TaxTMI 
TaxTMI 
2020 (1) TMI 1104
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....er of Income Tax (Appeals) Kota erred in confirming the action of the AO by making disallowance of Rs. 169408/- out of travelling expenses by holding that these expenses were for non business purposes vide his order dated 06/03/2019 arbitrarily. (Ground number 2 of ground of appeal filed before CIT(A)) 3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO by making disallowance of Rs. 35365/- out of advertising expenses by holding that these expenses were non supported by bills and vouchers and were non business purpose vide his order dated 06/03/2019 arbitrarily. (Ground number 3 of ground of appeal filed before CIT(A)) 4. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO by making disallowance of Rs. 2758/- out of Insurance expenses by holding that these expenses were non supported by bills vide his order dated 06/03/2019 arbitrarily. (Ground number 4 of ground of appeal filed before CIT(A). 5. On the facts and in the circumstances of the case, the Ld. Commissioner of Incom....
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....from other sources without deducting these incomes from the business income computed by them vide his order dated 06/03/2019 arbitrary. . (Ground number 11 of ground of appeal filed before CIT(A)) 12. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO by making disallowance of TDS claim of Rs. 39535/- by holding that the same is disallowable in the F.Y. 2008-09 and no such TDS credit was allowed by him in the scrutiny assessment completed of FY 2008-09 vide his order dated 06/03/2019 arbitrary. (Ground number 12 of ground of appeal filed before CIT(A)) 13. That the appellant craves to add, delete, alter and amend or modify any of the grounds of appeal either before or at the time of hearing. The assessee has also raised an additional ground as under :- " That AO was not justified in making addition of Rs. 7,61,166/- by invoking the provision of section 145(3) of the Income Tax Act, 1961, particularly when the books of accounts maintained by the assessee are true and correct and true profit can be deduced there from. Learned CIT Appeal also grossly erred ....
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....utting are supported by self made vouchers due to non availability of proper vouchers. The work done by the assessee is verified by the Site Supervisor and TDS has been deducted, therefore, the payments cannot be said to be not verifiable. Similarly, the payments regarding transport expenses at the site are also supported by self made vouchers but all these expenditures are verified by the Site Supervisor and also subjected to TDS, therefore, this cannot be a ground for rejection of books of account. As regards the site-wise consumption register, the ld. A/R has submitted that it is not practically possible to maintain site-wise consumption register when the assessee is working at different sites and as per the practice followed, the assessee physically verifies the work-in-progress at the end of each financial year. The closing stock-in-progress is determined based on the physical verification of the work. Thus the ld. A/R has contended that when the assessee is maintaining books of account in regular course of business duly supported by the details and vouchers, then the rejection of books of account under section 145(3) is not justified. 4. On the other hand, the ld. D/R has ....
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....that the assessee cannot take shelter under section 40A(3) of the Act to substantiate its claim of purchases and other expenses without proper vouchers. Provisions of section 40A(3) are invoked irrespective of an expenditure otherwise not disallowed under section 37(1) of the Act. Therefore, this explanation of the assessee cannot be accepted when the AO has specifically raised the query about the supporting evidence in respect of various claims made by the assessee. The second explanation of the assessee is that the various expenditures were incurred at the remote sites of the assessee and, therefore, the proper vouchers were not available with the assessee but only self made vouchers were produced by the assessee in support of the claims. It is pertinent to note that the assessee is working as a Railway Contractor and, therefore, the claim of the assessee for incurring expenditure in the process of executing the contract work is required to be supported by proper vouchers. It is not a rare incident of small claim or only few expenditures but the AO has pointed out so many instances of the claim of expenses right from various purchases, consumable items, mess, rail loading, unl....
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....s below. 8. We have considered the rival submissions as well as the relevant material on record. There is no dispute that after rejecting the books of account under section 145(3) of the Act, the income of the assessee is required to be estimated on some reasonable and proper basis. The past history of GP declared by the assessee is a proper guidance for estimation of income in pursuant to the rejection of books of account. In the case in hand, the assessee has declared GP at 11.06%. The assessee also furnished the comparative details of GP declared by the assessee for the preceding years including current year as under :- Particulars FY 2007-08 FY 2008-09 FY 2009-10 Sales 9,86,19,448 8,59,02,816 8,08,18,835 Gross Profit 1,18,33,739 92,70,173 89,37,103 Net Profit before interest and remuneration to partners. 55,15,568 51,64,667 41,17,011 GP Ratio 11.99% 10.79% 11.06% For the assessment year 2008-09 the assessee declared GP at 11.99%, for the assessment year 09-10 the assessee declared GP at 10.79%. However, there was an addition made by the AO and after the addition sustained by the ld. CIT (A), the GP for the assess....
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.... assessee has failed to discharge its onus, the burden cannot be shifted to the AO. 12. We have considered the rival submissions as well as the relevant material on record. The AO has made the disallowance of certain travelling expenses as under :- " The assessee firm has debited Rs. 5,96,402/- as travelling expenses. While examining the ledger account of the firm, it has been noticed that Shri Shailendra Gupta had performed almost monthly journey to Jammu, Delhi, Kolkata, Mumbai Central for personal purpose. On this journey following date wise expenses were debited :- a) 01.05.2009 Rs. 45,393 b) 01.10.2009 Rs. 42,356 c) 25.09.2009 Rs. 8,400 d) 03.09.2009 Rs. 24,714 e) 28.08.2009 Rs. 12,000 f) 06.08.2009 Rs. 8,561 g) 28.10.2009 Rs. 9,534 h) 21.12.2009 Rs. 7,950 i) 30.01.2010 Rs. 10,500 Total : Rs. 1,69,408 The AR of the assessee was asked to justify the above claim. However, the A.R has not offered any satisfactory explanation. Even, some bills were related to their family tours and Mata Vaisno Devi Darshan. Therefore, above total expenditure of Rs....
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....sessee has objected to the disallowance made by the AO, however, the assessee has not furnished any supporting documentary evidence in respect of this expenditure of Rs. 9,200/-. Thus in the absence of supporting documentary evidence, the expenditure incurred on account of Advertisement cannot be allowed. 16. Insurance Expenses : The AO has made a disallowance of Rs. 2,758/- regarding insurance expenses for want of supporting receipts. The ld. A/R of the assessee has submitted that the assessee submitted complete information supported by documents. The cash payment for petty expenses are allowable, therefore, the disallowance made by the AO is not justified. 17. On the other hand, the ld. D/R has submitted that since the assessee has not produced the receipts for payment of insurance premium, the claim of Rs. 2,758/- cannot be allowed. 18. We have considered the rival submissions as well as the relevant material on record. The AO has made a disallowance of Rs. 2,758/- on account of insurance expenses as under :- " Assessee firm has debited Rs. 63,821/- on account of insurance expenses. While examining the ledger account of the firm, it has been noticed that assess....
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....he payment was claimed to have been made in cash. The assessee has failed to produce any material for the claim of expenditure incurred for hiring of the jeep for the purpose of business of the assessee. Therefore, in the absence of any supporting evidence or other material even to prove that the Jeep was actually hired by the assessee for the purpose of business of the assessee, we do not find any error or illegality in the orders of the authorities below. 21. Sales Tax Penalty : We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. The AO has made the disallowance of Rs. 9,560/- towards Sales Tax Penalty as under :- " The assessee has debited Rs. 3,15,759/- in the P & L account under the head of Sales Tax Demand. During the course of assessment proceedings, the A.R has submitted copy of sales assessment orders and found that out of total claimed, penalty demands were of Rs. ,3,580+3,580+1200= Rs. 9,560/-. Since, the penalty demand is not allowable expenses, hence, Rs. 9,560/- is disallowed and added to the total income." The AO held that the said amount as claimed by the assessee in the Profit & Loss account under the head....
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....s : The AO has disallowed the arbitration fee of Rs. 18,118/- as under :- " The assessee has debited of Rs. 23,618/- under this head. In course of assessment proceedings, the a.R had only produced a bills of Rs. 5,500/- on 23.04.2009 which was paid in cash to K.B.B. Mody for tender. But, a bill of Rs. 18,118/- was not produced by the A.R to prove actual expenses and whether it was incidental to business or not. Simply, as per ledger, it was found that cash was paid to K.B. Mody, but purpose of payment is not clear. Therefore, the sum of Rs. 18,118/- is disallowed treating as non business expenses and added to the total income." 26. The AO has made the disallowance of the claim of Rs. 18,118/- for want of any bill. The AO has noticed that the payment was made in cash by the assessee to one Shri K.B. Mody, but since the assessee has not produced the bill, the AO has disallowed the said expenditure as non business expenditure. Once the assessee has claimed that this expenditure is towards arbitration fee and the dispute was between the assessee and railways regarding the business work of the assessee then the said expenditure is an allowable claim. Accordingly the disallow....
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....epreciation on the said claim was allowed. Hence in view of these facts, we do not find any error or illegality in the orders of the authorities below. 31. Ground Nos. 11 & 12 are not pressed by the ld. A/R of the assessee and the same are dismissed as not pressed. 32. In the result, appeal of the assessee is partly allowed. ITA NO. 857/JP/2019 - A.Y. 2011-12 : 33. The assessee has raised the following grounds :- "1. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of Rs. 252066/- out of sales tax penalty arbitrarily. (Ground number 1 of ground of appeal filed before CIT(A). 2. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of Rs. 23900/- out of Conveyance expenses arbitrarily. (Ground number 2 of ground of appeal filed before CIT(A)) 3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of Rs. 42000/-....
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....ee has submitted that the sales-tax amount paid was not on account of infraction of law but on account of non submission of sales-tax bills at the time of survey. The assessee deposited the tax in ordinary course of business which is an allowable expenditure under section 37(1) of the Act. The ld. A/R has submitted that the wrong description of the said amount in the accounts does not automatically lead to addition. Since the amount paid is not on account of penalty but on account of regular assessment, the same cannot be disallowed as penalty for infraction of law. 36. On the other hand, the ld. D/R has relied upon the orders of the authorities below. 37. We have considered the rival submissions as well as the relevant material on record. If the said amount is part of the demand arising from Sales tax assessment, then it will partake the character of Sales-tax and not the penalty. However, if the said amount is on account of penalty separately levied by the Sales Tax Authorities, then it cannot partake the character of simple Sales-tax payment. Accordingly, the AO is directed to verify the fact from the record whether the said amount of Rs. 2,52,066/- is arising from separat....
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.... Officer vs. C.V. Ramnarayanan (2016) 46 CCH 73 (Mum Tribunal) ii) Sunita Mine Chem Ind. Vs. Income Tax Officer (2008) 114 TTJ 98 (Jodh Trib) iii) Assistant Commissioner of Income Tax vs. Allied Construction (2007) 106 TTJ 616 (Delhi Trib) 40. On the other hand, the ld. D/R has relied upon the orders of the authorities below. 41. We have considered the rival submissions as well as the relevant material on record. The AO has made the adhoc disallowance @ 10% of the expenses on the ground that the reliability and genuineness of the expenses is doubted. He has also doubted the personal use of the two cars of the partnership firm by the partners. Thus it is clear that the AO has made the disallowance only on the basis of suspicion and doubt without pointing out a specific claim of expenditure is not genuine. Accordingly, the adhoc disallowance made by the AO is not justified, the same is deleted. Ground No. 3 is regarding adhoc disallowance of vehicle hiring expenses. 42. The AO has made the disallowance of vehicle expenses in para 3 as under :- " The assessee firm has claimed hire charges Rs. 4,20,000/- towards a jeep and car. On perusal of....
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....75,692/- have been incurred by the staff members for their outstation tours and Rs. 2,86,659/- were paid against the bills of partners and all these payments were necessary and incidental to the business of assessee. Reply of the assessee considered but not found satisfactory and looking to defects pointed out above as well as personal journeys of partners, an adhoc disallowance of 20% out of Rs. 2,86,659/- incurred by partners i.e. Rs. 57,331/- is made and added total income of assessee." The AO has made disallowance @ 20% of certain expenses on account of personal journey of the partners. 45. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. An identical issue has been considered by us for the assessment year 2010-11. Accordingly, in view of our finding on this issue, the same is confirmed. Ground No. 5 is regarding disallowance on account of Workmen and staff welfare expenses. 46. The AO has made the disallowance @ 10% of the expenses in para 5 as under :- " During the year the assessee has claimed expenses of Rs. 82,852/- under this head but no specific details regarding business expediency by assessee....
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....nds :- 1. "On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of Rs. 30158/- out of other expenses arbitrarily. (Ground number 1 of ground of appeal filed before CIT(A)) 2. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of Rs. 40615/- out of Conveyance expenses arbitrarily. (Ground number 2 of ground of appeal filed before CIT(A)) 3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of Rs. 28392/- out of festival celebration expenses arbitrarily. (Ground number 3 of ground of appeal filed before CIT(A)) 4. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of Rs. 1,44,431/- out of travelling expenses arbitrarily. (Ground number 4 of ground of appeal filed before CIT(A)) ....
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.... Disallowance out of other expenses:- The assessee has claimed General expenses of Rs. 47557/-, Welcome expenses of Rs. 57662/- and Worship expense of Rs. 45575/- in head of other expenses. On perusal of vouchers maintained by the assessee under this head, it is noticed that entire expenditure has been incurred in cash and mostly vouchers are self made which are not having reliability and genuineness /business expediency of said expenses. I, disallowed these expenses @ 20% i.e. Rs.30,158/- is made out of total expenditure claimed Rs.150794/-(47557+57662+45575) and added to total income of assessee. 2. Disallowance out of conveyance expenses:- The assessee has claimed conveyance expenses of Rs.203077/-. On perusal of vouchers maintained by the assessee under this head, it is noticed that entire expenditure has been incurred in cash and mostly vouchers are self made which are not having reliability and genuineness /business expediency of said expenses. The assessee firm has maintained two cars which are kept by the partners of the firm and entire expenditure has been claimed under this head by the firm. The partners have not mai....