2016 (4) TMI 417 - AT - Income Tax

Disallowance of expenses - 1/6th of total expenses comprises of telephone expenses, travelling expenses, Vehicle expenses and depreciation on car - Held that - AO made these disallowance mainly on the ground that most of the bills and vouchers for the expenses claimed were self-supporting and not fully verifiable and the assessee was not maintaining any log book for the use of vehicle, no registers were maintained for telephone and also for the fact that the assessee had not made any disallowance while computing its income for personal use of vehicle and telephone expenses. Taking into consideration all facts and circumstances of the case, in our opinion, it would meet the ends of justice if these disallowances are restricted to ₹ 4,00,000/-. - Decided partly in favour of assessee Disallowance of PF and ESIC - delay in deposits - Held that - Assessee was required to deposit the employees PF and ESIC contribution into the government account within the due date, including grace period allowed by the respective Acts and not before the due date of filing the return of income as contended by the assessee. Therefore, in our opinion, the CIT(A) has rightly upheld the disallowance made by the Assessing Officer amounting to ₹ 3,77,546/- Rs.3,51,103/- and ESIC of ₹ 54,187/- on account of late payment of employee s PF and ESIC to the government account. - Decided against assessee

Summary

Issues:
1. Disallowance of expenses comprising telephone, traveling, vehicle, and depreciation expenses.
2. Disallowance of PF and ESIC contributions.

Issue 1: Disallowance of Expenses
The Assessing Officer disallowed &8377; 1,37,175/- (1/6th of total expenses) due to lack of verifiable bills and vouchers, absence of log books for vehicle use, and failure to account for personal use of vehicle and telephone expenses. The ITAT held that considering the circumstances, the disallowance should be restricted to &8377; 4,00,000/-. Thus, the disallowance was partly allowed.

Issue 2: Disallowance of PF and ESIC Contributions
The Assessing Officer disallowed &8377; 3,77,546/- for late PF (Rs.3,28,261) and ESIC (Rs.48,285) payments after scrutinizing the deposit dates. The CIT(A) upheld this disallowance based on the Gujarat High Court's decision, emphasizing timely deposits into government accounts. The ITAT concurred with the lower authorities, dismissing the appeal and confirming the disallowance of &8377; 3,77,546/- for late PF and ESIC payments. No contrary evidence was presented by the assessee.

In conclusion, the ITAT partially allowed the appeal regarding the expenses disallowance but upheld the disallowance of PF and ESIC contributions. The judgment emphasizes the importance of maintaining proper records and timely payments in compliance with legal requirements.