TaxTMI 
TaxTMI 
2021 (4) TMI 456
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....Expenses and Business Promotion Expenses." 2. None has appeared for the assessee. The ld. AR Shri Akhilesh Kumar Jain has however submitted a letter dated 09.03.2021 wherein he has stated that the appeal may be decided taking into consideration the written submissions so filed on behalf of the assessee. In his written submission, the ld AR on behalf of the assessee has submitted as under: "Ground No.1- Addition of Rs. 1,60,983/= for delayed deposit of employees share of ESI & PF contribution Facts and Submissions - (i) All dues were deposited well before due date of filing of Return of Income as is evident from the perusal of the table reproduced on page 2 of the appellate order. (ii) There was no addition in the assessments on the issue in earlier assessment years except for AY 2007-08 and 2008-09 which were subsequently deleted by the learned CIT (Appeals) in orders dated 30.04.2014 and 06.03.2013. (iii) No disallowance / addition is attracted in view of several decisions including that of the ITAT-JPR, the jurisdictional Rajasthan High Court as well as the Supreme Court. Few of such decisions are cited below- (a) DCIT vs. ....
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.... of DCIT Vs. the Rajasthan Renewable Energy Corporation Ltd. rendered in Appeal No. ITA No 772 & 817/JP/2018 (copy enclosed) In view of above, your honours are therefore humbly requested to please delete the disallowance. Ground No. 3- Lump Sum Disallowance of Rs. 250000/- sustained being expenses alleging that expenses were not verifiable in absence of proper bills/ paid on self-made vouchers. Facts and Submissions - (i) Being a large organisation there is strict internal control system in operation and each expense is subject to verification by superior authority before payment/recording in books of accounts. (ii) Being a large organisation in health services and operating various Units - Multi Super Speciality Hospital, Nursing School-College, CT & MRI centre under PPP mode at SMS Hospital, payment of expenses by way of reimbursement of cash to staff members on self-made vouchers cannot be avoided. (iii) Perusal of table reproduced on page 8 and 9 of the appellate order reveals that all the payments were made to known persons. Out of aggregate expenses of Rs. 44,79,018.61 (33,69,566.97 + 11,09,451.64) a sum of Rs. 12,89,080.58 (7,13,656.59 + 5....
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....limit provided in the respective Acts. III Whether in the facts and circumstances of the case and in law the ITAT was justified in holding that employee's contribution to PF and ESI governed by the provision of section 43B and not by section 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act.? " The Hon'ble jurisdictional Court has decided as follows: "6. With regard to issue No. 2 and 3 the controversy is pending before the Supreme Court in C.I.T, Jaipur Vs. M/s State Bank of Bikaner and Jaipur in SLP(c) No. 16249/2014, therefore, subject to decision of SLP, for the present, these issues are decided in favour of the department and against the assessee. It will be open for the department to recover the amount if the decision is in their favour." In view of the same the disallowance made by the Assessing Officer is confirmed. This ground of appeal is dismissed." "3.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer made the disallowance by holding that the assessee is following mercantile system of accounting and therefore prior paid expenses are not allowable. Ld. Autho....
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.... case of CIT vs. Jaipur Vidyut Vitran Nigam Ltd. 363 ITR 307 and in case of CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd. 366 ITR 163. We further note that the ld. CIT(A) though has not disputed the various decisions of Hon'ble High Court however, disallowance made by the AO are sustained as he misunderstood the decision of Hon'ble Jurisdictional High Court in case of PCIT vs. M/s Rajasthan Renewable Energy Corporation Limited in DB ITA No. 10,11 & 12/2018 dated 13.03.2018. In the case of PCIT vs. M/s Rajasthan Renewable Energy Corporation Limited (supra) the Hon'ble High Court has considered this issue in para 4 to 6 as under:- "4. So far as question No. 1 is concerned, the same is now covered by the decisions of this Court in Principal Commissioner of Income-Tax V/s Rajasthan state seed Corporation Ltd. [2016] 386 ITR 267 (Raj) wherein it has been held as under:- "In so far as the expenditure incurred on State Renewal Fund is concerned, the said expenditure also goes to show that the renewal fund was set up by the State Government and was created with the object of providing a safety net for the workers likely to be effected by restricting in the State Publi....
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....hical mistake it was misunderstood by the ld. CIT(A) as in favour of the Revenue. Accordingly, in view of a series of decisions of the Hon'ble Jurisdictional High Court in favour of the assessee and further Hon'ble Supreme Court in case of PCIT vs. Rajasthan State Beverages Corporation Ltd. 250 taxmann 16 has dismissed the SLP filed by the Department this issue is decided in favour of the assessee and against the Revenue. Hence, disallowances/additions made by the AO on account of employees contribution to PF & ESI are deleted." We accordingly set-aside the order of the ld CIT(A) and the disallowance made by the AO towards employees contribution to ESI and PF is hereby deleted. In the result, the ground no. 1 of the assessee's appeal is allowed. 5. Regarding disallowance of prior period expenses, it is incumbent upon the assessee to account for the expenses in respective financial year in which they are incurred or the liability towards such expenses has accrued which is in line with the mercantile system of accounting as well as concept of matching accounting principle where the revenues and corresponding expenses are accounted for in the respective years. At the sa....
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....ht of aforesaid discussion, the disallowance of Rs. 150,279 is hereby directed to be deleted and ground no. 2 of assessee's appeal is allowed. 6. Now, coming to disallowance of travel, conveyance and business promotion expenses, the AO has disallowed a sum of Rs. 450,000/- holding that some of the expenses are not fully supported by proper bills/vouchers and thus not subject to verification. On appeal, the ld CIT(A) upheld the finding of the AO and at the same time, holding that the disallowance seems to be bit excessive has restricted the disallowance to Rs. 250,000/-. We find that the AO is well within his right and jurisdiction to examine the claim of the expenses and adopt an appropriate methodology of determining the nature and sample size of expenses and on examination thereof, where he find that the expense are not genuine or have not been incurred for the purposes of business, the same can be disallowed. However, before arriving at such a finding, he has to record specific finding highlighting particular expenditure which accordingly to him is not allowable and the reasons for the same which in the instant case is conspicuously absent and thus, the disallowance so ....