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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI G D PADMAHSHALI
आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-II, Raipur, dated 20.01.2020, which in turn arises from the order passed by the A.O u/s. 143(3) of the Income-tax Act, 1961 (for short ‘Act’), dated 23.03.2015 for A.Y. 2012-13. The assessee has assailed the impugned order on the following grounds of appeal before us :
“1. In the facts and circumstances of the case and in law the ld. Commissioner of Income Tax (Appeals) has erred in confirming disallowance made by the Ld. Assessing Officer of Rs.40,18,846/- u/s.40(a)(ia) of the Income Tax Act, 1961. 2. In the facts and circumstances of the case and in law the ld. Commissioner of Income -tax (Appeals) has erred in confirming following disallowance made by the Ld. Assessing Officer: a) Disallowance out of transportation charges Rs.3,00,000/- b) Disallowance out of Fuel & Lubricant Expenses Rs.4,00,000/- c) Disallowance out of repair & Maintenance Rs.1,00,000/- d) Disallowance out of Travelling Expenses Rs.25,000/- 3. The Appellant reserves the right to add, amend, alter, omit or withdraw all or any of the grounds of appeal.”
At the very outset of the hearing of the appeal it transpires that the appeal is time barred by 142 days. The assessee has filed an application seeking condonation of the delay involved in filing of the present appeal. The reasons given in the application reveals that the delay was caused because
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of circumstances which could neither be attributed to any deliberate conduct on the part of the assessee nor smacks of any lackadaisical approach on his part. The Ld. Departmental Representative (for short ‘DR’) did not raise any objection to the seeking of condonation of delay by the assessee. After going through the application, we are satisfied with the reasons leading to the delay and condone the same after drawing support from the order of the Hon’ble Supreme Court of India in suo motto Writ Petition (Civil) No.3 of 2020 dated 23.03.2020, which thereafter from time to time had been modified by the Hon’ble Apex Court vide its order(s) dated 08.03.2021, 27.04.2021, 23.09.2021 and 10.01.2022.
Succinctly stated, the assessee firm which is engaged in transportation business had e-filed its return of income for the assessment year 2012-13 on 27.09.2012, declaring an income of Rs.27,76,340/-. Subsequently, the case of the assessee firm was selected for scrutiny assessment u/s.143(2) of the Act.
Assessment was, thereafter, framed by the A.O vide his order passed u/s.143(3), dated 23.03.2015, determining the income of the assessee firm at Rs.76,20,186/- after making the following disallowances:
Sr. Particulars Amount No. (Rs.) 1. Disallowance u/s.40(a)(ia) of IT Act, Rs.40,18,846/- 1961
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Disallowance of expenditure under Rs.3,00,000/- the head transportation charges 3. Disallowance of expenditure under Rs.4,00,000/- the head Fuel and Lubricants 4. Disallowance of expenditure under Rs.1,00,000/- the head repair and maintenance 5. Disallowance of expenditure under Rs.25,000/- the head Travelling
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without any success.
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
We have heard the Ld. Authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
Apropos the grievance of the assessee that the lower authorities had erred in law and facts of the case in disallowing its claim for deduction of interest expenditure of Rs.40,18,846/- u/s.40(a)(ia) of the Act, it was submitted by the Ld. Authorized Representative (for short ‘AR’) for the assessee, that as the payees viz. M/s. Magma Leasing and M/s. Tata Motors
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Ltd to whom interest of Rs.40,18,846/- was paid by the assessee firm, had included the same in their returned income and paid the corresponding taxes on the same, therefore, the assessee could not be held to be an assessee-in-default and its claim for deduction of interest expenditure could be disallowed u/s.40(a)(ia) of the Act. Ld. A.R on a specific query by the Bench as to whether the certificate from a chartered accountant evidencing the inclusion of the aforesaid amount in the returned income of the payees a/w. payment of tax on the same had been obtained, answered in negative. It was submitted by the Ld. AR that the assessee had taken initial steps to obtain the requisite certificate from the aforesaid payees. On being called upon to produce any evidence which would substantiate its claim that necessary action had been taken on the part of the assessee to obtain certificate(s) from the above-mentioned payees, the Ld. AR expressed its inability to do so.
After having given a thoughtful consideration to the aforesaid claim of the Ld. AR, we are unable to persuade ourselves to subscribe to the same. On a perusal of the order of the A.O, it transpires that the amount of interest expenditure was disallowed by him, for the reason that the assessee had contravened the provisions of Section 194A of the Act by failing to deduct tax at source from the amount of interest of Rs.40,18,846/- (supra) that was paid to the aforementioned payees. On appeal, the CIT(Appeals) had
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categorically observed that as the assessee had failed to produce any evidence on record i.e. certificate in Form 26A of a Chartered Accountant which would evidence that the amount of interest was included by the respective payees in their returned income, and thus, had been subjected to tax, therefore, the claim of the assessee that the concession contemplated in the “2nd Proviso” to Section 40(a)(ia) of the Act did not merit acceptance. Although, a period of more than 7 ½ years had elapsed since the assessment was framed in the case of the assessee u/s.143(3) of the Act, dated 23.03.2015, however, we find that the assessee adopting a lackadaisical approach and acting in a callous manner had failed to obtain certificate(s) in Form 26A from a Chartered Accountant which would evidence his claim that the amount in question had been included in the returned income of the respective payees. In fact, as observed by us hereinabove, the CIT(Appeals) had categorically observed that in the absence of the requisite certificate in Form 26A from a Chartered Accountant, the assessee’s claim could not be entertained. Considering the aforesaid facts, we are of the considered view that no infirmity does emerge from the order of the CIT(Appeals) who had rightly held the assessee as being in default and sustained the disallowance of Rs.40,18,846/- made by the A.O u/s.40(a)(ia) of the Act. We, thus, in terms of our aforesaid observations uphold the view taken by the CIT(Appeals). Thus, the Ground of appeal No.1 raised by the assessee is dismissed in terms of our aforesaid observations.
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We shall now advert to the grievance of the assessee that the CIT(Appeals) had erred in law and the facts of the case in sustaining the ad- hoc disallowances made by the A.O. On a perusal of the order of the A.O, it transpires that he had made part disallowances of the assessee’s claim for deduction of expenses, as under: a) Disallowance out of transportation charges Rs.3,00,000/- b) Disallowance out of Fuel & Lubricant Expenses Rs.4,00,000/- c) Disallowance out of repair & Maintenance Rs.1,00,000/- d) Disallowance out of Travelling Expenses Rs.25,000/-
We shall deal with the sustainability of the aforesaid disallowances made by the A.O in a chronological manner, as under:
(A). Transportation Charges: Rs.3,00,000/-
On a perusal of the assessment order, we find that the assessee had claimed transportation charges of Rs.1,00,50,232/-. As the assessee in the course of the assessment proceedings had failed to produce the bills of the transporters to whom payment were claimed to have been made, therefore, the A.O drawing support from the fact that the aforesaid claim for deduction was merely supported by self-made vouchers, thus, on an ad-hoc basis disallowed an amount of Rs.3,00,000/-. In so far the claim of the Ld. AR that disallowance on an ad-hoc basis without specifically referring to the expenses which were not found to be in order; or were not found to have
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been incurred wholly and exclusively for the purpose of assessee’s business, was not permissible, we are persuaded to subscribe to the same. In fact, we are unable to comprehend as to on what basis the A.O had on an ad-hoc basis disallowed transportation charges of Rs.3 lac (out of Rs.1,00,50,232/- ). Admittedly, the assessee’s claim of having incurred transportation charges would be supported with bills of transporters, L/Rs etc., which we find were not produced by the assessee before the A.O. We though are in agreement with the Ld. AR that the disallowance on an ad-hoc basis, i.e, without placing on record any specific instance or evidence cannot be sustained, but at the same time are unable to endorse the manner in which the A.O had dealt with the issue in hand. In the totality of the facts involved in the present case, we are of the considered view that the matter requires to be restored to the file of the A.O for re-adjudication. The A.O is directed to call for the bills of the transporters, L/Rs etc., and therein restrict the disallowance, if any, only to the extent the assessee fails to substantiate its claim for deduction on the basis of supporting documents. We, thus, in terms of our aforesaid observation restore the matter to the file of the A.O for re-adjudication in terms of our aforesaid observation.
(B) Disallowance of Fuel & Lubricant: Rs. 4,00,000/- 12. As is discernible from the orders of the lower authorities, it transpires that the A.O had on an ad-hoc basis disallowed assessee’s claim for
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deduction of fuel and lubricant charges of Rs.4 lac (out of Rs.3,62,31,867/- ), for the reason that the said claim was merely supported by self-made vouchers. As the A.O had failed to point out any specific instance which would suggest that the self-made vouchers were either not to be found in order, or the correlating expenditure was not found to have been incurred wholly and exclusively for the purpose of the assessee’s business, therefore, there appears to be not justification in upholding the aforesaid disallowance. We, thus, in terms of our aforesaid observation vacate the disallowance of Rs. 4 lac made by the A.O, which, thereafter was sustained by the CIT(Appeals).
(C). Disallowance of repair & maintenance: Rs. 1,00,000/-
Apropos the disallowance on an ad-hoc basis of an amount of Rs.1 lac out of assessee’s claim for deduction of expenses incurred towards repair and maintenance of vehicles i.e. trucks, JCB machines, dozer and loader etc., it transpires that the said disallowance had been made by the A.O, for the reason that the claim of the assessee was merely supported by self-made vouchers. Although it was observed by the A.O that in some cases spares purchased for maintenance were not supported by proper bills of the traders, however, he had failed to point out any such instance and had merely on an ad-hoc basis worked out the aforesaid disallowance. Considering the aforesaid facts, we are unable to persuade ourselves to
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subscribe to the aforesaid disallowance of Rs.1 lac made by the A.O, which, thereafter had been upheld by the CIT(Appeal) and vacate the same.
(D). Disallowance of Tour & Travelling Expenses: Rs. 25,000/-
On a perusal of the orders of the lower authorities, it transpires that the A.O had made an ad-hoc disallowance of Rs.25,000/- out of assessee’s claim for deduction of tour and travelling expenses Rs.2,60,480/-, for the reason that the said claim for deduction was merely supported by self-made vouchers which did not contain the details of fare in many cases. As the A.O had failed to point out any specific instance whether the vouchers were not found to be in order, therefore, we have no hesitation in vacating the aforesaid disallowance of Rs.25,000/- made by the A.O. Thus, the Ground of appeal No.2 raised by the assessee is partly allowed for statistical purposes in terms of our aforesaid observation.
Ground of appeal No.3 being general in nature is dismissed as not pressed.
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In the result, appeal of the assessee is partly allowed for statistical purposes in terms of our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board.
Sd/- Sd/- G D PADMAHSHALI RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 12th December, 2022 ***SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��यथ� / The Respondent. 3. The CIT(Appeals), Raipur (C.G) 4. The CIT, Raipur (C.G) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.