M/S GLOBAL ALLOYS PVT. LTD.,KANPUR vs. INCOME TAX OFFICER-6(2), KANPUR

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ITA 310/LKW/2017Status: DisposedITAT Lucknow11 May 2022AY 2012-134 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted the assessee's failure to substantiate expenses despite opportunities. However, to meet the ends of justice, the matter was set aside to the Assessing Officer for verification of expenses with the help of vouchers and books of accounts. The AO was also directed to reconsider the allowability of donations, prior period expenses, and exceptional items.

What were the facts?

The assessee appealed against ad-hoc disallowances made by the Assessing Officer (AO) on various expenses, which were confirmed by the CIT(A). The AO's disallowances were based on the unverifiability of cash expenses supported by self-made vouchers. The assessee failed to produce books of accounts and vouchers for verification during appellate proceedings.

What were the issues?

Whether ad-hoc disallowances on expenses are justified when the assessee fails to produce supporting evidence for verification.

Which sections of the Income-tax Act were involved?

Not specified

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, LUCKNOW BENCH ‘SMC’ LUCKNOW

Before: SHRI T.S. KAPOOR

For Respondent: Shri Harish Gidwani, DR
Hearing: 10/05/2022Pronounced: 11/05/2022

This is an appeal filed by the assessee against the order of ld. CIT(A)-II, Kanpur dated 31.01.2017. The grounds of appeal taken by the assessee are reproduced below: “1. That the Ld. CIT (A) has erred in confirming ad-hoc disallowance out of travelling & conveyance and telephone expenses of Rs. 17,956.00 being 20% of the total expenses.

2. That the Ld. CIT (A) has erred in confirming ad-hoc disallowance out of repairs & maintenance expenses of Rs. 33,991.00 being 15% of the total expenses. 3 That the Ld. CIT (A) has erred in confirming ad-hoc disallowance out of labour & staff welfare and legal and professional charges of Rs. 26,725.00. 4 That the Ld. CIT (A) has erred in confirming ad-hoc disallowance out of stores consumed expenses of Rs. 3,94,015.00. 5 That the Ld. CIT (A) has erred in confirming ad-hoc disallowance out of freight expenses of Rs. 4,30,358.00.

6. That the Ld. CIT (A) has erred in confirming ad-hoc disallowance out of employee benefit expenses of Rs. 51,208.00.

7. That the Ld. CIT (A) has erred in confirming the disallowance on account of donation of Rs. 11,000.00. 8. That the Ld. CIT (A) has erred in confirming the disallowance on account of prior period expenses of Rs. 11,975.00, 9. That the Ld. CIT (A) has erred in confirming the disallowance for exceptional items of Rs. 25,000.00. 10. That the Ld. CIT (A) has erred in not providing proper opportunity of being heard.” 2. The appeal was earlier dismissed for non prosecution by assessee vide order of the Tribunal dated 25.01.2019. However, the said order of the Tribunal was recalled vide order dated 15.03.2021 and the appeal was fixed for hearing on merits. The ld. AR instead of hearing personally had filed written submissions wherein it has been submitted that the Assessing Officer had made adhoc disallowances without rejection of books of account and therefore, the disallowances were not warranted and reliance in this respect was placed on an order of ITAT, Lucknow Benches in the cases of Basti Wine Co. vs. ITO in and Bajaj Auto Centre vs. ITO in ITA No. 722/Lkw/2017. 3. The ld. DR, on the other hand submitted that the Assessing Officer had made disallowances as the assessee only filed copy of ledger account of respective expenses and most of the expenses incurred were not verifiable therefore, the Assessing Officer had rightly made the disallowances. The ld. DR submitted that the ld. CIT(A) wanted the assessee to file copy of vouchers along with books of accounts which it did not submitted therefore, ld. CIT(A) has rightly upheld the disallowances. 4. I have heard the rival parties and have gone through the material placed on record. I find that the Assessing Officer had made adhoc disallowances, as the assessee only filed copy of ledger account of such expenses. The Assessing Officer has held that most of the payments were made in cash on the basis of self made vouchers and were not open to complete verification. The ld. CIT(A)

wanted the assessee to produce books of account and vouchers in support of its contention and to examine the self made vouchers. However, the appellant failed to produce these books of account and vouchers for verification. The ld. CIT(A) has therefore held that the appellant has failed to rebut the contention of the Assessing Officer that expenses are not verifiable. The findings of ld. CIT(A) in this respect are reproduced below: “Decision: I have gone through the facts and the written submissions filed along with the details filed enclose therein. There is no dispute that the expenses are incurred in cash and assessee had filed the details of the expenses under various heads, and the AO has not pointed out any specific defects in the details filed but made specific observations regarding majority of the expenses being incurred through unverifiable cash vouchers, Appellant was asked during the appellate proceedings to produce books of accounts and vouchers in support of this contention and to examine the kind of self-made vouchers appellant is maintaining and if there are any defects in them as pointed out by the AO. However appellant failed to produce these books of accounts and vouchers for verification. Appellant has failed to rebut the contention of the AO that the expenses are not verifiable. Mere statement that though the expenses have been incurred in cash but for business purposes would not be sufficient enough to call for deletion of any addition. No allowance can be made on mere self serving submission. Considering the facts and circumstances of the case and in view of the failure on the part of the appellant to produce books of accounts and vouchers during the appellate proceedings these additions made by the AO are hereby confirmed. These grounds are dismissed.”

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