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Income Tax Appellate Tribunal, MUMBAI BENCHES “A” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner (Appeals) – 2, Mumbai and arises out of order u/s 143(3) of the Income Tax Act, 1961 (the “Act’’).
The grounds of appeal filed by the assessee read as under:- i. On the fact and circumstances of the case as well as in law, the learned CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing a sum of Rs. 8,90,553/- on adhoc basis being 1% out of the total Packing Expenses of Rs. 8,90,55,258/- without appreciating the facts and circumstances of the case. ii. On the facts and circumstances of the case as well as in law, the learned CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing a sum of Rs. 2,11,355/- on adhoc basis being 1% out of the total Packing Expenses of Rs. 2,11,35,583/- without appreciating the facts and circumstances of the case.
3. Briefly stated, the facts are that the Assessing Officer (AO) found during the course of assessment proceeding that most of the expenses in respect of packing materials of Rs. 8,90,55,258/- and miscellaneous expenses of Rs. 2,11,35,583/- have been incurred by raising self-made vouchers not supported by specific bills. The AO referred to the disallowance @1% made in respect of similar expenses from A.Y. 2006-07 to 2010-11 and then disallowed 1% of packing material and miscellaneous expenses which comes to Rs. 8,90,553/- and Rs. 2,11,355/- respectively.
4. The assessee preferred an appeal before the learned CIT(A). We find that the learned CIT(A) agreed with the reasons given by the AO that the expenses are supported by self-made vouchers which are not verifiable in nature. The learned CIT(A) also noted that the assessee gave the same submission which was given before the AO at the time of assessment proceedings and no fresh evidences could be filed before him during the appellate proceedings. As the vouchers are self-made ones, possibility of inflation of expenditure cannot be ruled out, therefore, the learned CIT(A) confirmed the disallowance of Rs. 8,90,553/- and Rs. 2,11,355/- made by the AO.
5. Before us, the learned counsel of the assessee referred to the order of the learned CIT(A) for the A.Y. 2010-11, wherein the disallowance of 1% of packing material expenses and miscellaneous expenses made by t he AO were deleted following the order of the learned CIT(A) for A.Y. 2008-09 and 2009-10.
The learned DR supported the order of the learned CIT(A) for the impugned assessment year confirming the disallowance of the above expenses made by the AO.
We have heard the rival submissions and perused the relevant material on record. We find that a similar issue arose before the Co- ordinate Bench in the case of the assessee for the A.Y. 2005-06 [ITA No. 6506/Mum/2008]. The Tribunal on similar facts reduced the disallowance to Rs. 50,000/- from the disallowance of Rs. 1,20,040/- made by the AO. Considering the entire facts and circumstances of the case as well as the fact that the assessee failed to file before the learned CIT(A) any fresh evidence, we are of the considered view that it would be just and fair if an estimated addition is made towards such expenses at Rs. 6,00,000/-. The AO is directed to restrict the disallowance to Rs. 6,00,000/- .
In the result, the appeal is partly allowed. Order pronounced in the open court on 04/01/2017