R.MANOJ KUMAR,CHENNAI vs. ACIT, CHENNAI

आदेश / O R D E R

PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

This is an appeal filed by the assessee against the Order dated 24.02.2016 of Commissioner of Income Tax (Appeals)-5, Chennai, in for the AY 2008-09.

2.0 All the grounds of the appeal are related to the disallowance of Rs.2,12,600/- being the difference in the net profit as per the P&L account

ITA No.1310/Mds/2016 :- 2 -: and the income admitted. During the assessment proceedings, the Assessing Officer (hereinafter referred to as ‘AO’) found that net profit as

per P&L account was Rs.7,39,610/- and the assessee had admitted only a sum of Rs.5,27,010/- as income. The assessee has claimed the expenses of Rs.2,12,600/- from the P&L adjustment account. The AO disallowed the expenses holding that the expenses were not wholly and exclusively laid out for the purpose of business. Aggrieved by the Order of the AO, the assessee went on appeal before the Learned Commissioner of Income Tax(Appeals) (hereinafter referred to as ‘Ld.CIT(A)’). During the first appellate stage, the Ld.CIT(A) called for the copy of the agreement with ‘Shell India’ and the assessee could not produce the agreement, therefore the Ld.CIT(A) confirmed the addition and dismissed the appeal.

3.0 Aggrieved by the Ld.CIT(A)’s Order, the assessee filed an appeal before this Tribunal.

During the appeal, the Ld.AR submitted that the assessee was in the business of running fuel outlet on behalf of M/s.Shell India Marketing Pvt. Ltd. and a small Departmental Store attached to the Fuel Station. The assessing officer disallowed the expenditure debited to the P&L adjustment account without verifying the facts and the entire expenditure was supported by bills and vouchers, the same were spent for the purpose of business to meet the hotel expenses of managers of ‘shell’ company and the vehicle expenses. The assessee used to draw every month towards his targeted earnings and out of this he spent amounts towards

ITA No.1310/Mds/2016 :- 3 -: expenses which are shown in the profit and loss adjustment account. The A.R argued that the AO disallowed the expenditure without calling for the details and no opportunity was given to the assessee to substantiate his case. The Ld.CIT(A) also did not give any opportunity to submit the copy of the agreement or to produce the bills evidencing the genuineness of the payment. Therefore, the Learned A.R argued that an opportunity to be given to the assessee to prove its case regarding genuineness of the expenditure. On the other hand, the Ld.DR relied on the lower authorities orders.

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

On close verification of the Assessment Order, it reveals that the AO has not called for the details and disallowed the expenditure without examination or verification of expenses, merely because the amount was claimed from the P&L adjustment account. The Ld.CIT(A) has called for the agreement, when the assessee has expressed his inability to produce the agreement, the Ld.CIT(A) landed in a conclusion that the expenditure was not genuine and hence confirmed the addition. The assessee stated that the expenses were incurred for the purpose of business and supported by the vouchers and bills. So long as the expenditure is incurred for the purpose of carrying on the business and supported by bills and vouchers, nomenclature of the account does not vitiate the claim of the expenditure and the AO has no option except to allow the expenditure

ITA No.1310/Mds/2016 :- 4 -: unless it is proved otherwise. In the instant case, the AO disallowed the expenses without verifying the details and the assessee’s AR argued that if the opportunity is given, the assessee is in a position to prove the expenditure and requested for one more opportunity for submission of the necessary details and information before the AO. Therefore, we are of the considered view that one more opportunity should be given to the assessee for production of details. Accordingly, we set aside the order of lower authorities and remit the matter back to the file of AO for verification and to decide the issue afresh on merits.

5.0 In the result, the appeal of the assessee allowed for statistical purposes.