2019 (10) TMI 920 - AT - Income Tax

Disallowance of transportation expenses @ 10% - ad hoc disallowance was sustained by the CIT(A) to the extent of ₹ 1.00 lac on lump sum basis - HELD THAT - D isallowance is made without considering the relevant facts. Further, when the transportation and freight expenses is inevitable in the assessee s line of business then without conducting any enquiry or giving a finding, the payment made by the assessee is either bogus or excessive/inflated then an ad hoc disallowance made by the A.O. of the entire claim of transport expenses where the majority of the payment has been made through cheques is not justified. CIT(A) has also confirmed the disallowance to the extent of ₹ 1.00 lacs which is an ad hoc disallowance without considering the relevant facts on the issue, accordingly, the disallowance sustained by the ld. CIT(A) is deleted. Disallowance of soyabean expenses @ 20% - A.O. observed that the assessee has paid some of the expenses in cash which are below ₹ 20,000/- for which no supporting evidence is available with the assessee except self-made vouchers - HELD THAT - The said expenditure is incurred on account of Pala and Bharai which means payment is made for loading and unloading of the goods. Though, the payment in such nature of expenditure is made in cash to the labourers, however, the labourers in a particular mandi are regular labourers working and not the strange persons to the traders in a particular mandi. Therefore, once the labourers are known and working almost regularly with the assessee and other traders then the details and particulars of the recipients should be mentioned in the vouchers. Even when these are regular workers working in the mandi then vouchers must have been got signed from the recipients. Since the entire payment is made in cash, therefore, the disallowance restricted by the ld. CIT(A) to 10% is proper and reasonable. Disallowance of wheat expenses - addition restricted by the CIT(A) to 10% from 20% - HELD THAT - This issue is identical to the issue of disallowance of soyabean expenses being on account of Pala and Bharai i.e. loading and unloading of the goods, therefore, in view of my finding on account of soyabean expenses, 10% disallowance restricted by the ld. CIT(A) is proper and justified. Disallowance of administrative expenses - HELD THAT - Depreciation on car cannot be disallowed on the ground of non-furnishing of vouchers or non-verifiable of the expenditure. The depreciation is a statutory allowance provided u/s 32 of the Act, therefore, the disallowance made by the A.O. and sustained by the ld. CIT(A) on account of depreciation on car is deleted. Telephone expenses are also not required to be proved by any voucher when the telephone bill itself is a proof. Even otherwise, this expenditure can be verified from an independent source. In absence of any verification conducted by the A.O. regarding the genuineness of the expenditure, the disallowance made and sustained by the ld. CIT(A) is not justified, the same is deleted. Office expenses - majority of the expenditure has been incurred through cheques except only one item of expenditure which is labour charges of ₹ 2,150/- for colour in office. All other expenses are duly supported by the bills of the vendor. It appears, without verifying the details of the expenditure, the A.O. has made ad hoc disallowance in a routine manner. Accordingly, the disallowance made by the A.O. and sustained by the ld. CIT(A) is deleted. Vehicle running and maintenance expenses, from perusal of the details of the expenditure, it is noted that the entire payment is made in cash and some of the payments are made for petrol and for others. No description is given in the details of the expenditure except some bill number is given. Therefore, when the entire expenditure is incurred in cash then the disallowance of 10% made by the ld. CIT(A) is on account of vehicle running and maintenance expenses is proper and justice - Appeal of the assessee is allowed in part.

Summary

Issues:
1. Disallowance of transportation expenses
2. Disallowance of soyabean expenses
3. Disallowance of wheat expenses
4. Disallowance of administrative expenses

Issue 1: Disallowance of Transportation Expenses
The appeal concerns the disallowance of transportation expenses by the Assessing Officer (A.O.) at 10%, with the Commissioner of Income Tax (Appeals) [CIT(A)] reducing the disallowance to a lump sum of ?1,00,000. The A.O. based the disallowance on lack of complete particulars for certain expenses paid in cash, supported only by self-prepared vouchers. The Tribunal noted that the A.O. did not provide details on the percentage of cash payments supported by such vouchers. The Tribunal found the disallowance unjustified as the majority of payments were made through cheques, without any evidence of excessive or inflated claims. Consequently, the CIT(A)'s sustained disallowance was deemed ad hoc and not based on relevant facts, leading to its deletion.

Issue 2: Disallowance of Soyabean Expenses
The A.O. disallowed 20% of soyabean expenses due to cash payments below ?20,000 supported by self-made vouchers, which the CIT(A) reduced to 10%. The Tribunal found the A.O.'s disallowance reasonable as the nature of the expenses involved loading and unloading payments to regular laborers. Since these laborers were known and worked regularly with the assessee, the disallowance of 10% by the CIT(A) was considered proper and justified, leading to no interference with the CIT(A)'s decision on this issue.

Issue 3: Disallowance of Wheat Expenses
The disallowance of wheat expenses was reduced from 20% to 10% by the CIT(A), similar to the soyabean expenses issue. The Tribunal found this reduction justified based on the nature of the expenses related to loading and unloading payments, aligning with the decision on soyabean expenses, thus upholding the CIT(A)'s decision on this issue.

Issue 4: Disallowance of Administrative Expenses
The A.O. disallowed 20% of various administrative expenses, which the CIT(A) restricted to 10% for items like office expenses, telephone expenses, vehicle running, and maintenance expenses, and depreciation on car. The Tribunal found the disallowance on depreciation improper as it is a statutory allowance. It also noted that telephone expenses do not require additional proof when supported by bills. The A.O.'s disallowance of office expenses was deemed routine without verifying details, leading to its deletion. The 10% disallowance on vehicle running and maintenance expenses in cash was considered proper, resulting in partial allowance of the appeal.

In conclusion, the Tribunal partially allowed the appeal, deleting certain disallowances while upholding others based on detailed analysis and justification for each issue raised in the appeal.