appeals for Assessment Years 2013-14 and 2014-15 is common and therefore, the appeals were heard together and are now being disposed of by way of this consolidated order for the sake of convenience and brevity. First we & 2670Mum/2019 Shri Vinay Kumar Agarwal Assessment Years :2013-14 & 2014-15 take up appeal for AY 2013-14 which contest the order of Ld. Commissioner of Income-Tax (Appeals)-53, Mumbai, [in short referred to as ‘CIT(A)’], on following grounds: -

1. Ld. CIT(A) erred in confirming disallowing of Rs.10 Lakhs, out of car expenses of Rs.8,11,593/- and depreciation of Rs.20,64,927/- based on survey proceedings conducted on 31/08/2015 merely on the plea that appellant is not in a position to substantiate the claim of vehicle used exclusively for purpose of business as no log book is maintained without properly appreciating the facts of the case and law applicable.

2. Ld. AO erred in upholding a disallowance of Rs.1,60,000/- out of certain expenses of Rs.7,98,030/- on adhoc basis in spite of the fact that all requisite evidences were submitted with relation to expenses incurred, merely observing that disallowance is reasonable without properly appreciating the facts of the case and law applicable thereto.

3. Ld. CIT(A) erred in not considering the fact that no disallowance is being made in the hands of appellant in A.Y. 2012-13 as well as in A.Y. 2015-16 and there was no specific reason for making disallowance in current year.

4. Appellant pray that disallowance made be deleted. As evident, the assessee is primarily aggrieved by disallowances of certain expenses. The Ld. AR, Shri Shankar Lal Jain, filed supporting documents and advanced arguments assailing the adhoc disallowances made by lower authorities. The Ld. Sr. DR, Ms. Samatha Mullamudi, drawing attention to the orders of lower authorities, justified the disallowances. We have duly considered the same. 2.1 The material on record would show that an assessment was framed against the assessee u/s. 143(3) on 30/03/2016 wherein the assessee was saddled with adhoc disallowance of Motor Car expenses of Rs.10 Lacs and unverifiable cash expenses of Rs.1,60,000/-. Both the disallowances are subject matter of appeal before us. The said disallowance stem from a survey action conducted by investigation wing of Income Tax Department on the assessee’s location on 31/08/2015. The assessee being resident individual is stated to be engaged in the & 2670Mum/2019 Shri Vinay Kumar Agarwal Assessment Years :2013-14 & 2014-15 business of manufacturing of plastic items in the name and style of M/s. Creative Technoplast. 2.2 During survey operations, it transpired that the assessee had 7 Motor Car in Daman Unit of M/s Creative Technoplast. These cars were purchased on different dates. Against the same, the assessee claimed depreciation of Rs.20.64 Lacs and vehicle expenses of Rs.8.11 Lacs during the year. In the sworn statement during survey operations, the assessee admitted that the cars were not used for any specific concern / unit and used for business interests of the group. Further the cars were used by the members of the family and for activities of other group concerns. In the said background, since no component of personal expenditure was disallowed by the assessee, Ld.AO proceeded to make adhoc disallowance to account for personal element in usage of cars as well as in view of the fact that the cars were being used by the other group concerns. During assessment proceedings, the assessee, inter- alia, submitted that the cars were being used by the staff for marketing purposes. However, not convinced, Ld. AO estimated an addition of Rs.10 Lacs against the same. However, Ld. AO provided deduction u/s 80-IB against the same @25%. In nutshell, the assessee was saddled with effective disallowance of Rs.7.50 Lacs. 2.3 Similarly, discrepancies were found in respect of actual cash found at the premises and cash as per books of accounts. Upon perusal of expenditure details, it transpired that the assessee incurred aggregate expenditure of Rs.7.98 Lacs on account of labor-welfare expenses and conveyance expenses. The said expenditure was claimed against self- & 2670Mum/2019 Shri Vinay Kumar Agarwal Assessment Years :2013-14 & 2014-15 made vouchers. Ld. AO estimated disallowance of Rs.1.60 Lacs against the same. However, the relief of 25% u/s 80-IB was provided against this disallowance also. In nutshell, effective disallowance of Rs.1.20 Lacs was made in the hands of the assessee. 2.4 Upon further appeal, Ld. CIT(A) dismissed assessee’s appeal finding no infirmity in adhoc estimation. Aggrieved, the assessee is in further appeal before us.

3. Before us, Ld. AR opposed adhoc disallowances, inter-alia, by submitting that such disallowances were not made in other years and further no specific defect was pointed out by Ld. AO in the evidences produced by the assessee. Upon careful consideration of factual matrix as enumerated in preceding paragraphs, we find that keeping in view the facts as emerging during survey proceedings including sworn statements made by assessee therein, personal element in usage of Motor Cars could not be ruled out. No disallowance was offered by the assessee in respect of the same while filing the return of income. Similarly, the labor- welfare expenses and conveyance expenses were claimed on the basis of self-made vouchers and the assessee could not produce satisfactory evidences in support of the same. Therefore, some adhoc disallowance is justified on the facts and circumstances. Keeping in view the assessee’s turnover, profits reflected during the year, we restrict the Motor Car disallowance to 20% of Rs.28,76,520/-. The same comes to Rs.5,75,304. The adhoc disallowance against unverifiable expenses is estimated @5% which comes to Rs.39,901/-. The assessee would be entitled for relief of 25% u/s 80-IB against both the items. The Ld.AO is ITA No.2669 & 2670Mum/2019 Shri Vinay Kumar Agarwal Assessment Years :2013-14 & 2014-15 directed to recompute the income of the assessee in terms of our above adjudication. The appeal stands partly allowed. (AY 2014-15) 4. Facts are pari-materia the same in AY 2014-15. The assessee was saddled with adhoc disallowance of Rs.10 Lacs against Motor Car and another adhoc disallowance of 10% amounting to Rs.5.08 Lacs on account of conveyance and staff welfare expenses. Since facts are identical, applying the adjudication of AY 2013-14, the Motor Car expenditure disallowance is restricted to 20% of Rs.26,41,702/- which comes to Rs.5,28,340/-. The disallowance on account of conveyance expenses & staff welfare expenses is estimated @5% which comes to Rs.2,54,243/-. From assessment order, it appears that the assessee is not eligible for deduction u/s 80-IB in this year. Therefore, no further relief would be available to the assessee. The Ld.AO is directed to recompute the income of the assessee in terms of our above adjudication. The appeal stands partly allowed. Conclusion 5. Both the appeal stands partly allowed in terms of our order. Order pronounced on 29th September, 2020.