2022 (11) TMI 21 - AT - Income Tax

Tribunal affirms disallowance of expenses for A.Y. 2013-2014

The Tribunal upheld the disallowance of the amount of stale cheques towards Other Creditors and the adhoc disallowance on Car Repair and Maintenance ... Disallowance of outstanding stale cheques in cash system of accounting - adhoc disallowance for personal element in business expenses - ex parte disposal for non-appearance of appellantDisallowance of outstanding stale cheques in cash system of accounting - Whether the addition of Rs.27,252 shown as 'Other Creditors' on account of stale cheques was correctly disallowed where the assessee followed cash system of accounting. - HELD THAT: - The Tribunal reviewed the record including the assessing officer's finding that the assessee followed cash system of accounting and the assessee's explanation that the amount represented cheques issued but not presented. The CIT(A)'s reasoning, reproduced in the order, noted that the assessee had reversed some stale cheque entries in the books and, because under cash system the liability is to be recognised only when paid, such amounts could not remain as creditors; therefore the AO's disallowance was sustained. No contrary material or arguable fallacy was placed before the Tribunal to displace the concurrent findings of the authorities below. [Paras 5, 7]Addition of Rs.27,252 on account of stale cheques disallowance is confirmed and the ground of appeal is dismissed.Adhoc disallowance for personal element in business expenses - Whether the assessing officer was justified in making 10% disallowance of car repair and communication expenses as personal element in absence of supporting details. - HELD THAT: - The AO made a 10% disallowance of car repair and communication expenses observing that personal element could not be ruled out and that the assessee had not furnished details. The CIT(A) upheld the additions after recording repeated opportunities given to the assessee/appellant representative to produce vehicle registration and telephone details, the repeated adjournments and ultimate failure to avail the opportunity, and the absence of evidence of separate vehicles or telephones exclusively for personal use. The Tribunal found no infirmity in the concurrent findings and noted that the assessee did not place any material before it to challenge those findings. [Paras 9, 12]Adhoc 10% disallowances in respect of car repair and maintenance and communication expenses are confirmed and the grounds of appeal are dismissed.Final Conclusion: The appeal is dismissed in its entirety; the disallowance of Rs.27,252 and the adhoc 10% disallowances in car repair and communication expenses are confirmed. The appeal was disposed of ex parte as the assessee did not appear. Issues:1. Disallowance of amount of stale cheques towards Other Creditors.2. Adhoc disallowance on expenses like Car Repair and Maintenance Expenses and Communication Expenses.Issue 1: Disallowance of amount of stale cheques towards Other Creditors:The appeal was filed against the Order of the Ld. CIT(A) relating to the A.Y. 2013-2014. The A.O. disallowed Rs.27,252/- appearing under 'Other Creditors' in the Balance Sheet, as the assessee was following the cash system of accounting and the amount was not cleared. The Ld. CIT(A) confirmed the disallowance, stating that as per cash system of accounting, the amount should be credited in the P & L A/c only when paid. The Tribunal upheld the decision, noting that the assessee failed to provide any new evidence or challenge the Ld. CIT(A)'s findings.Issue 2: Adhoc disallowance on Car Repair and Maintenance Expenses and Communication Expenses:The A.O. disallowed 10% of Car Repair and Maintenance Expenses and Communication Expenses claimed by the assessee due to the personal element in these expenses. The Ld. CIT(A) upheld the disallowance, mentioning that the appellant failed to provide evidence of separate vehicles and telephones for exclusive personal use. Despite multiple adjournments, the appellant did not submit the required details. The Tribunal supported the lower authorities' decisions, as the appellant did not present any new evidence or challenge the findings during the proceedings. Consequently, the grounds of appeal related to these expenses were dismissed.In conclusion, the Tribunal dismissed the appeal of the Assessee, upholding the disallowances made by the lower authorities regarding the stale cheques towards Other Creditors and the adhoc disallowance on Car Repair and Maintenance Expenses and Communication Expenses. The decision was based on the failure of the appellant to provide supporting evidence or challenge the findings during the proceedings.