M/S. KUMARALAYAM PROPERTIES (P) LTD.,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

This is an appeal filed by the assessee against an Order dated 27.07.2016 of Commissioner of Income Tax (Appeals)-8, Chennai, in for the AY 2012-13.

2.0 The assessment was completed u/s.143(3) on total income of Rs.19,59,450/-. During the assessment proceedings, the AO made the following additions to the returned of income:-

ITA No.2717/Mds/2016 :- 2 -:

(i) Advertisement and Sales promotion expenses - Rs.51,230/- (ii) Rates, taxes and Insurance - Rs.13,594/- (iii) Non-deduction of TDS i.r.o. Payment to Auditor - Rs.75,000/- (iv) Other General and Administrative expenses - Rs.81,042/- (v) Employee remuneration & benefits - Rs.13,53,200/- All the grounds of appeal are related to the above addition of Rs.19,59,450/- 3.0 Before the AO the Ld.AR of the assesse, Mr. Meenakshisundaram and the representative of the company, Shri Siddique, General Manager appeared and agreed for the above disallowance, as the assessee could not establish the expenditure with relevant evidences. The assessee went on appeal before the Ld.CIT(A) and pleaded for restricting the disallowance of 20% of the expenditure other than the audit fees and to restrict the disallowance to 30% in the case of Audit fee.

4.0 Before the Ld.CIT(A) also the assessee did not furnish any evidence to establish the genuineness of expenditure, hence the Ld.CIT(A) confirmed the addition made by the AO.

5.0 Aggrieved by the order of Ld.CIT(A) the assessee is on appeal before this Tribunal.

Appearing for the assessee, Shri K. Meenakshisunderam, Ld.Counsel argued that the assessee has lost all vouchers, bills, evidences in the recent floods and the assessee is not in a position to produce the evidences towards expenses. The Ld.AR contended that on similar facts 20% of the expenditure was disallowed in general. Therefore, he requested for restricting the disallowance to 20% of the expenses instead

ITA No.2717/Mds/2016 :- 3 -: of total disallowance of the expenses under the heads mentioned in the earlier paragraphs.

6.0 On the other hand, the Ld.DR submitted that the contentions and the arguments of the assessee were addressed by the Ld.CIT(A) in his orders and there was no effect of the floods as stated by the assessee’s AR since the assessment was completed before the occurrence of floods.

According to the Ld.DR, since assessee failed to produce any evidences, the entire addition made by the AO required to be confirmed.

7.0 We heard the rival submissions and perused the material placed on record.

8.0 The Ld.CIT(A) in his order discussed all the issues/contentions raised by the assesse in Para No.4.1 which is extracted as under for the sake of convenience:

“4.1 I have considered the observations of the Assessing Officer and the submissions made by the Appellant. The Assessing Officer disallowed expenses claimed to the tune of Rs.15,74,066/- since the appellant failed to furnish the necessary evidence in this regard. On the other hand, the Appellant pleads that many of the employees who were in their employment earlier have left the jobs with the Appellant and that the woes of the Appellant were further compounded by the floods in Chennai in December, 2015. I find no force in the arguments of the Appellant. Firstly, the floods in Chennai occurred in December, 2015, much after the assessment proceedings were completed. Secondly, the appellant- company is subjected to internal audit as per Companies Act and Tax Audit u/s.44AB of the Income Tax Act, and therefore, the Appellant’s Explanation that the default was caused due to employees leaving their jobs - a common occurrence in corporate sector - cannot be considered as a reasonable cause for failure to perform a statutory obligation. Thirdly, the Appellant’s argument that the strict rules of Evidence Act do not apply in Income Tax proceedings does not hold water since this is a case of total absence of evidence. Lastly, as the Assessing Officer observed, the Appellant had agreed for the disallowance of these expenses claimed in the course of assessment proceedings, and therefore, it is not given to the Appellant to approbate and reprobate on this issue. Moreover, the appellant has again pleaded for partial disallowance before me which goes on to prove that the appellant indulged in such activity on regular basis only to retract later on. In view of the above, the disallowance of Rs.15,74,066/- made by the Assessing Officer is sustained since no such circumstances exist - beyond the control of the Appellant as claimed - to explain the failure to furnish evidence as per the statutory requirements. The appellant fails on this ground”.

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9.0 During the appeal hearing for a query raised from the Bench, the assessee has expressed inability to produce any evidence in the form of bills, vouchers, etc., in support of its claim for expenses under the head sales, promotion, rates & taxes and insurance payment made to auditor, general administrative expenses and employee remuneration benefits. In the absence of evidences to support the claim, the expenditure cannot be held to be incurred for the purpose of business and the genuineness of the expenditure is not proved. Further, it can be seen from the Assessment Order and the Ld.CIT(A)’s Order that the assessee has expressed inability to produce evidences and accepted for the disallowance of expenditure. This fact has not been disputed by the assesse. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is confirmed.

11.0 In the result, the appeal of the assessee is dismissed.