Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 20.12.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2014-15.
The assessee filed the revised grounds of appeal
which are as under: “On the facts and circumstances of the case;
1. The Ld. Commissioner of Income Tax (Appeals)erred in confirming the addition of Rs, 26,62,061/- being 10% of Truck hire charges expenseson the presumption that net profit was lowered and expenses have been inflated.Your appellant submits that the disallowance of expenditure is adhoc and the expenses ought to be allowed as claimed.
2. The Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 1,06,6027- being 10% in respect of container movement expenses on the presumption that net profit was lowered and expenses have been inflated. Your
The Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.9,32,523/- being 10% of Trip expenseson the presumption that net profit was lowered and expenses have been inflated. Your appellant submits that the disallowance of expenditure is adhoc and the expenses ought to be allowed as claimed.
4. The Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.7,63,596/-beinglO% of Toll tax and parking expenseson the presumption that net profit was lowered and expenses have been inflated. Your appellant submits that the disallowance of expenditure is adhoc and the expenses ought to be allowed as claimed.
The appellant prays:
i) That the decreased net profit in the assessment year has no nexus with the disallowance of expenses. ii) That the expenses cannot be disallowed just based on presumption that expenses are inflated and such action of the Commissioner of Income Tax (Appeals) is void and bad in law. iii) That the alleged adhoc disallowances made by the Ld.AO and confirmed by the Commissioner of Income Tax (Appeals) be deleted. iv) Any other relief your Honors may deem fit.
6. The appellant craves to leave, add, amend or alter the grounds of appeal.”
3. The issue raised in ground No.1 is against the confirmation of addition to the tune of Rs.26,62,061/- by Ld. CIT(A) @ 10% of the truck hire charges thereby upholding the order of AO.
The facts in brief are that the AO during the course of assessment proceedings observed that assessee has debited a sum of Rs.2,66,20,610/- as hire charges under the head “Truck hire charges” which included an amount of Rs.10,46,020/-. Accordingly, the assessee was asked to furnish the complete details of the hire charges along with the details of transportation charges with bills, vouchers, invoices etc. The assessee furnished the monthly summary of the hire charges and ledger for the month of August 2013. The assessee
3 M/s. Baban G. Dangat submitted vide letter dated 23.12.2016 that party-wise details along with PAN were already furnished vide submission dated 08.09.2016 and with respect to additional information such as container numbers, weight etc. were not captured in the accounting system and could not be furnished in a short time given to the assessee. As regards the bills and invoices of hire charges paid, the assessee submitted that same were filed on 26.08.2016 and requested the AO to allow some time for furnishing the additional information. However, the AO disallowed Rs.26,62,061/- being 10% of the total hire charges on the ground that assessee failed to discharge the primary onus to substantiate and support the claim of expenses in the books of accounts.
5. In the appellate proceedings, the Ld. CIT(A) affirmed the addition by observing and holding as under: “4.2 I have perused the relevant facts of the case as mentioned by the Assessing Officer in the assessment order as well as arguments taken on behalf of the appellant. The Assessing Officer in the assessment order has clearly mentioned that the assessee failed to furnish supporting bills and vouchers. During the appellate proceedings, the appellant was directed to furnish net profit rate and on a perusal of the same, it is seen that there is considerable decrease in the net profit shown during the year as compared to the preceding two years. In the A.Y. 2012-13 and 2013-14, the NP has been shown at 4.46% and 3.24% respectively. However, in the present year, the NP shown is only 2.76%. The appellant is running a proprietary concern and therefore, inflation of expenses for the purpose of reducing taxable income cannot be ruled out particularly keeping in view of the fact that there is considerable reduction in the net profit shown during the year. I therefore hold that the Assessing Officer was already very fair and reasonable in restricting the disallowance to the extent of 10% of the claim and therefore, the disallowance made by him at Rs. 26,62,061/- is confirmed.”
After hearing both the parties and perusing the material on record, we observe that the assessee has furnished the bills, vouchers and books of accounts in support of his claim. However, the AO further sought the detail of weight, container
Before us the Ld. A.R. argued that the said information was not readily available with the assessee as the same was not captured in the books of accounts and the bills and which were very difficult to compile in a short period. The Ld. A.R. also submitted that the authorities below have not doubted the expenses, however, disallowed the expenses to the tune of 10% which comes to Rs.26,62,061/- for the reason that the assessee has not furnished the details which were asked for by the AO. The Ld. CIT(A) rejected the appeal of the assessee by observing that the net profit during the current year has fallen considerably vis-à-vis the two preceding years. The net profit during the year was 2.76% whereas in the preceding two years the NP was 4.46% and 3.24%. The Ld. CIT(A) held that the assessee is running a proprietary concern and the inflation of expenses can not be ruled out and thus justified the disallowance to the extent of 10%. In our opinion, the disallowance is merely based on estimation surmises and presumptions which is not correct and can not be sustained. Under these circumstances, we are inclined to set aside the order of CIT(A) and direct the AO to delete the disallowance.
Ground No.1 is allowed.
The issue raised in ground No.2, 3 & 4 of the appeal is against the confirmation of addition on account of container movement expenses, trip expenses and toll taxes and parking expenses to the tune of 10% of the total expenses claimed under
The facts in brief are that the AO during the course of assessment proceedings observed that assessee has charged to the profit & loss account under the head “Truck hire charges” Rs.10,46,020/- as container movement expenses. The AO, after observing that the vouchers were self made, disallowed 20% of the expenses which comes to Rs.2,09,204/-. Similarly, the assessee has debited trip expenses of Rs.93,25,322/- under the head fuel, oil and operating expenses. According to the AO these expenses were incurred in cash and assessee could not submit the bills and vouchers in support of his claim and accordingly disallowed a sum of Rs.13,98,784/- being 50% of the said expenses. Likewise, under the head of toll taxes and parking expenses, the assessee has debited Rs.76,35,962/- as toll tax and parking expenses. The AO disallowed Rs.11,45,394/- being 50% of the said expenditure on the estimated basis by holding that assessee could not produce the bills, vouchers in respect of these expenses which were incurred in cash and finally added all these disallowances to the income of the assessee.
In the appellate proceedings, the Ld. CIT(A) by comparing the net profit in the current year which was 2.76% with the earlier two assessment years namely 2012-13 and 2013-14 which was 4.46% and 3.24% respectively upheld the disallowance partly on the suspicion on that assessee might have suppressed the profit. The Ld. CIT(A) sustained the addition to the extent of 10% in respect of container movement
6 M/s. Baban G. Dangat expenses, trip expenses, sundry and toll tax and parking expenses thereby confirming additions under these heads to the tune of Rs.1,04,602/-, Rs.9,32,523/- and Rs.7,63,596/-. We observed that the disallowance was purely made on adhoc basis on the presumption that assessee might have inflated the expenses in order to suppress the income. In our opinion, such a presumption is not correct on the part of the Revenue Authorities as no concrete findings as to suppress of income by the assessee has been brought on record. Under these facts and circumstances, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the disallowance.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 09.08.2019.