AGS HOLIDAY RESORTS,VELLORE vs. DCIT, CHENNAI

The ld. AR Shri P. Ranga Ramanujam, C.A. drew our attention to page 7 of the impugned order and submits that the assessee incurred expenses in cash regarding garden maintenance, printing and stationery and subscription to periodicals. He argued that the assessee is located at remote village and engaged local people for its garden maintenance and incurred garden expenses on day-today basis in cash. The assessee paid the said garden expenses on daily basis to various local labour and no chance of paying the said amount through banking channel to the local labourer. Further, he submits that the assessee used to procure printing and stationery material from local suppliers whenever it is required and the assessee used to pay in cash on periodicals at that time. Further, the assessee used to get periodicals like journals, newspapers, etc. from local vendors and was also paid in cash. He argued that the assessee out of the total miscellaneous expenses, incurred in cash only to the addition confirmed by the ld. CIT(A) as there was no chance to the assessee to pay the same through banking channel as those were incurred locally, where the assessee’s resort is located.

The ld. DR relied on the order of the Assessing Officer.

Having heard both the parties and on perusal of the records, we note that the Assessing Officer disallowed 30% of total miscellaneous expenses claimed under the head ‘other expenses’. We find the details of expenditure are placed in tabular form in page 7 of the impugned order. On perusal of the same, we note that the assessee incurred all the said expenditure through banking channel except garden expenses, printing & stationery and subscriptions to periodicals. The Assessing Officer adopted the disallowance at an estimation of 30% only on the reason that there was no details of evidence in support of claim of the assessee, but, whereas, on perusal of the tabular form of details of expenditure at page 7 of the impugned order, we note that the assessee incurred all the said expenditures through banking channel like bank charges, faver block expenses, swimming pool expenses, water charges, electrical & furniture expenses, kitchen maintenance, consumables, laundry expenses, income tax and general expenses. The ld. CIT(A) examined all the said details in the first appellate proceedings. The ld. AR submits that all the details were furnished before the Assessing Officer, but, however, he proceeded to disallow 30% on estimation basis is not correct. We find force in the arguments of the ld. AR that the Assessing Officer, without examining the details, proceeded to disallow on estimation basis, in our opinion, it is not justified.

Coming to the impugned order, at para 7.8, we note that all the ledgers forming part of financials of the assessee were brought on record before the Assessing Officer and on examination of the same, the ld. CIT(A) restricted the addition to the extent of cash payments. In our opinion, the ld. CIT(A) ought to have examined the details of cash payments in the ledger accounts of the assessee and considered the same. We find no such consideration or examination made by the ld. CIT(A) with regard to the circumstances and reasons, which made the assessee to bear garden expenses, printing & stationery and subscription to periodicals in cash. Considering the facts and circumstances of the case, we accept the submissions of the ld. AR made in support of cash payments made with regard to garden expenses, printing & stationery and subscription to periodicals and the order of the ld. CIT(A) is not justified. Thus, the addition as restricted by the ld. CIT(A) is deleted and the ground raised by the assessee in ground No. 2 is allowed.

Ground No. 3 raised by the assessee is consequential in nature and requires no adjudication.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 27th November, 2024 at Chennai.