ABC INDIA LTD,KOLKATA vs. ADDL C.I.T RG - II,KOLKATA, KOLKATA

This appeal by assessee is arising out of order of Commissioner of Income Tax (Appeals)-XII, Kolkata dated 12.03.2013. Assessment was framed by ACIT, Ranje-11, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 30.11.2010 for assessment year 2008-09. Assessee has raised following effective ground:- “1) That the Ld. C.I.T.(A) has erred, both in law and on the facts and circumstances of the case, in sustaining Enroute Expenses incurred to the extent of Rs.2,50,000/- against adhoc-disallowance of Rs.4,78,730/- against assessee’s claim of Rs.95,74,607/- 2) That the Ld. C.I.T.(A) has further erred, likewise, in sustaining the addition of Rs.10,50,000/- made to disclosed receipts of Rs.1,95,000/- of sale of scraped/old and discarded losses.”

Facts in brief are that assessee is a Limited Company and engaged in the business of multi-model transport organization, freight forwarders, shippers and air freight bookers. During the year assessee has claimed an expenditure of Rs.95,74,607/- towards repairing charges for culvert, road partitions, tree cutting, shifting of overhead electric wires, route checking prior to embarking on trip, expenses on accompanying vehicles, foods etc., During the course of assessment proceedings, Assessing Officer observed that most of the expenses were incurred in cash and self-made vouchers were maintained. Therefore, the AO doubted the genuineness of all expenses and accordingly disallowed @ 5% of such expenditures for Rs. 4,78,730/- on ad hoc basis. An addition of Rs. 4,78,730/- was made to the total income of the assessee.

Aggrieved, assessee preferred an appeal before Ld. CIT(A) who partly confirmed the action of AO by observing as under:- “I have considered the finding of the AO and the written submission filed by the AR during the appellant proceeding. There is no denying the fact that while a accompanying heavy vehicles employees have to expend in cash for expenses incurred. But at the same time the AR should have produced proper bills for repairs and maintenances of heavy vehicles that assessee/AR has failed to produce. However, I find the disallowance of Rs.478730/- a little higher. Therefore, I restrict the disallowance for non-verifiability of bills and vouchers to Rs.2,50,000/-. Thus, assessee’s appeal on ground no.1 is partly allowed.”

Ld. AR before us submitted that Authorities Below have disallowed the aforesaid expenses only on estimate basis and without mentioning the ABC India Ltd. V. ACIT Rng-II, Kol. Page 3 relevant vouchers of the expenses as produced before the Authorities Below. Ld. AR also submitted that such en route expenses were also claimed in earlier years and no such disallowances were made for the same. Further, Ld. AR submitted that these are the expenses which have been incurred by the employees of assessee-company when they are carrying heavy project cargo and normally it is difficult to get the proper bills for these expenses. So these expenses are claimed only in terms of cash and stated that this issue may be decided on merit. On contrary, Ld. DR vehemently relied on the orders of AO.

We have heard both the rival parties and perused the materials available on record. From the aforesaid discussion, we find that assessee has claimed certain expenses which were incurred in cash and only self-made vouchers were available in support of those expenses. The AO opined that genuineness of such expenses cannot be established on the basis of self- made vouchers involving cash payments and he disallowed such expenses on ad hoc basis. However, Ld. AR before us submitted that such expenses were also claimed in earlier years and in this regard no such disallowances were made by Authorities Below. We also find that these expenses are commensurate with the sales declared by the assessee in comparison to earlier years. We also further find that AO has disallowed the claim on ad hoc basis without bringing out any defect and deficiency in the submission of assessee with regard to such expenses claimed by assessee. we also cannot ignore this fact that the assessee has been claiming such expenses since the last several many years and no disallowance was made on account of this. So we are of the view that the consistency should be maintained. In this view of this matter, we are inclined to reverse the orders of Authorities Below on the basis that assessee has been claiming these expenses consistently for the last many years and such expenses have not been disallowed. Hence, we allow assessee’s ground of this appeal.

Next ground is as regards to that Ld. CIT(A) erred in sustaining the addition of ₹10.50 lakh on account of sale of scraped / old and discarded ABC India Ltd. V. ACIT Rng-II, Kol. Page 4 trucks. During the years assessee has sold 30 trucks @ ₹ 15,000/- each to 27 persons at Guwahati but assessee failed to provide the addresses of the parties to whom trucks were sold. Therefore, AO doubted the genuineness for the sale price of the trucks i.e. Rs. 15,000/- each. The AO also observed that assessee was maintaining certain trucks having WDV at nil or Rs. ₹1/- in the books of accounts and those trucks were plying and given income to assessee. Accordingly, AO estimated the price per truck at ₹ 50,000/- and made addition of ₹ 10.50 lakh [30 trucks x Rs. 35,000/- (Rs. 50,000- 35,000.00)] to the total income of assessee.

Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the action of assessee by observing as under:- “I have considered the finding of the AO and the written submission filed by the AR. I think all old trucks with Registration No. have to be sold even as a scrap after taking permission/after giving intimation to the RTO. Therefore, assessee’s claim that names and addresses of purchasers of old trucks were not available/were not kept is not acceptable. Hence, Assessing Officer's action of making addition of Rs.10,50,000/- as enhance scrap value of old trucks is justified. Accordingly, assessee’s appeal on ground no. 2 is dismissed.”

Before us Ld. AR submitted that sale price of the trucks has been duly the reduced from the WDV of the relevant block of assets. The necessary details of the parties to whom the trucks were sold were duly submitted before Authorities Below along with addresses. On the contrary, Ld. DR stated that all trucks are having registration certificate issued from the Transport Authority. The transaction for transferring the ownership from the assessee to the buyers should be duly recorded with the Transport Authority but the assessee failed to submit the necessary details in support of the transactions for selling trucks to the concerned parties and he vehemently relied on the orders of Authorities Below.