2016 (8) TMI 598 - AT - Income Tax

Net income determination - assessee has not maintained proper vouchers but spent it in cash. - Held that - As only in AY 2008-09, he had earned additional revenue compared to other years and as well as the net profit declared by the assessee and the same was accepted by the department in the preceding and following years are between 15% to 17%. Moreover, the assessee had to spend certain expenditure to earn this income. The Assessing Officer cannot wear shoes of the assessee and determine, how much he has to spend. The Assessee had earned the income and we are not aware of the difficulties in earning the income in this line of business. The prospective buyers need to be convinced and taken to the respective sites to convince them. Assessing Officer has not brought anything on record to controvert that these expenses have not met by the buyers or sellers. In absence of such evidence, we have to go with assessee s claim. The assessee has not maintained proper vouchers but spent it in cash. The Assessing Officer has rejected the submissions of the assessee and disallowed 50% of advertisement and 50% on other expenditures. In our considered view, Assessing Officer should have estimated the income. The assessee was admitting the net income in the earlier year at 16.13% against the gross receipts of ₹ 16.88 lakhs and in subsequent year, it has admitted 14.80% on gross revenue of ₹ 17.71 lakhs. In the interest of justice, we direct the Assessing Officer to determine the net income of the assessee at 20% of the gross receipts. - Decided partly in favour of assessee

Summary

Issues:
Delay in filing appeal before ITAT, Disallowance of expenses on Car Hire Charges, Vehicle Maintenance & Travelling Expenses, Disallowance of expenses under the head 'Advertisement'

Analysis:
1. Delay in filing appeal before ITAT:
The appeal was filed with a delay of 5 days due to the assessee's illness. The assessee submitted a petition for condonation of delay along with a medical certificate and an affidavit. The ITAT, after hearing both parties, condoned the delay, considering the sufficient cause presented by the assessee.

2. Disallowance of expenses on Car Hire Charges, Vehicle Maintenance & Travelling Expenses:
The Assessing Officer disallowed 50% of the total expenditure on these expenses, amounting to &8377; 7,11,415, as they were a significant portion of the commission received without proper documentation. The CIT(A) reduced the disallowance to 30% considering the nature of the expenses. The ITAT acknowledged the necessity of such expenses in the business activity and directed a further reduction to 20% of the claim, emphasizing the lack of evidence against the assessee's claim.

3. Disallowance of expenses under the head 'Advertisement':
The Assessing Officer disallowed 50% of the advertisement expenses, totaling &8377; 3,03,900, stating it was excessive compared to the company's campaign. The CIT(A) reduced the disallowance to 40%, noting the nature of the expenses and the lack of proper documentation. The ITAT further reduced the disallowance to 20% of the gross receipts, emphasizing the necessity of such expenses in the business and directing the Assessing Officer to determine the net income at 20% of the gross receipts for justice.

In conclusion, the ITAT partially allowed the assessee's appeal, emphasizing the importance of considering the nature of business expenses and the lack of evidence against the assessee's claims. The judgment highlighted the necessity of proper documentation and reasonable estimation of income by the Assessing Officer for a fair assessment.