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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI RAM LAL NEGI, JM
O R D E R Per Shamim Yahya, A. M.:
This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-3, Mumbai (‘ld.CIT(A) for short) dated 30.03.2017 and pertains to the assessment year (A.Y.) 2011-12.
The grounds of appeal read as under:
1. The Hon’ble Commissioner of Income Tax Appeals [‘CIT(A)’] has erred in confirming 10% adhoc disallowance made by the learned Deputy Commissioner of Income Tax (‘AO') in respect of the following expenses: Sr. No. Particulars Amount (Rs.) 1 Repairs – heavy load equipment 26,58,765/- 2 Repairs – others 12,25,683/- 3 Port expenses 28,74,863/- 4 Mobilization expenses 19,00,208/- 5 Misc. expenses 16,68,707/- 6 Freight expenses 90,41,348/- 7 Transit expenses (including fuel expenses) 38,93,622/-
8 General cargo transportation expenses 36,55,441/- 9 Rates and taxes 33,79,304/- 10 Crew expenses 8,93,585/- 11 Contract staff expenses 7,71,930/- Total 3,19,63,456/-
The adhoc disallowance of Rs.31,96,345/- is in addition to the suo-moto disallowance of Rs.65,76,356/- made by the appellant in the return of income on account of inadequate supporting. On the facts and in circumstances of the case, the adhoc disallowance of Rs.31,96,345/- made by the learned A.O. ought to be deleted. 3. Brief facts of the case are that during the course of assessment proceedings, the AO has observed that the assessee has claimed expenditure of Rs.3,19,63,456/- under various heads and asked to produce documentary evidence in support of claim of expenses. After considering the submission of the assessee, the AO held that various expenses claimed by the assessee are not supported by proper bills/vouchers. Therefore, 10% of Rs.3,19,63,456/- i.e. Rs.31,96,456/- is disallowed and added back to the income of the assessee.
4. Before the ld. CIT(A), the assessee made the submission which are noted by the ld. CIT(A) as under:
The appellant is engaged in the business of freight, forwarding of ODC transportation. It undertakes projects of trwsporting oversized and heavy machinery, turnkey project forwarding and industrial plant relocation. The appellant has filed its return of income on 30.11.2011 declaring a business loss of Rs.1,33,90,988/-.
2. During the year appellant has earned revenue of Rs. 6 Grore from ODC operations and claimed an expenditure of Rs.4.55 Crore wholly and exclusively incurred for such business activities. However, out of the total expenditure of Rs.4.55 Crore company has identified expenditure amounting to Rs.67,05,769/- (approximately 21% of total expenditure) for which adequate supporting are not available (refer Note 19 of Schedule ió of the audited annual account for the year ended 31.03.2011). The statutory. Auditor and Tax Auditor has verified the expenditures incurred on ODO operations and did not offer any adverse comments for ñot supported by adequate vouchers/invoice etc. except those reported in Note 19 of the Schedule 16 of the audited annual account for the year ended 31.03.2011. Kindly refer page No. 22. 3. The Id. AO has asked the appellant to produce documentary evidence in support of claim of expenses for repairs (details given on page 2 of the order) (i.e. ODC expenses) and also asked to produce books of accounts on the hearing fixed on 04.03.2014. considering the voluminous vouchers of ODC expenses the appellant has taken time for preparation of details. Subsequently, on 07.03.2014 the appellant vide its letter dated o6-03.2014 has submitted the details of ODC expenses (copy enclosed at page nos. 23 25) and considering the voluminous vouchers (around 12 box flies) has produced two box files on sample basis for verification.
However, the Id. AO based on the suo motto disallowance of certain expenses (which are identified by the appellant as not adequately supported amounting to Rs. 67,05,7691- has concluded that various expenses claimed by the assessee are not supported by proper bill/vouchers and made additional ad-hoc 10% disallowance out of ODC expenses.
From the above stated facts, your honour will appreciate that the appellant company has filed its return of income at a loss of Rs.1,33,90,988/- and also suo-moto disallowed expenditures which are not supported by corroborative vouchers as identified by the company in Note 19 of Schedule 17 of the audited annual accounts for the year ended 31.03.2011 and verified by Statutory & Tax Auditory of the Company. Furthermore, the appellant company have brought forward unabsorbed business losses (including depreciation) of Rs.92,63,117/-. Therefore, there is no reason for claiming any bogus expenditure.
5. The ld. CIT(A) sent the additional evidence for verification to A.O. He noted that the A.O. has not responded. Then he proceeded to take adverse reference against the assessee. The ld. CIT(A) held as under:
6.2 During the course of appellate proceedings, the appellant has given additional evidences under Rule 46A of the IT Act, which has been remanded to the AO for verification of the details along with supporting books of accounts and appeal vouchers. However, in spite of various reminders, the AO has not produced the remand report and even not availed an opportunity of being before the undersigned personally on 16.03.2017 at 11:3Oam. 6.3 I have carefully considered the rival submissions and the facts of the case. The appellant has failed to substantiate the claim of the expenses incurred. Mere academic discussion by way of making submission is not sufficient to get relief. In view of the same, I did not find any reason to interfere in the findings of the AO, hence Ground No. 1 is dismissed.
We find that the ld. CIT(A) has passed a bizarre order. When the A.O. has not responded to his remand, how adverse inference can be taken against the assessee is beyond comprehension. Hence, in the facts and circumstances of the case, in the interest of justice, we remit this issue to the file of the A.O. The A.O. is directed to consider the issue afresh in light of the additional evidence submitted by the assessee.
In the result, the appeal by the assessee is allowed for statistical purpose.
Order pronounced in the open court on 04.02.2019