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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-6, Mumbai [in short CIT(A)], in appeal No. CIT(A)-6/IT-152/124/2016-17 dated 22.01.2018. The Assessment was framed by the Income Tax Officer, Ward-2(3)4, Mumbai (in short ‘ITO/ AO’) for the A.Y. 2011-12 vide order dated 12.12.2016
143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) restricting the disallowance of expenses in relation to business development expenses, travelling expenses and miscellaneous and conveyance expenses at 20%. For this assessee has raised the following two grounds: -
“1. The Commissioner of Income-tax (Appeals) - 6, Mumbai (hereinafter referred to as the CIT(A)) erred in upholding the action of the Income-tax Officer - 2(3)(4)1 Mumbai (hereinafter referred to as the Assessing Officer) in making an ad hoc disallowance of 20% out of 'Miscellaneous expenses and 'Conveyance expenses' debited to the profit and loss account on the ground that the expenses are not supported by proper evidence.
The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought not to have upheld the action of the Assessing Officer in making the said ad hoc disallowance inasmuch as the ClT(A) has not correctly appreciated the facts of the case and hence, the said disallowance requires to be deleted.
2. The CIT(A) erred in upholding 20% of the ad hoc disallowance made by the Assessing Officer out of 'Business Development expenses' and 'Travelling expenses' debited to the profit and loss account on the ground that the expenses were not supported by proper evidence.
the appellants contend that on the facts and in the circumstances of the case and in law, the ClT(A)
20% inasmuch as the CIT(A) has not correctly appreciated the facts of the case and hence, the said disallowance requires to be deleted.”
I have heard the rival contentions and gone through the facts and circumstances of the case. I find that the AO has disallowed the expenditure to the tune of 50% on account of business expenditure amounting to ₹ 4,89,932/-, 30% from travelling expenses amounting to ₹ 3,43,161/- and 20% of Misc. and conveyance expenses amounting to ₹ 86,177/-. Against this disallowance the assessee preferred the appeal before CIT(A), who restricted the disallowance at 20% by observing in Para 7 as under: -
“7. I have carefully considered the facts of the case, discussion of the AO in the assessment order, oral contentions of the appellant and material available on record, It is seen from the facts of the case that the assessee had not filed the return of income Within the provisions of section 139 of the Act. It was further noticed that the assessee had received substantial brokerage or commission of Rs.1,39,06,398/- and fee for professional technical services at Rs.11,03,0001-. Noticing such facts and that the appellant had not filed return of income, after recording reasons, notice u1s.148 was issued and in response thereof, the assessee filed return on 10.12.2016 declaring a loss of (-)Rs.4,030/-. It is primarily seen from the facts of the case that against such professional receipts, appellant had claimed a host of expenses under the head 'Administrative Expenses' to the tune of ₹ 70,97,390/-. It is further the fact noted by the AO that for such expenses claimed, appellant had on; maintained self-made vouchers and it had no third party evidences of having expenses incurred for the purposes of business. Though the Ld. AR of the appellant stated that the entire expenses were incurred for the purposes of business but such submission made by the Ld. AR did not have any supporting. It was also submitted that majority of the expenses were incurred through banking channels and again such submission of the appellant was not supported by any evidence as the bank statement of the assessee, bifurcation of the quantum of expenses incurred by way of banking channels and expenses incurred by way of cash. Under such facts and circumstances of the case, when the appellant had not filed its return of income within the time provided and in accordance with section 139 of the Act and based on information in possession of the Department and consequent to the issue of notice u/s.148, the appellant filed return wherein he claimed host of expenses totaling to Rs.70,97,390/- without any third party evidences of having incurred such expenses, the disallowance made by the AO on estimation basis, is found to be justifiable. The appellant's AR also inter-alia, had submitted that the disallowance made by the AO is on higher side. It is seen that the AO has disallowed 50% of Business Development expenses amounting to Rs.4,89,932/-, 30% out of Travelling expenses amounting to Rs.3,43,161/- and 20% out of total Miscellaneous and Conveyance expenses amounting to Rs. 86,177/-. There is no justification given by the AO in the assessment order as to why the higher percentages of disallowance has been adopted under the head Business Development Expen3es'
Travelling Expenses in this view of the matter, the disallowance made by the AO is restricted to be at 20% under the heads 'Business Development Expenses' and 'Travelling Expenses'. Further, the 20% disallowance made out of total Miscellaneous and Conveyance Expenses is found to be justified. The appellant gets consequential relief and accordingly, the ground so raised is partly allowed.”
Aggrieved, now assessee is in second appeal before Tribunal.
I have heard the rival contentions and gone through the facts and circumstances of the case and noticed that the AO has disallowed 50% of business development expense and 30% of travelling expense. He further disallowed 20% of misc. and conveyance expenses. The CIT(A) restricted the same at 20%. After hearing both the sides and going through the facts I find that the 20% disallowance is on higher side and hence, I restricted the disallowance at 10% and directed the AO accordingly. The reason for the same is that the expenses have been booked by assessee on self-made vouchers and there is every possibility of leakage of expenses. Hence, adhoc disallowance at 10% is retained.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 17-07-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 17-07-2018 kao kI ga[- .