2023 (1) TMI 32 - AT - Income Tax

Disallowance of claim for deduction of commission - As observed by the A.O, the fact that the ledger account or details maintained by the assessee does not even contain the name and description of the goods sold or supplied through the aforementioned person further fortifies the fact that no services were in fact rendered by him - HELD THAT - We find that not only the assessee had failed to adduce any documentary evidence which would support his claim of having paid genuine commission to the aforementioned person, viz. Shri. Maganlal Patel for the services rendered by him, but in fact he had despite specific directions of the A.O avoided producing him for necessary examination on the pretext that he was away to Gujarat and the date when he would be back was not to his knowledge. On the basis of the aforesaid facts, I am of a strong conviction that assesee only in the garb of his bogus claim of having paid commission to his father, viz. Shri Maganlal Patel had tried to suppress his profits. Accordingly, finding no infirmity in the view taken by the lower authorities uphold the disallowance made /sustained by them. Thus, the Ground of appeal No.1 raised by the assessee is dismissed in terms of the aforesaid observations. Disallowance of the assessee s claim for deduction of job work charges - Deduction claimed by the assessee to have been paid to his brother - HELD THAT - As observed by the A.O, and, rightly so, as the aforesaid bill did not even mention the nature of job work, therefore, it did not inspire any confidence as regards the authenticity of the same. As the assessee had failed to place on record any documentary evidence which would support the authenticity of his claim of having paid genuine job work charges to his brother, viz. Shri Bharat Kumar Patel, therefore, the same had rightly been disallowed by the A.O. Also,concur with the view of the A.O that the aforesaid expenditure had been booked by the assessee only with an intent to suppress his profits. Accordingly, finding no reason to interfere with the view taken by the lower authorities, uphold the order of the CIT(Appeals) and sustain the disallowance - Thus, the Ground of appeal No.2 raised by the assessee is dismissed. Ad-hoc disallowance of 15% out of vehicles and telephone expenses - Addition made primarily for the reason that the expenses booked under the respective heads of expenditure were not supported by proper vouchers - HELD THAT - We concur with the A.O that involvement of personal element as regards usage of car and telephone in absence of log book and call register could not be ruled out, but at the same time is unable to subscribe to the adverse inferences which had been drawn by him as regards the expenses in question on the ground that the same were not supported by proper vouchers. A.O had failed to point out a single voucher which as per him was either not found to be in order or the expenses therein claimed were liable to be disallowed for any other reason. On the basis of my aforesaid observations, uphold the disallowance of the aforesaid expenses only to the extent of 5%. Thus, the Ground of appeal No.3 raised by the assessee is partly allowed in terms of the aforesaid observations.

Summary

Issues Involved:
1. Disallowance of commission payment to Shri Maganlal Patel.
2. Disallowance of job work charges paid to Shri Bharat Kumar Patel.
3. Ad-hoc disallowance of 15% out of vehicle and telephone expenses.

Detailed Analysis:

1. Disallowance of Commission Payment to Shri Maganlal Patel:
The assessee claimed a commission payment of Rs. 8,98,445/- to Shri Maganlal Patel for liaising with officers and facilitating the sale and supply of HDPE pipes and sprinklers. The Assessing Officer (A.O) disallowed this expense due to lack of evidence supporting the services rendered by Shri Maganlal Patel. The A.O noted several deficiencies:
- The bill provided was a single, typed document without proper details or proof of work done.
- No evidence of travel or expenses incurred by Shri Maganlal Patel was provided.
- The ledger did not contain details of goods sold through Shri Maganlal Patel.
- The assessee failed to produce Shri Maganlal Patel for examination.
The Commissioner of Income-Tax (Appeals) [CIT(A)] upheld the A.O's disallowance. The Tribunal found no infirmity in the lower authorities' view, concluding that the assessee failed to substantiate the claim with documentary evidence, and upheld the disallowance.

2. Disallowance of Job Work Charges Paid to Shri Bharat Kumar Patel:
The assessee claimed job work charges of Rs. 7,06,700/- paid to his brother, Shri Bharat Kumar Patel. The A.O disallowed this expense, citing lack of evidence and noting:
- The bill provided was a single document without detailed records of work done.
- The payment appeared to be a lump sum amount without corroborative documents.
- The relationship between the assessee and the payee raised suspicion of non-genuine transactions.
The CIT(A) upheld the A.O's disallowance. The Tribunal agreed with the lower authorities, stating that the assessee failed to provide sufficient evidence to substantiate the job work charges, and upheld the disallowance.

3. Ad-hoc Disallowance of 15% Out of Vehicle and Telephone Expenses:
The A.O made an ad-hoc disallowance of 15% of vehicle and telephone expenses, citing lack of proper vouchers and potential personal use. The CIT(A) upheld this disallowance. The Tribunal partially agreed with the A.O, acknowledging the possibility of personal use but found the 15% disallowance excessive due to lack of specific evidence of improper vouchers. The Tribunal reduced the disallowance to 5%.

Conclusion:
The appeal was partly allowed. The disallowances of commission payment and job work charges were upheld, while the ad-hoc disallowance of vehicle and telephone expenses was reduced to 5%. The general ground of appeal was dismissed as not pressed. The order was pronounced on 26th December 2022.