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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per Bench:
The captioned appeal filed by the assessee, pertaining to assessment year 2015-16, is directed against the order passed by the Commissioner of Income Tax (Appeal)-2, Kolkata in appeal no. 10353/CIT(A)-2/17-18, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 11/12/2017.
The grounds of appeal raised by the assessee are as follows:
1.For that on the facts and in the circumstances of the case, the ld. A.O. was not justified in making an addition amounting to Rs. 1,37,874/- being 20% of Rs. 6,89,473/-.
Excel Stock Broking Pvt. Ltd. Assessment Year:2015-16 2. For that on the facts and in the circumstances of the case, the ld. A.O. was not justified in making an addition amounting to Rs. 95,800/- under the head motor car expense.
For that on the facts and in the circumstances of the case, the ld. A.O. was not justified in making an addition amounting to Rs. 66,730/- under the head computer expense.
For that on the facts and in the circumstances of the case, the ld. A.O. was not justified in making an addition amounting to Rs. 66,157/- under the head general expense, 36,000/- under the head Examination charges, 11,264/- under the head office maintenance & 18,300/- under the head Advertisement Expense.
That the appellant craves leave to add, alter or delete all or any of grounds of appeal.
3. The main grievance of the assessee in this appeal is that Assessing Officer has made ad hoc estimated disallowance without rejecting books of accounts. The detail of ad hoc / estimated disallowance under various heads are given below: i. Disallowance amounting to Rs. 137874/- under Travelling Expenses.
The Ld. A.O disallowed a sum of Rs 137874 i.e 20% of Rs. 689473/- under the head travelling expense on the ground that satisfactory supporting documents were not provided although the ld. Counsel submitted before us that all the documents has been submitted by assessee during the course of Assessment proceeding. ii. Disallowance amounting to Rs. 95800/- under Motor Car Expense.
The Ld. A.O disallowed a sum of Rs 95800/- under the head motor car expense on the ground that satisfactory supporting documents were not provided although the ld. Counsel submitted before us that all the documents has been submitted by assessee during the course of Assessment proceeding. iii. Disallowance amounting to Rs. 66730/- under Computer Expense.
The Ld. A.O disallowed a sum of Rs 66730/- under the head computer expense on the ground that satisfactory supporting documents were not provided although the Excel Stock Broking Pvt. Ltd. Assessment Year:2015-16 ld. Counsel submitted before us that all the documents has been submitted by assessee during the course of Assessment proceeding. iv. Disallowance amounting to Rs. 131721/- under General Expense, Examination Fees ,Office maintenance, Advertisement etc.
The Ld. A.O disallowed a sum of Rs 66157/- under the head General expense, 36000/- under the head Examination charges, 11264/- under the head Office maintenance and Rs. 18300/- under the head Advertisement Expense on the ground that satisfactory supporting documents were not provided although ld. Counsel submitted before us that all the documents has been submitted by assessee during the course of Assessment proceeding. v. Disallowance amounting to Rs. 18674/- under Interest on service tax.
The Ld. A.O disallowed a sum of Rs 18674/- under the head interest on service tax wrongly.
4. Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer observing the following:
“I have considered the grounds of appeal, statement of facts and submission of the authorized representative of the appellate company as well as the order of the assessing officer framed in the light of the materials available on record before the assessing officer during the assessment proceedings. The AO has mentioned that during the test checking, some bills, vouchers are missing and some are self-made in respect of aforesaid expenses. I agree with the AO that without supporting bills and vouchers it cannot be held that the expenses were incurred exclusively for the purpose of the business of the assessee. Keeping in view of the facts as mentioned above, in the absence of any cogent material evidence, I do not find any infirmity in the order of the assessing officer and the same is hereby upheld. In view of above, this ground of appeal is dismissed.”
5. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us.
The ld. Counsel for the assessee has relied on the submissions made before the authorities below. On the other hand the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.
Excel Stock Broking Pvt. Ltd. Assessment Year:2015-16 7. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that books of accounts of assessee company are audited and Assessing Officer while scrutinizing the expenses made ad hoc estimated disallowance. We note that the Assessing Officer could have ventured into estimation only after rejecting the books of accounts of the assessee u/s 145(3) and thereafter by best judgment assessment u/s 144 of the Act. Here in this case, the AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses with the self-made vouchers. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for adhoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained. Therefore we delete all the adhoc/estimated disallowance made by AO and ground Nos 1 to 4 raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 10.01.2020