2021 (3) TMI 2 - AT - Income Tax

Addition under the head hire charges paid to trucks - assessee had failed to produce books vouchers in support of the claimed expenditure - CIT-A reduced addition to 2% as against 20% made by the AO - HELD THAT - Expenditure claimed by the assessee during immediately previous two assessment years and succeeding assessment year has been accepted by the department without any dispute and the profit percentage, which comes to 2.75% of total turnover after considering the part addition confirmed by the CIT(A) is sufficient to cover all possible leakage of revenue. Therefore, in absence of any substantial and acceptable submission of the ld CIT DR, we do not find any valid reason to interfere with the findings of ld CIT(A). Hon ble Supreme Court in the case of Radhasoami Satsang 1991 (11) TMI 2 - SUPREME COURT held that the principle of resjudicata is not applicable in the Income tax matter. But findings of earlier years on the same matter are relevant where all fundamental facts permitting through different assessment years have been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. In the instant case also, in assessment year 2013-14, the assessee has shown net profit @ 3.08%, which was assessed u/s.143(3) of the Act. Further, in assessment year 2015-16, the profit was shown @ 2.99%, and accepted u/s.143(1) of the Act by the department, which is less than the net profit shown by the assessee in the present year under consideration i.e. 3.75%. Therefore, we find that the ld CIT(A) is justified in restricting the disallowance to 2% of the total expenses claimed by the assessee considering the quantum and nature of expenses and also the claim of earlier years. Decided against revenue.

Summary

Issues Involved:
1. Justification for reducing the addition made under "hire charges paid to trucks."
2. Justification for reducing the addition made under "staff salary," "travelling & conveyance," and "power and fuel."
3. Validity of the Joint CIT's authority to file the appeal.

Detailed Analysis:

Issue 1: Justification for Reducing the Addition under "Hire Charges Paid to Trucks"

The revenue contested the CIT(A)'s decision to reduce the addition of ?1,66,05,751 (20% of total expenses) made by the AO to ?16,50,575 (2% of total expenses). The AO had disallowed 20% of the total expenses of ?8,25,28,757 under the head "hire charges paid to trucks" due to the assessee's failure to produce supporting bills and vouchers. The CIT(A) reduced the disallowance to 2%, reasoning that the AO did not justify why 20% was considered reasonable. The CIT(A) considered the nature of the business, the quantum of expenses, and past expense claims, concluding that a 2% disallowance was reasonable. The Tribunal upheld the CIT(A)'s decision, noting that the AO had no factual basis for the 20% disallowance and that the CIT(A)'s 2% disallowance was sufficient and reasonable.

Issue 2: Justification for Reducing the Addition under "Staff Salary," "Travelling & Conveyance," and "Power and Fuel"

The AO had estimated a 20% disallowance of the total expenses under these heads due to the assessee's failure to produce supporting documentation. The CIT(A) reduced this disallowance to 2%, considering the nature of the business and past expenses. The Tribunal upheld the CIT(A)'s decision, applying the same reasoning used in the first issue. The Tribunal found the 2% disallowance reasonable and sufficient to cover any potential revenue leakage.

Issue 3: Validity of the Joint CIT's Authority to File the Appeal

The assessee's cross-objection argued that the Joint CIT was not authorized to file the appeal, rendering it non-maintainable. However, since the Tribunal dismissed the revenue's appeal, the cross-objection became infructuous and was dismissed.

Conclusion:

The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s decision to reduce the disallowances from 20% to 2% for both "hire charges paid to trucks" and other expenses like "staff salary," "travelling & conveyance," and "power and fuel." The Tribunal found the CIT(A)'s reasoning sound and the reduced disallowances reasonable. The assessee's cross-objection was dismissed as it became infructuous following the dismissal of the revenue's appeal. The order was pronounced on January 28, 2021.