GUPTAJEE & CO.,DELHI vs. ACIT, CIRCLE- 47(1), NEW DELHI

This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] - 16, New Delhi dated 30.10.2017 pertaining to assessment year 2013-14.

The substantive grievances of the assessee read as under:

That on the facts and in the circumstances of the case and the legal position, the ld CIT (As) has erred in confirming the disallowance of packing expenses to the extent of Rs. 8,00,000/- on adhoc basis.

Ground Nos. 1 and 2 relate to the adhoc disallowance relating to packing expenses and loading and unloading, cartage outward, general expenses and staff welfare expenses.

During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has debited and claimed packing expenses of Rs. 1,26,74,322/- in the profit and loss account. The assessee was asked to explain the nature of such expenses and to explain as to why the cash payment was made for such expenses.

In its reply, the assessee stated that the packing expenses are in the nature of wooden boxes, patti and labour paid for packing of material. It was explained that the same are petty in nature and not liable for TDS.

The reply of the assessee did not find any favour with the Assessing Officer who was of the firm belief that the wooden boxes, grass patti and other materials supplied by the assessee to persons/parties is in the nature of job contract which clearly attracts the provisions of section 194C of the Act and since no tax was deducted at source, addition of Rs.1,26,74,322/- was made.

Proceeding further, the Assessing Officer noticed that the assessee has claimed certain expenses in the nature of loading and unloading cartage outward, general expenses, staff welfare, business promotion and printing and stationery totaling to Rs. 2,18,19,181/-.

The assessee was asked to explain the expenses in light of provisions of section 194C of the Act.

In its reply, the assessee stated that these expenses have been paid to petty labourers on which no TDS is liable to be deducted u/s 194C of the Act.

The explanation of the assessee did not satisfy the Assessing Officer who made an adhoc disallowance of 10% and made addition of Rs. 2,18,19,181/-. The Assessing Officer further found that the assessee has claimed telephone expenses of Rs. 6,26,387/- and conveyance expenses of Rs. 3,44,093/- and was of the opinion that these expenses also involve personal element and disallowed 10% and made addition of Rs.97,048/-.

The assessee strongly agitated the assessment order before the ld. CIT(A).

In so far as the addition on account of packing material is concerned, the CIT(A), following the order of Assessment Year 2011–12, did not find any merit in invoking the provisions of section 194C of the Act. However, he restricted the disallowance to Rs.8 lakhs and in so far as adhoc disallowance in respect of other expenses is concerned, the ld. CIT(A) restricted the disallowance to Rs. 2 lakhs and 1/10 disallowance out of telephone and conveyance is concerned, the same was confirmed by the ld. CIT(A).

Before us, the learned counsel for the assessee vehemently stated that the assessee is maintaining regular books of accounts which were subject to audit and no adverse inference has been drawn by the auditors. Entire additions have been made on adhoc basis and, therefore, the same should be deleted.

Per contra, the ld. DR supported the findings of the lower authorities.

We have carefully considered the orders of the authorities below.

In the result, the appeal filed by the assessee in is allowed.