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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Per Shri A.T.Varkey, JM
This appeal filed by the assessee is against the order of CIT(A)-5, Kolkata, dated 01.09.2015 for AY 2008-09.
We note that ground nos. 1, 2 and 5 are general in nature and do not require any adjudication.
Ground no. 3 is against the action of the Ld. CIT (A) in confirming the disallowance made by the AO on the ground of non-furnishing of particulars whereby following ad hoc disallowances were made by AO:
i) Export expenses Rs. 25,209/- ii) Transportation charges Rs.5,00,000/- iii) Loading and unloading charges Rs.2,62,667/- 4. Now coming to the export expenses disallowed to the tune of Rs.25,209/- is concerned, the AO after perusal of the P&L Account noticed that under the head ‘export expenses’ assessee company had claimed an amount of Rs.7,99,60,344/-. The AO asked the assessee vide notice issued u/s. 142(1) of the Income-tax Act, 1961 (in short “Act”) dated 01.12.2010 as per point no. 4 for furnishing full party-wise break up of expenses. The AO
R. Piyarelall Iron & Steel (P) Ltd., AY 2008-09 notes that the assessee was unable to furnish details. However, the AO notes that assessee company failed to furnish any details in respect to the claim of expenses of Rs.5,25,089/-. Therefore, the AO disallowed 10% of that amount which comes to Rs.25,209/-. Aggrieved, assessee preferred an appeal before the Ld. CIT (A) who was pleased to confirm the same.
Likewise, the AO noted from the assessee’s account that the assessee had made purchase amounting to Rs.106,29,23,819/-. According to the AO, though question as per point no. 2 was asked to the assessee to furnish full party-wise break up with addresses of the parties, the AO acknowledges that Ld. AR of the assessee company furnished the full details. However, on perusal of the details the AO gathered that under the sub head ‘Transportation charges’ the assessee company has claimed an amount of Rs.17,12,47,839/-. According to AO, since no details about this expenditure could be produced before him, he doubted the genuineness of this claim of expenses and, therefore, the AO disallowed Rs. 5 lacs holding that there can be a scope of bogus claim and excess claim. On appeal, the Ld. LD. CIT(A) confirmed the same.
Likewise, the AO noted that the assessee has claimed an amount of Rs.2,62,66,757/- on account of loading and unloading charges. According to AO, the assessee was unable to furnish any details. In the absence of the details of bill, voucher etc. according to AO, quantum of the claim cannot be determined so he disallowed 1% of the claim which comes to Rs.2,62,667/-. On appeal, the Ld. CIT (A) confirmed the same. Aggrieved by the aforesaid three disallowances narrated above the assessee is before us.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee company was engaged in the business of export of iron ore products and other trading goods. During the scrutiny the AO has issued 142(1) notice dated 01.12.2010 wherein he has asked for details of expenses claimed by the assessee and since details could not be given on the aforesaid expenses, the disallowance was made by the AO which has been confirmed by the Ld. CIT(A). According to Ld. CIT (A), since the assessee during appellate proceedings before him, could not furnish any evidence to substantiate that the AO did not give proper opportunity to the assessee in respect to these disallowances he confirmed the same. We note that the AO has made ad hoc disallowance
R. Piyarelall Iron & Steel (P) Ltd., AY 2008-09 of Rs. 5 lacs on the suspicion that there is scope for bogus and excess claim. It has to be noted that suspicion howsoever grave cannot take the place of proof. Disallowances have been made on ad hoc basis and, therefore, per se arbitrary. The AO has not pointed out for which of the specific item either voucher are not maintained by the assessee or the expenses are not verifiable. So, without doing so no ad hoc disallowance out of genuine business expenditure claimed by the assessee could be made by the AO. Therefore, we are inclined to delete the disallowance of Rs. 5 lacs.
Coming to the disallowance of Rs.25,209/- assessee claimed an amount of Rs.7,99,60,344/- as export expenses. Out of which when assessee failed to furnish any details for expenditure of Rs.5,25,089/-, the AO has disallowed 10% of that amount, that too after giving opportunity to the assessee. Since the AO has specifically found out that assessee failed to produce any evidence for the expenditure, then AO should not have resorted to ad hoc disallowance. It has to be remembered that no fact is proved without evidence. An assessee who would be claiming a deduction is expected to have some evidence of such expenditure incurred by it, as no one is expected to expend by any payment to another without there being any proof for it. So the authorities below have power to disallow expenditure claimed item wise, if the assessee failed to adduce evidence for claiming the expenditure by not maintaining vouchers or bills for claiming expenditure. Therefore, both the disallowances of Rs. 25,209/-and Rs.2,62,667/- are concerned, we set aside the order of the Ld. CIT(A) and remand the matter back to the file of the Ld. CIT(A) to adjudicate the issue afresh after giving opportunity to the assessee and thereafter pass speaking order in the light of the observations made above.
Ground no. 4 is against the action of the Ld. CIT(A) in confirming the disallowance of interest paid of Rs.53,141/- by the AO u/s. 14A of the Act applying Rule 8D of the Rules.
At the outset, it has been brought to our notice that the assessee has not earned any dividend income. Since the assessee has not earned any dividend income, we relying on the case of Chem Investment Ltd. Vs. CIT (2009) 121 ITD 318 (Del.) hold that no section 14A disallowance is to be made in case the assessee has not earned any exempt income. Therefore, no disallowance was warranted and, therefore, we allow this ground of appeal of R. Piyarelall Iron & Steel (P) Ltd., AY 2008-09 the assessee and direct the AO to delete the sum of Rs.53,141/- on account of sec. 14A disallowance. This ground of appeal of assessee is allowed.
In the result, appeal of assessee is partly allowed for statistical purposes.