VENUGOPAL MAHESWARI,MURSHIDABAD vs. ITO, WARD-2, BERHAMPORE, MURSHIDABAD, MURSHIDABAD

In this appeal the assessee has raised as many as grounds, amongst which the ld.AR for the assessee at the time of hearing before us has not pressed the ground nos. 1 to 5. Therefore, such grounds are dismissed as not pressed. The last ground being general in nature needs no adjudication. Hence, the same is also dismissed. Thus, the only effective ground remains for our consideration is to be decided as to whether the CIT(A) justified in sustaining the impugned addition on estimation basis @ 10% of the total expenses of Rs.8,56,507 being Rs.85,650/- in the facts and circumstances of the case.

The brief facts of this case are that the assessee is an individual and engaged in the business of cloth and filed his return of income declaring a total income at Rs.3,43,670/- on 28-09-2007. Under scrutiny, notices u/s. 143(2) and 142(1) of the Act were issued. In response to which the ld.AR of the assessee appeared and produced before the AO cash book, ledger, bank statement, bills and vouchers in support of the return filed/claim of expenditure. On verification of the P & L account, the AO found that the assessee has debited the expenses totaling to Rs.8,56,507/- on account of Sundry expenses (Rs.4,52,858/-), Conveyance and travelling (Rs.1,85,345/-), General Expenses (Rs.72,281/-), Mess expenses (Rs.96,937/-) & Repair and maintenance (Rs.49,086/-). In support of these expenses and claims, the assessee filed mostly self made debit vouchers. The claim of assessee could not be fully verifiable in absence of proper evidences and found it was very difficult to verify such vouchers. Accordingly, the AO disallowed @ 10% of total claim of expenditure of Rs.8,56,507/- i.e. at Rs.85,650/- on estimation basis and added the same to the total income of the assessee.

Before the CIT-A the assessee submitted that inspite of examining the books of account, records and relevant bills and vouchers, the AO added the Venugopal Maheshwari 2 impugned amount of addition without considering the nature of business of assessee. But, however, the CIT-A confirmed the addition made by the AO as the evidence submitted by the assessee by way of debit vouchers are not capable for cross verification.

Before us the ld.AR submits that all the expenses as claimed by the assessee were incurred for the purpose of assessee’s business and assessee is engaged in the business of sale of cloth and requires to incur such expenditure. The ld.AR further submits that the assessee submitted all the required documents in support of expenditure incurred by the assessee before the AO. But the AO doubted the veracity of such debit vouchers being self made vouchers. The ld.AR also argued that the addition was made by the AO on the basis of estimation and on assumption and is not maintainable. Before the AO the assessee filed proper evidences along with various details of cash book, ledger, bank statement, bills etc. Both the AO and the CIT-A have not considered the said details. The AO and the CIT-A held that these vouchers are not capable for cross verification and prayed to allow this ground of appeal.

On the contrary, the ld.DR submits that the AO has rightly doubted the veracity of such debit vouchers as it was not capable for cross verification and relied on the orders of both the authorities below. He also submits that the assessee did not produce any evidence other than self made vouchers in support of his contention.

Heard rival submissions and perused the material available on record. We find that the AO made the addition on assumption basis. This action of the AO was confirmed by the CIT-A. We find that the assessee filed cash book, ledger, bank statement, bills and vouchers in response to mandatory notices issued by the AO. The AO made the impugned addition only on the basis of assumption doubting the relevant evidences in support of the expenditure claimed are mostly self made vouchers. In our opinion the addition made on assumption is not maintainable and sustainable in the eye of law. Taking into consideration, submissions of assessee and nature of assessee’s business, we disallow such expenditure @ 5% of Rs. 85,650/- i.e. at Rs.42,825/- as against 10% made by the AO. Therefore, the ground of assessee’s appeal involving the same is partly allowed.

In the result, the appeal of the Assessee is partly allowed as stated above.