ANIL KUMAR PAIK,KOLKATA vs. J.C.I.T (OSD) UNDER CIT - III, KOL, KOLKATA

The relevant facts of the case giving rise to this appeal are as follows. The assessee is an individual, who is engaged in the business of Construction, Trading in Country Spirit and running a Medical Shop. The return of income for the year under consideration was filed by him declaring total income of Rs.21,00,893/-. The case of the assessee was selected for scrutiny by the Assessing Officer and in the assessment completed under section 143(3) vide an order dated 08.12.2011, the total ./2013 Assessment year: 2009-2010 Page 2 of 13 income of the assessee was determined by the Assessing Officer at Rs.55,23,192/- after making various additions/disallowances.

3. Against the order passed by the Assessing Officer, an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) confirmed some additions/disallowances made by the Assessing Officer while deleting other additions/disallowances or sustaining the same partly. The ld. CIT(Appeals) thus allowed the appeal of the assessee partly vide his appellate order dated 23.01.2013, which is impugned by the assessee in the present appeal filed before the Tribunal on the following grounds:- “1. The Ld CIT(A) erred in confirming addition against interest to the extent of Rs. 2,34,084/-.

As noted at the outset, there is a delay of 117 days on the part of the assessee in filing this appeal before the Tribunal. In this regard, an application is filed by the assessee seeking condonation of the said delay and keeping in view the reasons given therein, which are duly supported by an affidavit filed by the assessee as well as medical certificate issued by a Doctor, we are satisfied that there was a sufficient cause for the delay of 117 days on the part of the assessee in filing his appeal before the Tribunal. Even the ld. D.R. has not raised any material objection in this regard. We, therefore, condone the said delay and proceed to dispose of the appeal of the assessee on merit.

At the time of hearing before us, the ld. counsel for the assessee has filed a written submission in support of the assessee’s case on the various issues raised in this appeal. The ld. D.R., on the other hand, has relied on the impugned order of the ld. CIT(Appeals) in support of the revenue’s case by stating that the same is well reasoned and well discussed on all the issues raised by the assessee in this appeal.

We have considered the rival submissions and also perused the relevant material available on record including the orders of authorities below as well as the written submission filed by the ld. counsel for the assessee. At the time of hearing before us, the ld. counsel for the assessee ./2013 Assessment year: 2009-2010 Page 4 of 13 has not pressed Ground No. 1 raised by the assessee in this appeal. The same is accordingly dismissed as not pressed.

At the time of hearing before us, the ld. counsel for the assessee has submitted in the written submission that the expenditure in question incurred by the assesese on repairs and maintenance of old racks did not result in creation of any new asset and the same being only 1% of the total turnover of the liquor business, the ld. CIT(Appeals) is not justified in sustaining the disallowance made by the Assessing Officer on this issue to the extent of 50%. We are unable to accept this contention of the ld. counsel for the assessee. As rightly observed by the ld. CIT(Appeals), the expenditure claimed by the assessee on repairs and maintenance was certainly on the higher side keeping in view the nature of the said expenditure as well as the nature of the business of the assessee. Moreover, the relevant details and documents were not furnished by the assesese to support and substantiate his claim for the said expenditure. Having regard to all these facts of the case, we are of the view that the impugned order of the ld. CIT(Appeals) sustaining the disallowance made by the Assessing Officer on this issue to the extent of 50% does not call ./2013 Assessment year: 2009-2010 Page 7 of 13 for any interference being fair and reasonable. We accordingly uphold the same and dismiss the Ground No. 4 of the assessee’s appeal.

The issue raised in Ground No. 5 relates to the disallowance of Rs.1,41,953/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of entertainment expenses. The expenses of Rs.1,41,953/- claimed to be incurred by the assesese on payment of contribution to local Club, Association, etc. who arranged cultural programmes were disallowed by the Assessing Officer on the ground of lack of business expediency. Before the ld. CIT(Appeals), it was contended by the assessee that he had to give away passes/tickets of various cultural or musical programmes to some of his regular customers for maintaining good client relationship. However, keeping in view the nature of the business of the assessee of purchase and sale of liquor on retail basis, the ld. CIT(Appeals) did not accept this contention of the assessee by observing that there was no need of entertainment of customers in this type of business. He also noted that no supporting bills or documents were produced by the assessee to establish the exact nature of the expenses or the business expediency thereof. At the time of hearing before us, the ld. counsel for the assessee in the written submission has reiterated the stand taken on behalf of the assessee before the ld. CIT(Appeals). We, however, find no merit in the same keeping in view the nature of the business of the assesese which, in our opinion, hardly justified any customer entertainment by providing passes/tickets of various cultural or musical programmes. Moreover, as categorically noted by the ld. CIT(Appeals), no details or any documentary evidence could be filed by the assessee either before the Assessing Officer or even before the ld. CIT(Appeals) to support and substantiate his claim of entertainment expenditure. We, therefore, uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on this issue and dismiss Ground No. 5. ./2013 Assessment year: 2009-2010 Page 8 of 13 13. As regards the issue involved in Ground No. 6 relating to the disallowance made by the Assessing Officer and sustained partly by the ld. CIT(Appeals) on account of cost incurred by the assessee for providing snacks to the customers, it is observed that the disallowance on this issue was made by the Assessing Officer in the absence of any supporting evidence produced by the assessee. Before the ld. CIT(Appeals), it was contended by the assessee that he distributed packets of dry snacks like nuts, chips, etc. free of cost to customers, who lifted larger quantity of liquors. Keeping in view the nature of the assessee’s business, the ld. CIT(Appeals) held that incurring of certain expenditure of this nature could not be ruled out. However, keeping in view the absence of any supporting evidence, he found it fair and reasonable to restrict the disallowance to 50% as against 100% made by the Assessing Officer. Having considered the submissions made by the assessee in writing as well as the material available on record including the orders of the authorities below, we are of the view that the order of the ld. CIT(Appeals) allowing the claim of the assessee on this issue to the extent of 50% is quite fair and reasonable keeping in view the nature of the assessee’s business as well as the failure of the assessee to produce any documentary evidence to support and substantiate his claim. We, therefore, uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss Ground No. 6.

The issue involved in Ground No. 7 relates to the disallowance made by the Assessing Officer and sustained partly by the ld. CIT(Appeals) on account of tea & tiffin expenditure and staff welfare claimed by the assessee.

The expenditure claimed under the head “tea and tiffin” and “staff welfare” were explained by the assessee before the Assessing Officer as the expenses incurred for providing lunch, snacks, etc. to staff during duty hours. It was, however, noted by the Assessing Officer that the assessee had also claimed shop expenses and general expenses ./2013 Assessment year: 2009-2010 Page 9 of 13 separately. He, therefore, held that the tea & tiffin expenses and staff welfare expenses claimed by the assessee were in the nature of personal expenditure not related to his business and the same were disallowed by him. On appeal, the ld. CIT(Appeals) restricted the disallowance made by the Assessing Officer on this issue to 50% observing that the disallowance only to that extent was justified on account of personal and non-verifiable element involved in the relevant expenditure. After considering the submissions made by the assessee as well as the material available on record, we find no infirmity in the impugned order of the ld. CIT(Appeals) on this issue. Even though the personal and non-verifiable elements were involved in the tea & tiffin expenses and staff welfare expenses claimed by the assessee as pointed out by the Assessing Officer, the disallowance of the entire claim of the assessee as made by the Assessing Officer was not justified in the facts of the case including the nature of the assessee’s business and in our opinion, the disallowance made by the Assessing Officer on this issue was rightly restricted by the ld. CIT(Appeals) to 50% keeping in view the involvement of personal element as well as non-verifiable element. We, therefore, uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss Ground No. 7.

The issue involved in Ground No. 8 relates to the disallowance of 50% made by the Assessing Officer out of conveyance expenses, which is restricted by the ld. CIT(Appeals) to 25%.

The expenses of Rs.2,08,259/- claimed by the assessee on account of conveyance were disallowed by the Assessing Officer to the extent of 50% keeping in view the nature of the business of the assessee to run liquor shop. He held that hardly any expenditure on conveyance was required to be incurred for the business of the assessee and also noted that the entire expenses incurred by the assessee in cash on conveyance were claimed on the basis of self-made vouchers. On appeal, the ld. CIT(Appeals) found the disallowance of 50% made by the Assessing ./2013 Assessment year: 2009-2010 Page 10 of 13 Officer to be excessive and restricted the same to 25% keeping in view the nature of business activities of the assessee as well as the volume of turnover.

After considering the submissions made by the assessee as well as the material available on record, we are of the view that the involvement of personal element in conveyance expenses claimed by the assessee cannot be ruled out. Keeping in view the same as well as the fact that the entire claim for the conveyance expenses incurred in cash was made by the assessee on the basis of self-made vouchers without giving the relevant details, we find that the disallowance as finally made by the ld. CIT(Appeals) to the extent of 25% of the assessee’s claim for conveyance expenses is quite fair and reasonable. The impugned order of the ld. CIT(Appeals) on this issue is accordingly upheld and Ground No. 8 of the assessee’s appeal is dismissed.

As regard the issue involved in Ground No. 9 relating to the disallowance made by the Assessing Officer and sustained partly by the ld. CIT(Appeals) on account of carriage inward, it is observed that the expenses claimed by the assessee on carriage inward amounting to Rs.5,14,222/- were disallowed by the Assessing Officer as he found that similar expenses incurred for taking of delivery of liquor bottles and sending empty bottles were separately claimed by the assessee as delivery expenses. He also noted that there was failure on the part of the assessee to furnish any relevant details or documents to support his claim on account of carriage inward expenses. Before the ld. CIT(Appeals), it was submitted by the assessee that the carriage inward expenses related to bringing loaded bottles to the shop premises while delivery charges related to returning of empty bottles. It was also brought to the notice of the ld. CIT(Appeals) by the assessee that the expenses incurred on carriage inward were only to the extent of 2.76% of his turnover. The ld. CIT(Appeals) found some merit in the submissions ./2013 Assessment year: 2009-2010 Page 11 of 13 made by the assessee. He accordingly restricted the disallowance made by the Assessing Officer on account of carriage inward expenses to 50%.

At the time of hearing before us, the ld. counsel for the assessee has submitted that considering the huge number of bottles brought in and large number of trips involved, the expenditure claimed by the assessee on carriage inward which is only 2.76% of his turnover is quite reasonable and the same should be fully allowed. We are unable to accept this contention of the ld. counsel for the assessee keeping in view the facts and circumstances of the assessee’s case. It is observed that separate claim on account of delivery expenses was made by the assesese and although the same was explained before the ld. CIT(Appeals) as related to returning of empty bottles, there is nothing brought on record by the assessee to show that any income by way of sale of empty bottles was declared by the assessee. Moreover, the relevant details and documents to support and substantiate his claim for carriage inward expenses were not furnished by the assessee either before the Assessing Officer or even before the ld. CIT(Appeals). Keeping in view all these facts of the case, we are of the view that the disallowance of 50% out of carriage inward expenses as finally made by the ld. CIT(Appeals) is fully justified. We accordingly uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss Ground No. 9.

Ground No. 10 is not pressed by the ld. counsel for the assessee at the time of hearing before us. The same is accordingly dismissed.

The issue involved in Ground No. 11 relates to the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of transport charges.

While explaining transport charges of Rs.3,34,397/- claimed by him, it was submitted by the assessee before the Assessing Officer that as per ./2013 Assessment year: 2009-2010 Page 12 of 13 C&F Agreement, transport charges on inward delivery were to be borne by principal while that on outward delivery were to be borne by agent. The relevant details in this regard, however, could not be furnished by the assessee. The Assessing Officer also noted that no tax at source was deducted by the assessee from the payment of transport charges as required by section 194C. Keeping in view the failure of the assessee to furnish the relevant details as well as the copy of agreement and his failure to deduct tax at source as required by section 194C, the transport charges claimed by the assessee were disallowed by the Assessing Officer. On appeal, the ld. CIT(Appeals) confirmed the said disallowance for the same reasons as given by the Assessing Officer in the assessment order.

At the time of hearing, the ld. counsel for the assessee has contended that there was no written contract between the assessee and the transport agents and in absence of the same, the provisions of section 194C were not applicable as held by the Hon’ble Punjab & Haryana High Court in the case of CIT(TDS), Chandigarh –vs.- United Rice Land Limited [174 Taxman 286]. We are unable to accept this contention of the ld. counsel for the assessee. First of all, it is observed that the relevant details and documents to support and substantiate this contention are not placed on record before us. Secondly, it was claimed on behalf of the assessee himself before the Assessing Officer that the outward delivery charges were borne by the agent as per C&F Agreement, but the copy of the said agreement was never produced by the assessee. Even the relevant details of the transport charges were not furnished by the assessee. The disallowance on account of transport charges thus was made not only because of the failure of the assessee to deduct tax at source but also because of the failure of the assessee to file the relevant details and documents to support and substantiate his claim for deduction on account of transport charges. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on account of transport ./2013 Assessment year: 2009-2010 Page 13 of 13 charges and upholding the impugned order of the ld. CIT(Appeals) on this issue, we dismiss Ground No. 11 of the assessee’s appeal.

In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on June 21, 2017.