2016 (4) TMI 1089 - AT - Income Tax

Disallowance of carriage Inward expenditure - Held that - Assessing Officer was not correct in disallowing 10% of such expenditure. We have gone through the submissions of the assessee and orders of the authorities below. The Assessing Officer disallowed the expenditure on adhoc basis without pointing out any specific instances, where supporting bills are not available. On perusal of financial statement filed by the assessee, we find that the expenditure claimed is very less when compared to related turnover. The assessee is into the business of trading in fertilizers which requires lot of carriage inward expenditure, as the goods are bulky and which needs to be transported to various places. Considering the nature and size of business, we are of the opinion that the disallowance made by the Assessing Officer is at higher side. During the course of hearing, the Authorised Representative of the assessee requested for scale down the disallowance made by the Assessing Officer. The Ld. D.R. on the other hand did not object for the proposal. Therefore, to meet the ends of justice, we direct the Assessing Officer to disallow 5% of carriage inward expenditure. Accordingly, we direct the Assessing Officer to disallow 5% of expenditure under the head carriage inwards. Disallowance of depreciation on motor cycles - Held that - During the course of assessment proceedings, the assessee could not produce bills in support of the capital expenditure. The assessee s contention is that it has bills in support of the fixed assets, however could not produce before the Assessing Officer by oversight. The CIT(A) held that even during the course of appellate proceedings, the assessee could not furnish bills in support of the expenditure. Even before us, the facts remained same. The assessee could not furnish any bills in support of the expenditure claimed. Therefore, we are of the opinion that the CIT(A) has rightly confirmed the additions made by the Assessing Officer. We do not see any reason to interfere with the order passed by the CIT(A)

Summary

Issues: Disallowance of carriage inward expenditure and disallowance of depreciation on motor cycles.

Issue 1: Disallowance of Carriage Inward Expenditure
The appellant, a partnership firm engaged in fertilizer trading, filed its return for the assessment year 2009-10, declaring total income. The Assessing Officer disallowed 10% of the claimed expenditure towards freight and carriage outwards due to lack of supporting evidence. The appellant produced way bills but failed to provide evidence for the quantum of expenditure or the payees' addresses. The CIT(A) upheld the disallowance, citing insufficient details. The appellant contended that the disallowance was adhoc and excessive. The Tribunal noted the nature of the appellant's business and reduced the disallowance to 5%, considering the turnover and business size. The Tribunal directed the Assessing Officer to disallow 5% of the expenditure under the head carriage inwards.

Issue 2: Disallowance of Depreciation on Motor Cycles
The Assessing Officer disallowed depreciation claimed on two motor cycles due to the absence of bills and vouchers. The appellant stated that the invoices were available but not submitted due to oversight. The CIT(A) upheld the disallowance, noting the lack of evidence even during the appellate proceedings. The Tribunal agreed with the CIT(A) and upheld the disallowance, as the appellant failed to provide supporting bills for the expenditure claimed. The appeal was partly allowed, confirming the disallowance of depreciation on the motor cycles.

In conclusion, the Tribunal addressed the issues of disallowance of carriage inward expenditure and depreciation on motor cycles. The Tribunal reduced the disallowance percentage for carriage inward expenditure and upheld the disallowance of depreciation on motor cycles due to the lack of supporting evidence. The appeal was partly allowed, and the decision was pronounced on 18th March 2016.