ASSISTANT COMMISSIONER OF INCOME TAX, NEW DELHI vs. JAIPUR GOLDEN TRANSPORT CO PRIVATE LIMITED, NEW DELHI

PER AMITABH SHUKLA, AM, The captioned appeal has been preferred by the Revenue against order dated 29.08.2024 of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, New Delhi, [hereinafter referred to as ‘ld. CIT(A)’] arising out of assessment order dated 31.03.2015 passed u/s 143(3) of the Income Tax Act, 1961 pertaining to Assessment Year 2012-13. The word ‘Act’ herein this order would mean Income Tax Act, 1961. Page 2 of 12

hired trucks. During the year under consideration, the assessee had filed
Return of Income on 28.09.2012 declaring income of Rs.11,42,89,545/-.
During the course of assessment proceedings, the ld. AO had queried the assessee, which were responded through clarification/explanations as per para-1 of the assessment order, Books of Accounts were produced by the assessee and which were examined on text check basis. The ld. AO noted that the gross profit and the net profit of the assessee had fallen from 21%
and 5.06% in the immediately preceding assessment year to 19.65% and 4.27% respectively in the present year. Thus, in real terms the assessee had declared net profit of Rs.11,71,12,915/- on gross receipts of Rs.274,47,75,603/-. The fall in net profit was attributable to increase in truck freight expenses, in turn attributable to rising fuel costs, etc. The ld.
AO noted that there was a fall in diesel and lubricant expenses as also that the freight charges paid could not have been impacted fall in net profit given the fact that the assessee was using hired trucks also. The ld. AO also noted abrupt increase in advertisement, printing and stationary expenses. The ld.
AO confronted the assessee to file details of hired trucks, truck wise details, etc., which were not appropriately complied. The AO conducted his own enquiry in respect of impugned expenses which were not fully complied in as some parties were either untraceable or query letters remained unserved.
The ld. AO consequently concluded that the results of his enquiries alluded towards an element of claimed expenses being unverified, lacking
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commercial expediency and excessive and hence proceeded to make additions on the basis of his surmises.
5. Before the ld. CIT(A), the assessee reiterated the arguments taken before the AO. The assessee had before the ld. CIT(A) claimed that all the submissions with evidences were provided to the ld. AO. It was contended that the expenses are genuine business expenses and routed through banking channel. The ld. First Appellate Authority held that the additions of the ld. AO were based upon an ad hoc and arbitrary disallowance and that the same is not permissible in law. On page-6 of his order, he observed that the Assessing Officer had not examined the books of the assessee or pointed any defects. He also concluded that the assessee cannot be held liable if the respective parties did not respond to notices of ld. AO. Consequently, he proceeded to delete the additions with the following remarks:
“……In this ground of appeal the assessee has challenged the disallowance of a sum of Rs.96,50,000/- and Rs.48,00,000/- out of expenditure incurred on truck freight and crossing charges claimed by the assessee.
The facts of the case in brief are that the assessee company is engaged in the business of transportation of goods and also derives income from running petrol pumps and cargo handling units. The return of income for AY
2012-13 was filed on 28.09.2012 declaring a total income of Rs.11,42,89,545/-. The case was selected for scrutiny and notice under section 143(2) was served on the assessee. The Assessing Officer observed that the G.P. ratio and the N.P. ratio for AY 2012-13 were lower in comparison with the corresponding figures for AY 2011-12. The N.P. rate had fallen from 5.06% in AY 2011-12 to 4.27% in AY 2012-13. The assessee explained that the fall of 0.8% in N.P. was on account of increase in truck freight which in turn was due to an increase in the price of diesel. In order to verify this assertion of the assessee the Assessing Officer asked the assessee to produce the copies of the account of the truck owners whose trucks were being used by the assessee in his transportation business. The Page 5 of 12

assessee company duly furnished copies of account of the truck owners in its books of account duly authenticated by the truck owners. The assessee company also furnished the addresses of these truck owners. The Assessing
Officer issued notice under section 133(6) to all such truck owners at the address provided by the assessee company. In all, 31 notices under section 133(6) were issued by the Assessing Officer and the details of the same have been mentioned by the Assessing Officer on pages 3, 4 and 5 of his assessment order dated 31.03.2015. After analysing the replies received in response to the notices under section 133(6), the Assessing Officer observed that either the notice under section 133(6) had not been complied with or details furnished were unsatisfactory and incomplete. Even in cases where replies were received, the Assessing Officer observed discrepancies which the assessee could not reconcile. The Assessing Officer concluded that there was scope for manipulation of expenses booked under this head and proceeded to disallow Rs.96,50,000/- out of the total expenses of Rs.9,64,28,498/- under the head ‘Truck Freight’ and further disallowed an amount of Rs.48,00,000/- out of total expense of Rs.24,32,07,463/- under the head ‘Crossing Charges’.
In the appellate proceedings the assessee contended that complete details of ‘Truck freight’ expenses and ‘Crossing charges’ had been furnished to the Assessing Officer during the course of the assessment proceedings but the same had not been considered. The appellant submitted that the Assessing
Officer has made ad hoc disallowances which are not sustainable in law and that the same should be deleted.
I have examined the assessment order passed by the Assessing Officer and have also perused the detailed submissions of the appellant. From the assessment order, it is seen that while examining ‘Truck Freight’ expenses, the Assessing Officer issued notices under section 133(6) to 31 parties. Out of these 31 notices, replies were received in 15 cases confirming the transaction and also stating that the respective truck owners were filing their Income Tax Returns under section 44AE. Out of the remaining 16
notices, 7 notices were successfully served but no reply was received and the remaining 9 notices came back unserved. Hence, out of 31 notices issued under section 133(6), 22 were served successfully. Despite this the Assessing Officer took the view that truck freight payments were inauthentic which is a conclusion not justified by the above average response to the notices under section 133(6). Further, the Assessing Officer has neither examined the ledger accounts of the truck operators or the bank accounts through which payments were made but has proceeded to make a completely arbitrary and ad hoc disallowance of Rs.96,50,000/- which represents roughly 10% of the total truck freight expenses of Rs.9,64,28,498/-. The Assessing Officer has further disallowed a sum of Rs.48,00,000/- under the head ‘Crossing Charges”. There is no discussion of why this disallowance has been made. This is again an ad hoc disallowance made out of the total crossing charges of Rs.24,32,07,463/-. The Assessing
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Officer has also not examined the books of account of the assessee or pointed out any defects therein. The Assessing Officer made these disallowances solely on the basis of suspicion as is evident from his remark made in Para 6 of the assessment order wherein he states that “It is concluded that the truck freight paid account of the assessee leaves a scope for manipulation to suit the requirements of the assessee”.
It is a well settled position of law that ad hoc disallowance cannot be sustained and neither can additions based on the mere fact that notices under section 133(6) came back unserved be upheld in law. In various judicial pronouncements, it has been held that ad hoc additions are not tenable in law. This has been held in:- a) 102 TTJ 882 (Pune) Lavrids Knudsen Maskin fabrik (India) Limited vs
Additional Commissioner of Income Tax b) 43 DTR 116 (TM) (Agra) ITO vs Mayur Aggarwal c) 254 ITR 673 (Guj) Dinesh Mills Ltd. vs CIT d) 73 ITD 189 (Del) Goodyear India Ltd vs ITO e) 106 TTJ 1065 (Del) Hughes Escorts Communications Limited vs JCIT f) 94 TTJ 423 (Asr) Sunder Mal Sat Pal vs ITO g) 81 TTJ 448 (Jodh) DCIT vs Surface Finishing Equipment h) 237 ITR 570 (SC) Manika Gems &Ors v ACIT i) 104 TTJ 254 (Pune) Coco Cola (India) Ltd v JCIT j) 253 ITR 749 (Guj) Sayaji Iron &Engg. Co.
Again, mere non-compliance with notices issued under section 133(6) cannot be made a basis to hold that expenditure incurred by the appellant company is not genuine. The responsibility of the appellant was limited to producing the names and the correct address of the various parties and it is not correct to hold the assessee accountable if some parties did not respond to the notices issued under section 133(6). This again is a well settled legal proposition and can be seen in the following judgements:- i)
ITA No 2901/D/2014 Phool Singh v. ACIT dated 11.04.2017
ii)
ITA No 4904/D/2014 M/s Hind Global Links v. ITO iii)
ITA No 1596/M/2016 M/s Fancy Wears v. ITO dated 20.09.2017
iv)
ITA No 3699/Mum/2016 M/s Geolife Organics v. ACIT v)
ITA No 1411/M/2016 Prankit Exports v. ITO dated 01.02.2018
vi)
251Taxmann 346 (Bom) CIT vsHaresh D. Mehta dated 04.09.2017
vii)
77taxmann.com 275 (JMum) ITOvsKarsanNandu viii)
176 TTJ 166 (Kol) ACITvs Bharat Hi-Tech (Cement) (P.) Ltd
Hence, in conclusion, it is held that both the additions of Rs.96,50,000/- under ‘Truck Freight expenses’ and of Rs.48,00,000/- under ‘Crossing
Charges’ have been made in an ad hoc and arbitrary manner. These additions are based on suspicious and surmises and are not supported by any concrete evidence. Accordingly, both these additions of Rs.96,50,000/- and of Rs.48,00,000/- are hereby deleted and the assessee’s appeal is allowed.
Ground no. 3 & 4:
These two grounds of appeal relate to a disallowance of a sum of Rs.75,00,000/- out of expenditure incurred on advertisement and publicly by the appellant company and to a disallowance of Rs.8,00,000/- out of printing and stationery expenditure incurred by the appellant company. The addition relating to the disallowance of advertisement expenditure is Page 7 of 12

discussed by the Assessing Officer in pages 8 to 10 of his assessment order.
The method followed by the Assessing Officer is similar to that adopted by him in disallowing ‘truck freight’ expenses which has been discussed in Ground of Appeal No. 2 viz. the AO issued notices under section 133(6) to various parties which had undertaken advertising and publicity work for the appellant company and when these notices under section 133(6) came back unserved, the AO formed an opinion that the appellant company was inflating its expenditure by dubious means. The ad hoc and arbitrary way in which the addition has been made can be gauged by examining Para 7.6 of the assessment order. The same is reproduced as under:
“An adverse inference is therefore being drawn with regard to expenses booked under the head advertisement and publicity for the following reasons:-
(i)
The assessee is paying separately professional charges to its retired employees stating there experience and wi om contribute much to the business of the assessee company.
(ii)
The assessee has also incurred business promotion expenses of Rs.
36,82,603/- for the same purposes which are found veiled under the head misc expenses and not expressly depicted in its final account though this head is a commonly used appropriate head in the accounting practice.
(iii)
The advertising materials in the form of any calendar and dairy pertaining to the calendar year 2012 were not produced during the assessment proceedings. The parties which did not respond to the notices u/s 133(6) issued or were found untraceable by the Postal Authorities were all relating to printing of calendar and dairy.
(iv)
During the assessment proceedings the assessee produced specimen of calendar, diary and desk calendar got printed by him for the calendar year 2015 which depicted that the same bears the description of assessee company and its sister concern M/s Jaipur Golden Hospital Pvt.
Ltd. Assuming that the similar practice must have been followed by the assessee company in earlier year as well, it is concluded that expenditure incurred under this head might not have been solely and exclusively for the business of the assessee company.
(v)
The bill raised in respect of purchase of paper and printing of calendar and dairies are raised in the month of February 2012 and March
2012 which is unusual as the period of any financial year after December loses its relevance for such purposes. Moreover these calendars carry normal details and do not carry any other useful information. Few such instances in respect of untraceable parties are mentioned below:-
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(vi)
The expenses booked under this head as compared to immediate preceding assessment years are disproportionately on a higher side and no commensurate increase in business profit is noticed in the assessment year under consideration contradicting the contention of the assessee with regard to nexus of higher expenditure under this head resulting in increase business profit.”
Hence, the Assessing Officer has made the disallowance entirely on suspicion and guesswork. There is no discussion of the ledger accounts of these parties and no examination of the bank account of the assessee from where these payments have been made or of the TDS which the appellant company has been regularly deducting on those payments. For reasons already given while disposing off Ground of Appeal No. 2, ad hoc additions cannot be upheld in law and neither can those additions be sustained which have been made merely because notices under section 133(6) came back unserved. The Assessing
Officer’s addition has been made in an arbitrary manner and is not corroborated by concrete evidence. Accordingly, the addition of Rs.75,00,000/- is hereby deleted.
The other disallowance which is being contested by the appellant company relates to the addition of Rs.8,00,000/- made by the Assessing Officer under the head ‘Printing and Stationery’. This again is an ad hoc disallowance as seen by a perusal of Para 8.3 of the assessment order which is reproduced below:-
“From the details furnished It is observed that 99% of these expenses are paid for in cash for at the branches and booking offices. The accounts are supported and manageable substantially by internal records and vouchers. The assessee company has not adopted the system of keeping any imprest amount with the branches to defray day to day cash expenses of routine nature. Therefore possibility of defraying such expenses from the cash amount received from the customers at the branches/booking offices cannot be ruled out. Thus the suppression of receipts side can also not be ruled out. Since this account is prone for leakages on account of above stated all reasons, an amount of Rs.
8,00,000/- is being disallowed out of expenses of Rs. 1,50,27,637/- claimed under this head. It may be mentioned here that in the immediate proceeding assessment year these expenses were to the tune of Rs. 94,18,078/- only and considering even and inflation rate of 10%, the amount of Rs. 1,50,27,637/- debited for the assessment year under consideration is on a very high side.”
Hence, for reasons already given in the preceding pages, this ad hoc addition is being deleted as it is based entirely on guesswork and is not supported by any evidence. The addition of Rs.8,00,000/- is hereby deleted.
The assessee’s appeal is allowed.”
6. Per Contra, the ld. Sr. DR, Shri Om Prakash vehemently argued against the order of the ld. CIT(A). It was contended that the relief accorded
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by the ld. CIT(A) was excessive, arbitrary and unjustified. The ld. DR argued that the ld. AO has made the additions as the assessee has failed to provide him requisite details with evidences. He also contested that no blame can be attached upon the ld. AO for making additions in respect of non-complying parties-existing or otherwise.
7. The ld. Counsel for the assessee reiterated its arguments made before the lower authorities. The ld. Counsel fully supported the order of the ld.
First Appellate Authority and requested that the same be confirmed.
8. We have heard rival submissions in the light of material available on records. We have noted that both ld. Assessing Officer and ld. CIT(A) have drawn unilateral conclusions without placing on record sufficient evidences to support the same. The narration made by the ld. AO in the assessment order also indicates that the assessee on its part also cannot escape the blame of inadequate and insufficient compliance to the requirement of the ld. AO.
We have noted that the conclusions drawn by the ld. AO though tilt towards the element of human probability yet they cannot be summarily rejected as mere piece of figment of imagination since they are based upon results of third parties enquiries conducted by the ld AO. We have also noted that the ld. CIT(A) while according relief has made incorrect conclusion of books of accounts not been examined by the ld. AO, when on the very first page, ld. AO has given his findings of examining the same on text check basis.
We have also noted that the ld. CIT(A) has referred to a plethora of judicial
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pronouncements as supporting his conclusion, however he has not explained in detail as to how the impugned decisions are relevant in the present case. Mere quoting of judicial citations without establishing a co- relation between the facts of the case at hand and those in the relied upon judgments would not come to the rescue of ld. First Appellate Authority.
9. We have noted that the assessee is engaged in the business of transport, where the commercial expediency of claimed expenses cannot be all together ruled out. At the same time, it is a settled principle of law that the expenses claimed in course of business need to be justifiably explained with demonstrative evidences before the Revenue authorities for their acceptance. In the present case, the conduct of the assessee to the extent has been found to be wanting. A presumption therefore for the impugned expenses not being fully vouched, justified or suffering from adequate commercial expediency, therefore cannot be ruled out. Estimated disallowance by the assessing authorities therefore cannot be summarily rejected. The question that therefore comes however is the quantification of disallowance of such expenses on estimate basis. We have noted that the estimation of ld. Assessing Officer has been on higher side. Be that as it may be, we are of the view that end of justice would be met if the disallowance made by the ld. AO and deleted by the ld. CIT(A) is restricted to 50% of the total disallowance. Accordingly, we set-aside the orders of the lower authorities on the contested issue and direct the ld. AO to restrict
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his disallowance of advertisement expenses of Rs.75 lakhs, of truck freight expenses of Rs.96,50,000/- , of crossing charges expenses of Rs.48 lakhs and of printing and stationary expenses of Rs.8 lakhs to 50% of the disallowed amount. All the grounds of appeal nos. 1 to 4 raised by the appellant Revenue are therefore partly allowed.
10. In the result, appeal of the Revenue is partly allowed.
Order pronounced in the open court on 19th December, 2025. /- [ANUBHAV SHARMA] [AMITABH SHUKLA]
JUDICIAL MEMBER

ACCOUNTANT MEMBER
Dated: 19.12.2025
Shekhar