Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
This appeal of the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-52, Mumbai [in short CIT(A)], in appeal No. CIT(A)-52/IT/DC-CC-2(3)/263/2016-17, dated 27.10.2016. The Assessment was framed by the Dy. Commissioner of Income Tax, Central Circle-9, Mumbai (in short ‘DCIT/ AO’) for the A.Y. 2012-13 vide order dated 20.03.2014 under section 143(3) read with section 153C of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of expenses made by the AO on adhoc basis. For this assessee has raised the following ground: -
“On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in confirming the disallowance made by the assessing officer to the tune of ₹ 2,02,060/- being 10% of the total tea & sundry expenses and motor car expenses on ad- hoc basis.”
We have heard the rival contentions and gone through the facts and circumstances of the case. Briefly stated facts are that the assessee has incurred tea and sundry expenses and motor car expenses as under: -
Nature of expense Amount (Rs.) Tea and Sundry Expenses 20,20,599 Motor Car Expenses 3,28,611 The AO noted that the assessee has produced vouchers but found unverifiable. According to him, part of such expenses is disallowable on account of unverifiable expenses and therefore, the AO disallowed 15% of the same on adhoc basis. Thereafter, the AO disallowed a sum of ₹ 3,52,396/-. Aggrieved, assessee preferred the appeal before CIT(A), who restricted the disallowance at 10% by observing in Para 6 as under: -
“6. I have considered the facts of the case, submissions and contentions of the assessee as also the order of the Assessing Officer. From the assessment order it appears that the AO made this addition/ disallowance on the grounds that complete bills and vouchers in support of the expenses were not produced. During the course of appellate proceedings the assessee produced copies of some bills and vouchers and argued that disallowance made by the AO was not justified. I have considered the facts of the case. From the assessment order it appears that the AO has made this addition in summary manner without examining the facts of the case properly or without raising any query to the assessee about the vouchers which were not produced. At the same time it appears that all the vouchers have not been produced by the assessee for examination. Besides some of the expenses have been incurred in cash also. Therefore considering the nature of expenses and overall facts of the case, I am of the view that ends of justice will be met if the disallowance made by the AO is reduced form 15% to 10%. The assessee thus gets relief of ₹ 1,01,030/-. Remaining addition of ₹ 2,02,060/- is confirmed.”
Aggrieved, now assessee is in second appeal before Tribunal.
Before us, the learned Counsel for the assessee drew our attention to the order of AO and stated that the assessee has declared a total income of ₹ 1,35,74,269/- and despite survey under section 133(A) of the Act, the cash balance and the stock available with the assessee was tallied paisa to paisa. And even stock was verified with the stock of the respective parties also. During the survey loose papers were found, verified and tallied with the papers of the respective parties to whom it belongs. In these facts, the learned Counsel for the assessee stated that the vouchers in respect of these expenses were produced but some were found unverifiable, he stated that the nature of expenses of tea and sundry expenses and motor car expense are different. According to him, it does not possible that if tea and sundry expenses 100% voucher are to be maintained. In view of the above, the learned Counsel for the assessee stated that no disallowance at all should be made on adhoc basis. He also referred to the decision of this Tribunal in the case of Mukesh Kumar Mahawar Sitapur vs. Income Tax Officer vide order dated 16.09.2015 of Lucknow Bench, wherein the exactly on the same basis disallowance was deleted by observing in para 4 as under: -
“4. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we are of the view that the ad hoc disallowance is not permissible under the law and if the Assessing Officer is not satisfied with a particular expense, he may make necessary verification and also to point out defect in the books of account, but ad hoc disallowance should not be made by making general observation. In the instant case, since ad hoc disallowance is made by making general observation, we do not find any merit in the addition made by the Assessing Officer. We accordingly delete the addition made on ad hoc basis after setting aside the order of the ld. CIT(A).”
When this was confronted to the learned Sr. Departmental Representative, he could not controvert the arguments of the learned Counsel of the assessee but he relied on the assessment order and the order of the CIT(A).
We have heard the rival contentions and gone through the facts and circumstances of the case, we find from the facts of the case that this is adhoc disallowance made by AO and further estimation on adhoc basis by CIT(A). There is no defect pointed out in the books of accounts or in particular voucher as was mentioned by the Assessing Officer. Hence, by making general observation no adhoc disallowance can be made. We find merit in the arguments of the learned Counsel for the assessee and in the given particular facts and circumstances as noted above, we delete the disallowance and allow the appeal of the assessee. 7. In the result, the appeal of assessee is allowed. Order pronounced in the open court on 28-09-2018.