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Income Tax Appellate Tribunal, “E”, BENCH MUMBAI
Before: SHRI PAWAN SINGH, JM & SHRI G. MANJUNATHA, AM
This is an appeal filed by the assessee is directed against order of the Commissioner of Income Tax Appeals–10, Mumbai dated 27/03/2018 and it pertains to the Assessment Year 2011-12. The assessee has raised following the grounds of appeal:-
I. Confirming cash expenditure to the extent of Rs. 5,10,000/- as non genuine out of Adhoc Disallowance made by AO of Rs. 10,00,000/- for cash expenses.
1. The Learned CIT(A) erred in confirming cash expenditure to the extent of Rs. 5,10,000/- as non genuine out of adhoc disallowance made by AO of Rs. 10,00,000/- for cash expenses.
2. The Learned CIT(A) failed to appreciate the fact that the total cash withdrawal made during the year are Rs. 7,60,000/- which is duly depicted in the Bank Statements & not Rs. 2,50,000/- as understood.
3. The disallowance of Rs. 5,10,000/- for cash expenditure requires to be deleted.
2. The brief facts of the case are that the assessee company is engaged in the business of Project services for Oil, Gas and Power including LNG and LPG filed its return of income for AY 2011-12 on 20/09/2011 declaring total loss of Rs. 7,62,30,388/-. The assessment has been completed u/s 143(3) of the I.T. Act, 1961 on 26/02/2014, determining total loss of Rs. 7,52,30,390/- by making adhoc disallowance of Rs. 10 Lacs in respect of various expenditure debited into the profit and loss account including employee cost, administrative and other expenses.
3. Aggrieved by the assessment order, the assessee preferred an appeal before CIT(A). Before, the Ld. CIT(A), the assessee submitted that the AO was incorrect in adhoc disallowance of a sum of Rs. 10 Lacs in respect of various expenses, ignoring the fact that out of total expenses of Rs. 10,97,31,961/-, expenses to the extent of Rs. 7,84,850/- was incurred in cash for which cash has been drawn from bank to the extent of Rs. 7,60,000/- on various dates and the remaining amount has been spent out of opening cash balance for which necessary details has been filed. The CIT(A) after considering the relevant submissions of the assessee partly allowed relief in respect of adhoc disallowance of expenses, where he has deleted additions made by the AO to the extent of Rs. 4,90,000/- and balance amount of Rs. 5,10,000/- has been sustained on the ground that although assessee claims to have withdrawn a sum of Rs. 7,60,000/- from bank, but on appraisal of bank statements it appears that the assessee has withdrawn a sum of Rs. 2,60,000/- only. Therefore, it appears that the expenses to the extent of Rs. 5,10,000/- are non genuine and hence sustained additions to that extent. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
The Ld. AR for the assessee submitted that the Ld. CIT(A) was erred in not considering cash withdrawals from banks on various dates from BNP Paribas Current Account amounting to Rs. 7,60,000/- for which necessary evidences has been placed before the AO. The Ld. AR further submitted that the assessee had opening cash balance of Rs. 59,960/- and cash withdrawal of Rs. 7,60,000/- which comes to Rs. 8,19,960/-.
Further, it has incurred cash expenses of Rs. 7,84,858/-. If we compare cash balance availability and cash expenses, the cash available with the assessee is more than the amount of expenses, therefore there is no merit in the findings of the Ld. CIT(A) that there is no cash withdrawals from the bank. The Ld. AR, in respect of further query from the Bench regarding observations of the AO with regard to cash expenses of Rs. 7,40,54,320/- submitted that the AO has appraised incorrect facts in light of losses declaredg by the assessee for the year under consideration to come to conclusion that assesee incurred cash expenses of Rs. 7,40,54,320/-, but fact remains that out of total expenses, expenses to the extent of Rs. 7,84,858/- was only incurred in cash.
The Ld. DR, on the other hand, strongly supporting order of the CIT(A) submitted that there is no clarity in facts brought out by the AO as well as Ld. CIT(A) and arguments advanced by the Ld. AR for the assessee. Therefore, the matter may be set aside to the file of the AO for verification.
We have heard both the parties and perused the relevant material available on record. The only dispute is with regard to adhoc disallowance of a sum of Rs. 10 Lacs, in respect of various expenditures debited into the profit and loss account. The AO has disallowed a sum of Rs. 10 Lacs on the ground that the assessee has incurred majority of expenses in cash. Although, the Ld. CIT(A) has allowed partial relief of Rs. 4,90,000/- on the basis of submissions of the assessee, but confirmed balance amount of Rs. 5,10,000/- on the ground that there is no proof of cash withdrawal from bank. It is claim of the assessee that out of total expenses of Rs. 10,97,31,961/-, a sum of Rs. 7,84,858/- was incurred in cash and the remaining expenditure has been incurred by cheque. In this regard, the assessee has filed a detailed chart showing total expenses, expenses incurred by cheque and expenses incurred by the cash. The assessee has also filed cash accounts summary as per which the total cash available for the year was at Rs. 8,19,960/-, as against this total cash expenditure of Rs. 7,84,858/- was incurred. The facts are contradictory each other. The AO as well as the CIT(A) claims that there is no cash withdrawals from the bank to support cash expenditure, whereas the assessee claim that it has withdrawn a sum of Rs. 7,60,000/- from BNP Paribas Current Account on various dates. Therefore, we are of the consider that the issue needs to be set aside to the file of the AO to verify the facts in light of claim of the assessee that it has withdrawn a sum of Rs. 7,60,000/- from bank on various occasions out of which cash expenditure of Rs. 7,84,858/- was incurred. Hence we set aside the issue to the file of the AO and direct him to verify cash withdrawals from banks.
In case, the AO found that the assesee explains cash availability in respect of expenditure incurred in cash, then the AO is direct to delete additions made towards adhoc disallowances were expenses.
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on this 31 /07/2019