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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY
The present appeal has been filed by the assessee challenging the order dated 13th July 2018, passed by the learned Commissioner of Income Tax (Appeals)–25, Mumbai, for the assessment year 2013–14.
The dispute in the present appeal is confined to the disallowance of trip expenses amounting to ` 4,69,792.
Brief facts are, the assessee is a partnership firm. As stated by the Assessing Officer, the assessee is engaged in the business of transportation of industrial products. For the assessment year under 2 Reehal Roadlines dispute, the assessee filed its return of income on 29th September 2013, declaring total income of ` 3,94,420. In the course of assessment proceedings, the Assessing Officer, after verifying the Profit & Loss account called upon the assessee to furnish the details of major expenses. After perusing the details, he found that ` 93,95,842, is debited towards trip expenses. On further clarification being sought from the assessee, he found that the assessee has sixty-six trucks which have been employed in transportation business. Further, the assessee stated that the trip expenses are given in cash to drivers and cleaners before each trip of transportation for their miscellaneous use and toll expenses. The Assessing Officer observed, as per the transportation agreement entered with one of the customers, the customer would make payment towards toll naka charges. Further, referring to the same agreement he observed that if the tour is for long distance and covers the period of more than fifteen days, the impact of increase in diesel expenses and lodging expenses would be considered by the customer separately. After undertaking an arithmetical exercise on his own, the Assessing Officer ultimately concluded that the trip expenses claimed by the assessee is on a higher side and accordingly worked out such expenses at ` 84,51,300. Further, he observed that the expenses were always made in cash, hence, not fully verifiable. However, ultimately, the Assessing Officer disallowed 5% of the trip expense claimed by the assessee which 3 Reehal Roadlines worked out to ` 4,69,792. The assessee challenged the aforesaid disallowance before the first appellate authority.
After considering the submissions of the assessee in the context of the facts and material on record, learned Commissioner (Appeals) sustained the disallowance made by the Assessing Officer.
The learned Authorised Representative submitted, the Assessing Officer according to his own calculation has worked out the trip expenses at `84,54,300, however, he has ultimately restricted the disallowance to 5% of the expenses claimed on purely ad–hoc basis. The learned Authorised Representative submitted, while deciding identical issue in assessee’s own case for the assessment year 2010– 11, the Tribunal has reduced the disallowance to ` 50,000, as against the disallowance made by the Assessing Officer. Further, he submitted, in assessment year 2012–13 the Assessing Officer himself restricted the disallowance to ` 75,000. Thus, he submitted, in worst case, the disallowance made by the Assessing Officer should be restricted to ` 75,000.
The learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals).
4 Reehal Roadlines 7. I have considered rival submissions and perused the material on record. The fact that the assessee is in transportation business and has employed a fleet of vehicles in such business is beyond doubt. The doubt raised by the Assessing Officer regarding the quantum of expenses is due to incurring of such expenses in cash. However, the Assessing Officer in an arithmetic exercise undertaken by him has worked out the trip expenses at ` 84,51,300. Of–course, ultimately, he has restricted the disallowance to 5% of expenses claimed on a purely ad–hoc basis. As could be seen from the statements filed before learned Commissioner (Appeals). The trip expenses as a percentage of the transportation receipt worked out in the range of 11% to 13% in assessment years 2009–10 and 2010–11. However, in assessment years 2011–12 to 2013–14, such expenditure remained in the range of 8.5% of the transportation receipt. It is further evident, while considering the issue relating to similar disallowance made in the assessment year 2010–11, the Tribunal in ITA no.4424/Mum./2015, dated 17th May 2016, has restricted the disallowance to ` 50,000, as against the expenditure claimed of ` 83,79,427. Similarly, in the assessment year 2012–13, as against the expenditure claimed of ` 75,85,193, the Assessing Officer disallowed an amount of ` 75,000. Considering the quantum of expenditure claimed by the assessee in the impugned assessment year and past instances relating to such disallowances, I am of the considered opinion that the disallowance in 5 Reehal Roadlines the impugned assessment year should be restricted to ` 1,00,000 only. The Assessing Officer is directed to compute the disallowance accordingly. The ground raised by the assessee is partly allowed.
In the result, appeal is partly allowed. Order pronounced in the open Court on 13.03.2020