AMIYA PRASAD MISHRA,CUTTACK vs. ACIT, CIRCLE-2(2), CUTTACK

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ITA 96/CTK/2016Status: DisposedITAT Cuttack05 January 2017AY 2011-125 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the ad-hoc disallowance of business expenses without pointing out specific deficiencies in vouchers was not sustainable. However, the disallowance of donation was upheld as it was not proven to be incurred for business purposes.

What were the facts?

The Assessing Officer made an ad-hoc disallowance of 20% on certain business expenses for which the assessee failed to produce supporting bills and vouchers. The CIT(A) confirmed this disallowance. The assessee also claimed a donation which was disallowed by the AO and confirmed by the CIT(A) as not being incidental to business.

What were the issues?

Whether ad-hoc disallowance of business expenses without specific evidence is justified, and whether donations claimed as business expenditure are allowable without proving their nexus to business.

Which sections of the Income-tax Act were involved?

Section 44AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CUTTACK ‘SMC’ BENCH,

Before: SHRI N.S SAINI

For Appellant: Shri S.N.Sahu, AR
For Respondent: Shri D.K.Pradhan, DR
Pronounced: 05/01

This is an appeal filed by the assessee against the order of CIT(A)-

Cuttack, dated 19.2.2016, for the assessment year 2011-2012 .

2.

In Ground No.1 of the appeal, the grievance of the assessee is that the

ld CI(A) erred in confirming the adhoc disallowance @ 20% from the following

expenses and making the addition of Rs.1,02,490/- to the income of the

assessee:

2 ITA No. 96 /CT K/20 16 Asse ssme nt Ye ar :2011-12

a) Travelling expenses : Rs. 74,541/- b) Vehicle maintenance : Rs.1,42,563/- c) Printing & stationary : Rs.1,81,330/- d) General Expenses : Rs. 71,420/- e) Consultancy charges : Rs. 45,6000/- Total: Rs.5,12,454/-

3.

I have heard the rival submissions and perused the orders of lower

authorities and materials available on record. In the instant case, the

Assessing Officer found that the assessee has debited Rs.5,12,454/- in total

under the head: (i) travelling expenses, (ii) vehicle maintenance, (iii)printing

and stationary, (iv) general expenses and (v) consultancy charges. The

Assessing Officer required the assessee to produce the details of such

expenses to substantiate the above claim of expenditure. The assessee filed

ledger copy of some of the expenses but did not produce bills and vouchers

for verification. The assessee stated that the expenses have been incurred

wholly for the purpose of business. Since the assessee did not furnish

supporting documentary evidences regarding the expenses incurred, the

Assessing Officer disallowed 20% out of the above expenses and made an

addition of Rs.1,02,490/- to the income of the assessee.

4.

On appeal, ld CIT(A) confirmed the action of the Assessing Officer.

5.

Before me, ld A.R. of the assessee argued and submitted that the

Assessing Officer was not justified in making adhoc disallowance out of

genuine business expenditure claimed by the assessee. He relied on the

decision of this Bench of the Tribunal in the case of Shri Mahendra Kumar

3 ITA No. 96 /CT K/20 16 Asse ssme nt Ye ar :2011-12

Saha vs ACIT (ITA No.54/CTK/2015) order dated 23.2.2016, wherein, it was

held as under:

“………..Further, in this case, regular books of account have been maintained and audited u/s.44AB of the Act. No adverse inference has been drawn by the auditor. Taking the guidance of various judicial pronouncements, we concur with the findings of higher judicial authority that the tax authorities must consider the claims in reasonable and practical manner. The disallowance of petty nature of expenses makes hardly any impact on overall revenue collection, but such disallowance creates a lots of dissatisfaction amongst tax payers. Therefore, considering all these factors and in the interest of justice, we delete the addition of Rs.1,00,000/- sustained by the ld CIT(A).”

6.

On the other hand, ld D.R. supported the orders of lower authorities. 7. I find that the Assessing Officer has made 20% of adhoc disallowance out

of business expenses claimed by the assessee. He has not pointed out for which

specific expenditure claimed by the assessee, the vouchers were not produced

before him for verification. In the absence of the same, the disallowance made

in a summary manner cannot be sustained in law. Hence, I set aside the orders

of lower authorities and vacate the disallowance of Rs.1,02,490/- and allow the

ground of appeal of the assessee.

8.

In Ground No.2 of the appeal, the grievance of the assessee is that the ld

CIT(A) erred in confirming the disallowance of Rs.16,901/- made under the head

“donation” by the assessee.

9.

I have heard the rival submissions and perused the orders of lower

authorities and materials available on record. In the instant case, the

4 ITA No. 96 /CT K/20 16 Asse ssme nt Ye ar :2011-12

Assessing Officer observed that the assessee has claimed deduction of

Rs.16,901/- under the head “donation”. He required the assessee to produce

details of such donation which could not be produced by the assessee.

Therefore, he disallowed the same for not having incurred for the purpose of

business and not incidental to the business of the assessee.

10.

On appeal before the ld CIT(A), the assessee submitted that the

donation of Rs.15,900/- was paid to Smt. Tota Shreelaxmi as she was

suffering from cancer. The assessee was approached and requested by M/s

Orissa Cricket Association and some of the players to help her from the

humanitarian point of view. Since the assessee was working as Consultant

Engineer under Orissa Cricket Association, he accepted the request in the

greater interest of business. Further, donation of Rs.1001/- was paid to Seikh

Bazar durga Puja Committee on the request of local people.

11.

After considering the above submission of the assessee, ld CIT(A)

confirmed the action of the Assessing Officer on the ground that the expenses

claimed are not incidental to the business of the assessee.

12.

Before me also, no evidence has been filed by the assessee to show that

the expenses claimed are wholly and exclusively incurred for the business

purposes of the assessee. Hence, I find no good and justifiable reason to

interfere with the order of ld CIT(A), which is hereby confirmed and dismiss

this ground of appeal of the assessee.

5 ITA No. 96 /CT K/20 16 Asse ssme nt Ye ar :2011-12

13.

In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 05/01/2017 in the presence of parties. Sd/- (N.S Saini) ACCOUNTANT MEMBER Cuttack; Dated 05/01 /2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Shri Amiya Prasad Mishra, Prop. M/s. Mishra Engineers, Deula Sahi, Tulsipur, Cuttack. 2. The Respondent. ACIT, Circle 2(2), Cuttack 3. The CIT(A) Cuttack 4. CIT, Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// BY ORDER,

ASST.REGISTRAR, ITAT, Cuttack

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