SMT. KARPAGAM,CHENNAI vs. DCIT, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) 14, Chennai dated 23.06.2016 and pertains to the assessment year 2010-11.

Shri S. Sridhar, the Ld. Counsel for the assessee submitted that the assessee claimed expenditure of ₹73,18,704/- towards wages and carriage outwards to the extent of ₹39,63,216/-. The Assessing Officer found the bills and vouchers produced by the assessee before him were not in order. Accordingly, he disallowed 20% of the total expenditure claimed by the assessee. On appeal by the assessee, the CIT (Appeals) found that it is not a case of total absence of evidence for the expenditure claimed. Accordingly, he restricted the disallowance to 15%. The Ld. Counsel submitted the fact, that the expenditure incurred for carrying out the business cannot be doubted, merely because the assessee couldn’t produce the bills and vouchers in the form in which the Assessing Officer expected. There cannot be any reason for disallowing the claim of the assessee. Therefore, the Ld. Counsel submitted that the CIT (Appeals) ought to have deleted the entire addition made by the Assessing Officer.

On the contrary, Smt. Sumathy Venkatraman, the Ld. Departmental Representative submitted that the total expenditure claimed by the assessee was not substantiated by producing necessary bills and vouchers. Since the genuineness of the expenditure was in doubt, the Assessing Officer by taking a lenient view disallowed the claim of the assessee to the extent of 20%. The CIT (Appeals) further restricted the disallowance to 15%. According to the Ld. Departmental Representative, it is a clear case for disallowing the entire claim of the assessee. Since both the authorities below are very lenient and considered the case of the assessee sympathetically no interference is called for.

We have considered the rival submissions on either side and perused the material available on record. The assessee is engaged in the business of trading in waste newspaper collected from the street vendors. The waste papers collected from the street vendors are segregated in different categories and disposed off. In the course of business activity, the assessee claimed that all the waster papers and the material collected in the course of the business were sorted out and the rejected papers were thrown away. The assessee has paid wages on weekly basis to the employees. The assessee has claimed ₹73,18,704/- towards wages and transport charges to the extent of ₹39,63,216/-. The Assessing Officer however found that the bills and vouchers produced by the assessee are not in order. Accordingly, he restricted the disallowance of 20% on the claim of the assessee. On further appeal, the CIT (Appeals) however restricted to 15%. This Tribunal is of considerable opinion that unless the assessee incurred the expenditure, she cannot carry on the business. No doubt, there are certain discrepancies in the bills and vouchers produced by the assessee. However, as rightly observed by the CIT (Appeals), this is not a case of absence of any evidence. The very fact that the Assessing Officer allowed 80% of the total claim and restricted the disallowance only to 20% shows that the assessee has infact incurred the expenditure. Therefore this Tribunal is of the considered opinion, disallowance of 10% of the total claim would meet the ends of justice. Accordingly, the order of the lower authorities are modified and the Assessing Officer is directed to disallow 10% of the total claim of the expenditure.

In the result, the appeal of the assessee is partly allowed.