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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
This appeal preferred by the assessee is against the order of the Ld. CIT(A)-5, Kolkata dated 16.06.2017 for AY 2011-12.
Ground Nos. 1 and 2 are general in nature and do not require any adjudication.
Ground no. 3 of assessee’s appeal is against the action of Ld. CIT(A) in confirming the disallowance of Rs.6,69,777/- being 10% of the liability for lorry hire charges on ad hoc basis as made by the AO.
3.1. Briefly stated facts are that a sum of Rs.6,69,777/- being 10% of the liability for lorry hire charges under the head current liabilities amounting to Rs.66,97,775/- has been added back by the AO to the income on estimate basis by stating that the genuineness of the said sundry creditors could not be proved fully and for the same being not verifiable. On appeal, the Ld. CIT(A) confirmed the action of the AO. Aggrieved, assessee is before us.
Lakhotia Transport Co. Pvt. Ltd. AY 2011-12 3.2. We have heard rival submissions and gone through the facts and circumstances of the case. We note that a sum of Rs.6,69,777/- being 10% of the liability for lorry hire charges under the head current liabilities amounting to Rs.66,97,775/- has been added back by the AO to the income on estimate basis by stating that the genuineness of the said sundry creditors could not be proved fully and for the same being not verifiable. We note that assessee had filed the details of the lorry hired by it like registration number, Xerox copy of R.C. Book and copies of challan before the AO. The AO has not doubted the genuineness of the claim and has only disallowed on the species plea that assessee failed to produce all challans, which action of AO cannot be countenanced. Ad hoc disallowance is an arbitrary exercise of power which has no sanction of law, so it needs to be deleted. So we order for deletion of the same.
Ground nos. 4, 5 and 6 are against the action of Ld. CIT(A) in confirming the disallowance of Rs.1,85,736/- being 10% of total expenditure towards Misc. expenses amounting to Rs.18,57,360/- on estimate basis. Likewise, AO disallowed 10% of travelling expenses of Rs.7,53,839 and AO disallowed Rs.16,500/- out of Rs.2,98,163/- claimed on account of Labour Thapi expenses.
4.1. Briefly stated facts are that a sum of Rs.1,85,736/- being 10% of the total expenditure towards Misc. expenses amounting to Rs.18,57,360/- has been disallowed by the AO on estimate basis by stating that the expenses are not fully verifiable. Likewise, for Travelling expenses AO disallowed 10% of the claim. However for Labour Thapi expenses claimed the AO disallowed Rs 16,500/- since assessee failed to produce any bill for Rs.16,500/-. On appeal, the Ld. CIT(A) confirmed the action of AO. Aggrieved, assessee is before us.
4.2 We have heard rival submissions and gone through the facts and circumstances of the case. We note that a sum of Rs.1,85,736/- being 10% of the total expenditure towards Misc. expenses amounting to Rs.18,57,360/- has been disallowed by the AO on estimate basis by stating that the expenses are not fully verifiable. On appeal, the Ld. CIT(A) confirmed the action of AO. We note that assessee had submitted ledger copy of labour
Lakhotia Transport Co. Pvt. Ltd. AY 2011-12 thapi expenses, travelling expenses and Misc. expenses. The AO acknowledges that assessee produced supporting evidence in respect of above expenses on 21.02.2014. Only because cash payment of Rs.16,500/- was paid by assessee out of total expenses of Rs.2,98,163/- under head labour head thapi expenses and assessee failed to produce some bills/vouchers, the AO ordered ad-hoc disallowance, which action cannot be countenanced. Ad hoc disallowance is an arbitrary exercise of power which has no sanction of law, so it needs to be deleted However since assessee failed to produce any evidence for cash payment made to the tune of Rs.16,500/-, we confirm the action of ld CIT(A) confirming the disallowance of the said amount. The other ad-hoc disallowance on account of Misc. expenses and Travelling expenses are ordered to be deleted.
Ground no. 7 is against the action of Ld. CIT(A) in confirming the disallowance of Rs.35,520/- out of interest paid to Calcutta Goods Transport Association by invoking sec. 40(a)(ia) of the Act.
5.2 Briefly stated facts are that a sum of Rs.35,520/- have been disallowed out of interest paid to Calcutta Goods Transport Association by invoking sec. 40(a)(ia) of the Act stating that the assessee had failed to deduct tax at source. On appeal, the Ld. CIT(A) confirmed the action of AO. Aggrieved, assessee is before us.
5.3 We have heard rival submissions and gone through the facts and circumstances of the case. We note that a sum of Rs.35,520/- have been disallowed out of interest paid to Calcutta Goods Transport Association by invoking sec. 40(a)(ia) of the Act stating that the assessee had failed to deduct tax at source. On appeal, the Ld. CIT(A) confirmed the action of AO. Before us the Ld. AR has restricted his argument to one point only that addition may be restricted to 30% of the total addition as per amendment in section 40(a)(ia) of the Act. In support of the said contention he has relied upon order of the ITAT, Jaipur bench in the case of Shri Rajendra Yadav vs. ITO in assessment year 2007-08 dated 29 th January, 2016 in which in para 6.1 and 7, the appeal of the assessee has been partly allowed on this issue. The same paras are reproduced as under :-
Lakhotia Transport Co. Pvt. Ltd. AY 2011-12 “6.1 Recently in the mat Smt. Kanta Yadav vs. ITO Page 3 of 4 section (1) of section 139, such sum shall be allowed as a deduction in computing the income of previous year, such sum shall be allowed as a deduction in computing the income of previous year, and further, section 40(a)(ia) has been substituted wherein the 30% of any sum payable to a resident has been substituted. In the present case, the authorities below has added the entire sum of Rs. 7,51,322/- by disallowing the whole of the amount. Though the substitution in section 40 has been made effective with effect from 1.4.2015, in our view the benefit of the amendment should be given to the assessee either by directing the Assessing Officer to confirm from the contractors, namely, M/s. Garvit Stonex, M/s. Chanda Marbles and M/s. Nidhi Granites as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of Rs. 7,51,322/-. In our view, it will be tied of justice if the disallowance is only restricted to 30% of Rs. 7,51,322/-. Accordingly, the appeal of the assessee is partly allowed in the above said manner.
7. In the result, appeal of the assessee is partly allowed.” 5. 4 He has further submitted that said order has been followed by ITAT Jaipur Bench in the case of Smt. Sonu Khandelwal vs. ITO in ITA No. 597/JP/2013 dated 13th May, 2016. He has therefore submitted that disallowance may be restricted to 30% of the total disallowance. On the other hand Ld. DR relied upon orders of the authorities below.
We have considered rival submissions and find that issue is covered in favour of the assessee by order of ITAT Jaipur Bench in the case of Shri Rajendra Yadav vs. ITO and Smt. Sonu Khandelwal vs. ITO. In these orders it was held that the disallowance u/s 40(a)(ia) to be restricted to 30% of the addition. In these orders the Tribunal has considered the amended provisions of section 40(a)(ia) of I.T. Act. In these orders the assessment year’s involve was 2007-08 and 2008-09. In the present appeal the assessment year is 2011-12 and the facts are identical. In this view of the matter and following the above decisions of Jaipur Bench, we set aside and modify the orders of the authorities below and direct the Assessing Officer to restrict the addition to 30% of the total addition made on account of deduction of TDS u/s 40(a)(ia) of the Act.
In the result, appeal of assessee is partly allowed.
Order is pronounced in the open court on 26/10/2018 Sd/- Sd/- (Dr. A. L. Saini) (A. T. Varkey) Accountant Member Judicial Member Dated: 26th October, 2018
Lakhotia Transport Co. Pvt. Ltd. AY 2011-12 Jd.(Sr.P.S.)
Copy of the order forwarded to:
1 Appellant – M/s. Lakhotia Transport Co. Pvt. Ltd., 26, Tarachand Dutta Street, Ground floor, Kolkata-700 073. 2 Respondent – DCIT, Circle-14(2), Kolkata. 3 CIT(A)-5, Kolkata. (sent through e-mail)
4 CIT, Kolkata. DR, Kolkata Benches, Kolkata (sent through e-mail) 5 .