2022 (11) TMI 302 - AT - Income Tax

Disallowance of sale and administrative expenses - Assessee failed to produce any bills/vouchers - only contention raised by assessee is that its pump/filing station for petrol, diesel etc. is in remote area and no bills /vouchers for expenses are available - HELD THAT - It of the considered view that since the assessee has completely failed to produce any bills/vouchers for sale and administrative expenses to substantiate that these sale and administrative expenses were incurred wholly and exclusively for the business of the assessee, and the Assessing Officer made disallowance to the tune of 25% of these expenses which is reduced by ld. CIT(A) to 12 % wherein substantial relief is already granted by ld. CIT(A). Revenue has not come in appeal against relief granted by ld. CIT(A), and thus, in my considered view , no interference is called for with the appellate order passed by ld. CIT(A) and the estimate of disallowance made by ld. CIT do not call for any interference by me , as there is no material on record which could justify further relief. No merit in the appeal filed by assessee before tribunal on this issue, which now stand dismissed. Disallowance of drawings for household expenses - AO estimated household drawing expenses of Rs.20,000/- per month - HELD THAT - Keeping in view that we are presently concerned with financial year 2012-13 , the drawings towards household expenses to the tune of Rs.10,000/- per month is quite justifiable and is reasonable , more-so keeping in view status of the assessee that he is retailer of Bharat Petroleum Corp. Ltd. and having a petrol filing station , of which the annual turnover was substantial to the tune of Rs.11.77 crores during the year under consideration and in my view , drawings for household expenses of Rs.10,000/- per month is quite reasonable . Thus , in nutshell, the assessee is not entitled for any further relief towards estimation of household expenses . This disposes ground number 5, which now stands dismissed.

Summary

Issues Involved:
1. Disallowance of sales and administrative expenses by the Assessing Officer (AO).
2. Addition for low household withdrawals by the AO.

Detailed Analysis:

Issue 1: Disallowance of Sales and Administrative Expenses

The assessee, a proprietor of a petrol and diesel retail business, filed an appeal against the disallowance of 25% of sales and administrative expenses amounting to Rs. 14,79,532/-, which was reduced to 12.5% by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO disallowed these expenses because the assessee failed to produce supporting bills and vouchers, except for a solar rent bill. The AO's decision was based on the fact that the accountant of the assessee admitted to recording expenses based on the owner's instructions without any supporting documents.

The CIT(A) granted partial relief by reducing the disallowance to 12.5%, acknowledging the lack of supporting documents but considering the nature of the business and the remote location of the petrol pump. The Tribunal upheld the CIT(A)'s decision, emphasizing that the primary onus was on the assessee to substantiate the expenses with proper documentation as mandated by Section 37(1) of the Income-tax Act, 1961. The Tribunal found no merit in the assessee's appeal for further relief, citing the decision of the Hon'ble Allahabad High Court in the case of Pr.CIT v. Rimjhim Ispat Ltd. [2016] 382 ITR 152 (Alld. HC), which supports the disallowance in the absence of proper documentation.

Issue 2: Addition for Low Household Withdrawals

The AO added Rs. 1,79,000/- to the assessee's income, estimating household withdrawals at Rs. 2,40,000/- per annum against the Rs. 61,000/- declared by the assessee. The CIT(A) reduced this addition, estimating household expenses at Rs. 10,000/- per month, considering the assessee's status as an unmarried individual living in an ancestral house in a village.

The Tribunal upheld the CIT(A)'s estimation, finding it reasonable and justifiable given the assessee's substantial business turnover of Rs. 11.77 crores. The Tribunal noted that the Revenue did not appeal against the relief granted by the CIT(A), and no further evidence was presented to justify additional relief. Thus, the Tribunal dismissed the assessee's appeal on this issue as well.

General Ground:

The general ground raised by the assessee was dismissed as it did not require separate adjudication.

Conclusion:

The Tribunal dismissed the appeal filed by the assessee, upholding the CIT(A)'s decision to disallow 12.5% of sales and administrative expenses and to estimate household withdrawals at Rs. 10,000/- per month. The order was pronounced on 29/08/2022 at Allahabad, U.P.