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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO
सुनवाई की तायीख / Date of Hearing : 23.06.2016 घोषणा की तायीख /Date of Pronouncement : 03.08.2016 आदेश / O R D E R PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 21.1.2015 is against the order of the CIT (A)-21, Mumbai dated 1.10.2014 for the assessment year 2010-2011. In this appeal, assessee raised three grounds in toto and they read as under:- “1. The CIT (a) erred in disallowing the expenses Rs. 2,55,870/- and while doing so, he amongst other failed to appreciate that: a. The appellant company has incurred expenses wholly for the business purpose; b. The appellant company had never been asked by the AO to produce the bills and the vouchers for the same; c. The Ld CIT (A) disallowed the expenses without assigning any reasons for the same.
2. The Ld CIT (A) erred in disallowing 0.5% of the investments in the sister concern u/s 14A.
The Ld CIT (A) kept the issue pending for verification in respect of Rs. 1,78,493/- being part of commission income which had already been credited to profit and loss account.”
During the proceedings before the Tribunal, assessee filed a letter of adjournment without having a valid ground in support of the same. Considering the smallness of the issues and amounts involved, I am of the opinion that the appeal should be heard with the help of the Ld DR for the Revenue and the accountant of the assessee-company, Mr. Yogesh.
3. First issue relates to the disallowance of Rs. 5,11,743/- on account of verifiability of certain expenses debited to the Profit & Loss Account for want of papers / evidences. In the assessment, the AO disallowed 10% of the expenses viz telephone expenses; travelling expenses; conveyance expenses; office & other expenses of Rs. 12,43,803/-; advertisement expenses and sales promotion expenses. For similar reasons, CIT (A) restricted the disallowance to 5% of the claim. The contents of para 5.3 of the CIT (A)’s order are relevant in this regard wherein it was mentioned that the assessee furnished only the general ledger and not the evidences / bills / vouchers etc in support of the claims. Considering the facts available on record, I am of the opinion that restricting the disallowance to 5% as done by the CIT (A) creates a new trend in the AOs to follow in the years to come ignoring the facts which may be relevant and specific to those years. This is not the case of the Revenue that the expenses were not incurred and they are incurred on the personal accounts of the persons. Therefore, restricting the disallowance to a round sum of Rs. 51,000/- of the total claim of Rs. 51,71,435/- should meet the ends of justice. Accordingly AO is directed. Thus, the first ground is partly allowed.
Ground no.2 relates to the disallowance u/s 14A read with Rule 8D of the Act. By the time, the matter reached the Tribunal, the amount confirmed by the CIT (A) is only Rs. 2,257/- ie 0.5% of the average investments disallowed under Rule 8D(2)(iii) of IT Rules, 1962. In my opinion, the decision taken by the CIT (A) is fair and reasonable and there is no infirmity in the order of the CIT (A). Therefore, I upheld the decision of the CIT (A). Accordingly, ground no.2 raised by the assessee is dismissed.
Ground no.3 relates to the reconciliation of figures of commission qua the TDS particulars. As seen from the order of the CIT (A), I noticed that the CIT (A) only directed the AO to reconcile and allow the claim subject to verification. In my opinion, the direction of the CIT (A) is fair and reasonable. Considering the same, AO is directed to speed up the matter in a time bound manner and give effect to the CIT (A)’s direction. Accordingly, the Ground no.3 is allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed for statistical purposes.