2022 (12) TMI 795 - AT - Income Tax

Disallowance of power fuel expenses - Addition @ 5% of the total claim of expenses - CIT(A) after going through the details filed by the assessee held that expenses on power and fuel are proportionately high in certain months are not justified and specially in the month of March which was without any justification - HELD THAT - On perusal of the details filed by the assessee notice that during AY 2013-14 fuel expenses are 14.45% of the total turnover Ct the assessee has purchased its own vehicle. Major Increase in the expenditure of power expenses - As assessee has been able to satisfy the considerable change. However, considering the fact that most of the expenses of power fuel have been booked at the fag end and there considerable increase in the percentage of this expenditure for the AY 2010-11 onwards, we deem it proper to sustain the addition/disallowance @ 1% of the total claim of expenditure at Rs.2,15,63,895/-. Therefore, against the disallowance of Rs.10,78,194/-, a sum of Rs. 2,15,638/- is sustained and remaining disallowance of Rs.8,62,556/- is deleted. Ground no.1 raised by the assessee is partly allowed. Disallowance of repair maintenance expenses - HELD THAT - Assessee has filed complete ledger accounts of the expenditure incurred. Except an amount as incurred in cash remaining/balance amount has been paid through banking channel. We also note that percentage of repair and maintenance expenditure has scaled down as comparable to the preceding year. Disallowance of repair and maintenance expenses needs to be sustained only to the extent which the assessee failed to explain. Thus, remaining addition of is deleted. The assessee gets part relief. Ground no. 2 is partly allowed. Disallowance of unloading chipping expenses computed @ 5% - HELD THAT - As most of the expenditure though has been incurred in cash but subjected to deduction of TDS, which has been duly deposited. Both the lower authorities have given general remarks and have not specifically pointed out any such payment, which has been made in cash and TDS not deducted and not supported by relevant documents. Considering the fact that loading and chipping expenses constitutes major parts of the expenditure of the assessee company i.e 32.14% and also considering the fact that turnover of the assessee has increased from 1.26 cr during AY 2010-11 to Rs. 14.92 cr during AY 2013-14 and also net profit which was declared at Rs. 9,04,071/- during AY 2010-11 has risen to Rs.99,15,955/- in AY 2013-14, the books of account regularly audited and complete details have been filed before us in the shape of paper book, we being fair to both the parties are inclined to sustain the disallowance @ 1% i.e at Rs. 4,79,618/- as against Rs.23,98090/- confirmed by the ld. CIT(A). Thus, assessee gets relief at Rs. 19,18,472/-. Ground no.3 is partly allowed.

Summary

Issues:
1. Disallowance of Power and Fuel Expenses
2. Disallowance of Repairs & Maintenance Expenses
3. Disallowance of Unloading & Chipping Expenses
4. General Grounds of Appeal

Issue 1: Disallowance of Power and Fuel Expenses:
The appeal concerns the disallowance of power and fuel expenses amounting to Rs. 10,78,194. The Assessing Officer (AO) disallowed 5% of the total claim of expenses. The CIT(A) found the expenses disproportionately high in certain months, especially in March, without justification. Upon review, it was noted that fuel expenses were 14.45% of the total turnover for the year 2013-14, compared to 6.58% in the previous year. Despite justifying the increase in power expenses, the Tribunal sustained the disallowance at 1% of the total claim, resulting in Rs. 2,15,638 being upheld, with the remaining Rs. 8,62,556 deleted.

Issue 2: Disallowance of Repairs & Maintenance Expenses:
The dispute involves the disallowance of repair and maintenance expenses totaling Rs. 1,29,741. The assessee provided ledger accounts showing most payments made through banking channels, except for Rs. 25,100 in cash. The percentage of repair and maintenance expenses decreased compared to the previous year. The Tribunal decided to sustain the disallowance only for the cash amount of Rs. 25,100, with the remaining Rs. 1,04,641 being deleted, granting partial relief to the assessee.

Issue 3: Disallowance of Unloading & Chipping Expenses:
The issue pertains to the disallowance of unloading and chipping expenses calculated at 5%, amounting to Rs. 23,98,090. The disallowance was based on 50% of the expenditure being in cash and lack of TDS deductions. However, the Tribunal observed that TDS was deposited for most cash expenses. Considering the significant portion of these expenses in the company's operations and the growth in turnover and net profit, the Tribunal reduced the disallowance to 1% of the total expenses, resulting in relief of Rs. 19,18,472 for the assessee.

Issue 4: General Grounds of Appeal:
The general ground of appeal required no specific adjudication.

In conclusion, the Tribunal partly allowed the appeal of the assessee, providing relief in the disallowance of various expenses after a detailed analysis of the facts and submissions presented.