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Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
Present for: Appellant by : Anil Kochar, Adv. Respondent by : Supriya Pal, Addl. CIT (DR) Date of Hearing : 23.09.2024 Date of Pronouncement : 26.09.2024 O R D E R
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is filed against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)”] dated 27.06.2024, passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2018-19, which is passed against the assessment order dated 23.04.2021 u/s 143(3) read with section 144B of the Act.
The grounds of appeal raised by the assessee are reproduced as under:
“1. For that the orders passed by the lower authorities are arbitrary, erroneous, without proper reasons, invalid and bad-in-law, to the extent to which they are prejudicial to the interests of the appellant. 2. For that the Ld. CIT (A) erred in confirming the disallowance of Rs.2,28,043/- made by the A.O. claimed under the head 'other expenses' without properly appreciating the facts of the case.
Rishi F.L. On Shop AY: 2018-19 3. For that the Ld. CIT (A) ought to have appreciated the fact that there are various expenditures which are incurred but are not specifically mentioned in the columns of P/L A/c in the ITR and for that purpose the column is 'other expenses'.
4. For that, without prejudice, even otherwise the disallowance so made and confirmed by the CIT (A) is high and/or excessive.
For that the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.”
Brief facts of the case as culled out of the statement of facts filed before the Ld. CIT(A) are that the return of income declaring total income of Rs.4,90,170/-was filed on 31.10.2018. The case was selected for complete scrutiny under CASS module on the sole issue which was 'Income from liquor Business'. Accordingly statutory notices u/s 142(1) were issued on 23.09.2020, 04.11.2020 and 07.12.2020 through e-filing account of the appellant. The appellant could not comply with the notices issued. Finally, on receiving the no-response letter of the Ld. AO, the assessee submitted a few details. The assessment was framed u/s 143(3) wherein additions were made on account of the following -
1. 1. Rs.16,69,485/- on account of difference in turnover vis-à-vis TCS.
2. Rs.3,20,000/- on account of partner's salary being debited twice in the ITR.
3. Rs.2,28,043/-on account of other expenses debited in the P/L a/c. There was delay in filing the appeal, which was condoned by the Ld. CIT(A). The issue relating to partner’s salary was not pressed while the addition on account of difference in turnover was deleted and, on the disallowance out of other expenses, relief was partly allowed. Aggrieved with the order of the Ld. CIT(A) the assessee has filed the appeal before the Tribunal.
Rival contentions were heard and the submissions made have been considered. The Ld. DR supported the order of the Ld. CIT(A) while the Ld. AR requested that the addition made may be deleted. Although the Rishi F.L. On Shop AY: 2018-19 assessee has raised five grounds of appeal
, but they all relate to confirming partly the disallowance of Rs. 2,28,043/- made by the Ld. AO under the head ‘other expenses’. The Ld. AO made the addition by observing as under in the assessment order:
6. Further, the assessee has debited various expenses in P&L A/c. Under the heading other expenses, the assessee has debited expenses of Rs.33,75,994/- specifying their nature. However, an amount of Rs.2,28,043/- is towards other expenses again. This amount of expenditure is neither specified in the ITR nor has any explanation been furnished by the assessee. Thus, the amount of other expenses at Rs.228043/- is added to the total income of the assessee. Penalty proceedings u/s 270A of the I.T. Act is being initiated separately for under reporting of income.”
5. The Ld. CIT(A) partly allowed relief to the assessee by observing as under in the appellate order: “9.2.1 During the course of appellate proceedings the appellant has made written submission as under: The A.O. has made disallowance of Rs. 2,28,043/- which relates to different head of expenses and there being no specific head in the ITR and as provided therein the aggregate amount of Rs.2,28,043/- has been filled up in the ITR under the head "Other Expenses'. The breakup of the other expenses is as under: Accounting Charges 18,000/- Consumable Stores 8,735/- Depreciation 30,811/- Donation 6,850/- Generator Charges 55,242/- License Fees 10,000/- Printing & Stationary 12,450/- Shop Expenses 85,955/- From the aforesaid you will find that the A.O.'s inference that the appellant having debited expenses of Rs.33,75,994/- specifying their nature, the amount of Rs.2,28,043/- which has neither been specified in the ITR nor has any explanation for the same is on wrong footing. The addition so made relates to various head which are not specifically categorized in the ITR and that is the reason the same has been reflected in the column pertaining to other expenses. The expenses so incurred are all attributable to and incurred wholly and exclusively for the purposes of business activity, hence fully allowable.
Rishi F.L. On Shop AY: 2018-19 9.2.2 The above written submission made by the appellant has been carefully perused and considered. In the above submission, though the appellant has given the details of expenditure covered under the head 'other expenses', neither during the course of assessment proceedings nor during the appellate proceedings has provided any documentary evidences in support of the expenditure claimed. It was required on the part of the appellant to provide necessary authentic documentary evidences to show that such expenditure have been incurred wholly and exclusively for the purpose of business and incidental to it and incurred during the relevant previous year. In the absence of any such documentary evidences the claim of expenditure cannot be allowed as incurred for the purpose of business. However, considering the nature of business of the appellant, claim of expenditure on account of depreciation of Rs. 30,811/- and license fees paid of Rs. 10,000 is considered as relating to the appellant's business and hence considered as allowable deduction. Thus, the appellant get relief of Rs. 40,811/- and balance disallowance of Rs. 1,87,232/- is upheld. This ground of appeal raised by the appellant is thus partly allowed.”
6. In the course of the appeal before the Tribunal, the Ld. AR was required to explain whether the required supporting documents were available with the assessee to which he responded that all the vouchers may not be available. Since the remaining expenses were not supported by the required vouchers, some disallowance was called for as the expenses were not supported by the vouchers. However, considering the nature of expenses viz. accounting charges, consumable stores, donation, generator charges, printing and stationery and shop expenses, which total up to Rs. 1,87,232/-, and which are required to be incurred for day- to-day running of the business and cannot be said to be excessive on the total sales shown at Rs. 6,18,37,315/-, the disallowance of entire expenditure was not justified and is found to be excessive. Hence, on a reasonable basis, it would be justified if 10% of the expenditure claimed under these heads i.e. Rs. 18,723/- is upheld as the disallowance under these heads in the absence of supporting vouchers and rest of the addition is deleted and the assessee gets the consequential relief of Rs. 1,68,509/- which was not opposed by the Ld. AR. Hence Ground Nos. 2, 3 and 4 are partly allowed while Ground Nos. 1 and 5 being general in nature do not require any separate adjudication.