TaxTMI 
TaxTMI 
2014 (5) TMI 1136
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.... 4. Deleting the disallowance of Rs. 50,000/- made by the Assessing Officer out of selling expenses, without appreciating the facts of the case; 5. The appellant craves to add, amend, alter, delete or modify the above ground of appeal before or at the time of hearing." 2. Ground No. 5 of the appeal is general in nature, so do not require any comment on our part. 3. Vide ground No. 1, the grievance of the department relates to the deletion of disallowance of Rs. 9,97,206/- made by the Assessing Officer out of administrative expenses. 4. Facts of the case in brief are that the assessee was engaged in the business of manufacturing and trading of synthetic fibers, processing and manufacturing and sale of sponge iron and claimed the following administrative expenses: (a) Travelling and conveyance expenses Rs. 23,16,139/- (b) Telephone and trunk call expenses Rs. 17,69,848/- (c) Rent expenses Rs. 48,23,514/- (d) Membership and subscription expenses Rs. 10,62,585/- The Assessing Officer observed that the assessee was not maintaining the telephone register, some vouchers of travelling and conveyance expenses were either self prepared or ....
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....en from the above chart, all these expenses are of routine and operational nature which are compulsory to be incurred in this type of business. Complete ledger account along with bills were provided to the Ld. AO in course of scrutiny which was test checked. In the course of scrutiny, it was submitted by the assessee that:- "Your good self has desired the justification regarding disproportionate increase in the telephone expenses, repair and maintenance to vehicle and rent expenses. It is submitted that the above expenses have been incurred absolutely for the business purposes and the same is in direct proportion to the business needs of the company. The company is engaged in various types of business i.e. textile, processing and steel. The expenditure has been wholly and exclusively incurred during the course of business. The company had produced entire books of accounts and voucher for verification and furnished each and every details with regard to genuineness of the expenditure incurred and submitted copies of bills, vouchers etc during the assessment proceeding. Regarding telephone expenses, the above expenses have been incurred in respect of usage of telepho....
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.... various types of external audits apart from continues system of internal audit, which leaves no chance of misreporting. The company has units located at Bhilwara in Rajasthan as well as Bellary in Karanatka. Proper accounting and reporting is a must and preliminary condition to manage such a huge company. There are complete system of day to day reporting, internal controls, checks and audits. The company has maintained each and every records of accounting the transactions and maintenance of piece-to-piece records of fabrics as is customary in line of this business. Further Company maintained all the necessary and required books of accounts such as Cash Book, Ledger, Journal, Sales, Debtors & Creditors Ledger, Bank Book, Stock Records, Process Register, Purchase & Sales Register, and Vouchers for Expenses etc. The fact is evident from the Audit Report. We have already been produced all the above referred books of accounts before Ld A.O, which was examined on test basis. Apart from these, the Assessee Company is maintaining complete quantitative records as required by other law such as excise, companies act, etc. This fact is also evident from Tax Audit Report in w....
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....of the appellant as well as assessment order. Telephone and trunk call expenses: It is a case of a public limited company and the above expenses have been claimed for calls made by directors and employees of the company. There can be no personal use in the case of the company. As such, the disallowance on above account is not sustainable. Travelling and conveyance expenses: The expenses have been claimed for the purpose of business of the company. It has not been shown that the expenses supported by the self made vouchers were bogus or non genuine or personal in nature. The minor deficiencies in the bills and vouchers produced cannot lead to the disallowance unless the expenses are proven to be bogus, unreasonable or excessive. As such, the disallowance on above account is not sustainable. Rent expenses: The assessee has produced the ledger account for the rent expenses incurred. It has not been shown that assessee has claimed bogus rent expenses by way of any enquiry. The AO himself has accepted 90% of rental expenses as allowable expenses. Merely increase in rental expenses as compared to earlier years can not lead to disallowance of part of expenses. A....
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....the membership and subscription expenses merely on this basis that the proper vouchers had not been maintained but no defect was pointed out and no specific instance of claim being bogus and unreasonable or excessive had been pointed out, therefore, disallowance made by the Assessing Officer was rightly deleted by the Ld. CIT(A). We do not see any infirmity in the order of the Ld. CIT(A) on this issue. 12. The next issue vide ground No. 2 relates to deletion of disallowance of Rs. 2.00 lacs made by the Assessing Officer out of repairs and maintenance of plant and machinery. 13. Facts related to this issue in brief are that the Assessing Officer during the course of assessment proceedings, noticed that the assessee had claimed expenses of Rs. 2,65,67,266/- as repair and maintenance of plant and machinery, which were more than last year. The Assessing Officer also mentioned that some of the supporting vouchers were self made and payment was in cash. He further observed that proper bills had not been maintained for the expenses incurred through imprest account, some of the vouchers were not verified by supervisory officer and machine wise spare items purchased, could not be corr....
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....ed to be bogus and the imprest account itself had shown that the assessee company had incurred these expenses for the purpose of business and not for personal purpose. Accordingly, the addition made by the Assessing Officer was deleted. Now the department is in appeal. 16. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that turnover of the assessee increased in comparison to the earlier years and the Assessing Officer had not pointed out any specific instance of bogus, unreasonable or excessive expenses relating to repairs and maintenance of plant and machinery. He had also not pointed out that the expenses were not incurred for business purposes or those were personal in nature, therefore, the disallowance made on the basis of surmises and conjecture is not tenable and the Ld. CIT(A) rightly deleted the same. We do not see any merit in this ground of the departmental appeal. 17. The next issue vide ground No. 3 relates to deletion of disallowance of Rs. 1.00 lac made by the Assessing Officer out of manufacturing expenses. 18. Facts related to this issue in ....
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....nishing Equipment (2003) 81 TTJ (Jod-Trib) 448] Disallowance of expenses has to be made by a specific finding. Merely because the assessee has incurred expenditure more than that of the earlier year the assessing officer cannot make any adhoc disallowance. -Vide Sundarmal Satpal v. TTO (2005) 94 TTJ 423 (Asr-Trib). In the case of New Ambadi Estates (P.) Ltd. v. State of Tamil Nadu [1993] 200 ITR 64 (Mad.) it was held that if the expenditure is for the purpose of the business, then it is no matter that the amount is high as compare to previous year." 20. The Ld. CIT(A) after considering the submissions of the assessee observed that the expenses of Rs. 83.11 lacs had been incurred on account of ETP Sludge/water & air pollution, water cess, misc. expenses, tanker and tipper running and maintenance account. He also pointed out that a sum of Rs. 68.51 lacs had been incurred out of the above expenses at steel division for the business purposes and the Assessing Officer had not pointed out as to which expenses, were not supported by bills and vouchers before making lump sum disallowance, therefore, the disallowance was deleted. Now the department is in appeal. 21. ....
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....ills were provided to the Ld. AO in course of scrutiny which was test checked. The AO has made an adhoc addition of Rs. 50000/- on this head, contending that these expenses are not fully supported by vouchers which is quite unreasonable, unwarranted and deserves to be deleted in total Income. The contention of the AO is baseless and do not have any evidential value. The contention of the AO that AR of the assessee has agreed that sufficient vouchers are not kept by assessee is fully baseless and is not supported by any evidences. Further following case laws clearly confirm our view point :- The A. O. had not pointed out any specific item that was of disallowable nature therefore; the disallowance sustained out of the general expenses is here by deleted. [Dy. CIT V. Surface Finishing Equipment (2003) 81 TTJ (Jod-Trib) 448]. Disallowance of expenses has to be made by a specific finding. Merely because the assessee has incurred expenditure more than that of the earlier year the assessing officer cannot make any adhoc disallowance.--Vide Sundarmal Satpal v. ITO (2005) 94 TTJ 423 (Asr-Trib). In the case of New Ambadi Estates (P.) Ltd. v. State of Tami....