KING KAVERI TRADING COMPANY,MUMBAI vs. DCIT 22(2), NAVI MUMBAI

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ITA 1063/MUM/2013Status: DisposedITAT Mumbai23 November 2015AY 2007-084 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowances were made on an ad-hoc basis without pointing out specific defects in the business expenses or the books of accounts. Therefore, the ad-hoc disallowance was not justified.

What were the facts?

The assessee claimed various expenses including repairs, loading/unloading, and travelling. The Assessing Officer disallowed 20% of these expenses, totaling Rs. 9,03,718, due to cash payments supported by self-made vouchers.

What were the issues?

Whether ad-hoc disallowances of business expenses are justified solely on the basis of cash payments and self-made vouchers without specific defects being identified.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SHRI N.K. BILLAIYA & SHRI PAWAN SINGH

Hearing: 23.11.2015Pronounced: 23.11

O R D E R

PER N.K. BILLAIYA, AM:

1.

1. This appeal by the assessee is preferred against the order of the Ld. CIT(A)-19, Mumbai dated 7.12.2012 pertaining to Assessment year 2007-08.

2.

The sole grievance of the assessee is that the Ld. CIT(A) erred in confirming an adhoc disallowance @ 20% of certain expenses amounting to Rs. 4,87,281/-.

3.

The assessee is trading of trailers and trailer parts. The return of income was electronically filed on 17.210.2007 declaring total income at Rs. 79,00,270/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.

3.1. While scrutinizing the return of income, the Assessing Officer noticed that the assessee has claimed following expenditures in its profit and loss account.

1.

Repairs & Maintenance 85,364/- 2. Loading/unloading 8,30,129/- 3. Delivery charges 10,61,900/- 4. Travelling 14,26,942/- 5. Sales promotion 6,55,244/- 6. Office expenses 4,59,013/- 45,18,592/- 3.2. The AO observed that some of the expenses are incurred in cash and are supported only with self made vouchers. Accordingly, the AO disallowed 20% and added a sum of Rs. 9,03,718/-.

4.

The assessee carried the matter before the Ld. CIT(A). It was strongly contended that the AO has failed to pin point any irregularities in incurring of various expenses. After considering the facts and the submissions, the Ld. CIT(A) found that on certain expenses, the assessee has also paid FBT and allowed relief to that extent and confirmed the disallowance at Rs. 4,87,281/-.

5.

Aggrieved by which the assessee is before us.

6.

The Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. The Ld. Counsel also relied upon the decision of the Tribunal, Mumbai Bench in the case of Crescent Chemicals in Calcutta Bench in the case of Sri Damodar Prasad Agarwal in ITA No. 1363/Kol/2009.

7.

Per contra, the Ld. Departmental Representative strongly supported the findings of the lower authorities.

8.

We have carefully gone through the orders of the authorities below. The undisputed fact is that the disallowances made by the AO are on adhoc basis. It is also an undisputed fact that the AO has not pointed out any expenditure which is not related to the business of the assessee. The only adverse inference drawn by the AO is that some of the expenses are incurred in cash and are supported by self made voucher. In our considered opinion, these general observations of the AO would not justify the disallowances. No specific defect has been pointed out in the books of accounts maintained by the assessee. Therefore, we do not find any justification in making such adhoc disallowances. Findings of the Ld. CIT(A) is set aside. The AO is directed to delete the addition of Rs. 4,87,281/-.

9.

In the result, the appeal filed by the assessee is allowed.

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