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TMI Blog2013 (4) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue is dismissed. - Decided against the revenue. - ITA No. 4846/Mum/2010 - - - Dated:- 31-1-2012 - SHRI B. RAMAKOTAIAH AND SHRI V. DURGA RAO, JJ. Appellant by : Mr. Parthasarathi Naik Respondent by : Mr. Vijay Mehta ORDER PER V. DURGA RAO, J.M.: This appeal filed by the Revenue is directed against the order of CIT(A)-26, Mumbai, passed on 26/03/2010 for the assessment year 2006-07 wherein the revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing aggregate relief of Rs. 33,01,708/- out of the disallowances made under various heads, as under:- a. relief of Rs. 24,32,307/- out of the total disallowance of Rs. 32,95,669/- on account of cash expenses included in handling freight charges (the correct quantum of disallowance is Rs. 27,02,563/- and not Rs. 32,95,669/-.) b. relief of Rs. 2,41,657/-(which includes general expenses of Rs. 33,992/-, expenses of Rs. 7,665/- and travelling conveyance expenses of Rs. 2,00,000/-) out of the disallowance of Rs. 3,33,505/- made out of expenses claimed under other heads. c. relief of Rs. 4,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 11,89,28,148/- as handling freight charges and it incurred an expense of Rs. 10,69,77,274/- for earning the same. Out of the total expenses paid as handling freight, an amount of Rs. 27,02,563/- was paid in cash,. He pointed out that the said amount of Rs. 27,02,563/- was erroneously mentioned as Rs. 32,95,669/-. The assessee explained that the nature of work involved for handling and freight expenses for which the cash paid is mainly on account for loading and unloading charges, labeling charges, transportation charges, hamali charges, stuffing charges etc. for which the employees of the assessee could not play any role because they were not suitable to do the above job. It was argued that the assessee had to pay the outside workers/transporters and labourers, therefore, the above expenses were necessity, considering the nature of services provided by the assessee as it had to ensure that its clients get their cargo on time and in a proper condition. The assessee pointed out that the assesee had gross receipts of Rs. 11,89,28,148/- and had incurred an expense of Rs. 27,02,563/- in cash in relation to the receipts in order to provide the cargo to the clients on time. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income and expenditure account but the same were adjusted against the receipts and shown as net receipts. He contended that the assessee has not explained the purpose for which the expenses have been claimed nor is explained the nature of work or genuineness of expenditure. 6. On the other hand, the learned counsel for the assessee strongly placed reliance on the order of CIT(A) and submitted that the assessee had established the purpose for which the expenses have been incurred, nature of work carried out and genuineness of the expenditure claimed. He, therefore, submitted that the CIT(A) after considering the facts of the case restricted the disallowance to 10%, and the order of the CIT(A) may be upheld. 7. We have considered the rival submissions, perused the record and gone through the orders of the authorities below. The CIT(A) gave a finding that the AO on one hand in remand report admitted that the vouchers bear the credentials to support the cause of expenses and on the other hand he has recommended that to meet the possibility of inflation in expenses certain percentage of expenses needs to be disallowed. The CIT(A) further observed that the AO has not given any bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by upheld dismissing this ground of appeal of the revenue. 11. As regards the ground against relief of Rs. 4,80,202/- out of the disallowance of Rs. 6,00,000/- made out of business promotion expenses, it is observed that the assessee had incurred expenses of Rs. 7,94,650/- under the head of business promotion and entertainment expenses and out of this an amount of Rs. 3,59,049/- had been paid through credit card/cheques and rest of the amount of Rs. 4,35,601/- was paid in cash. As per the AO, majority of expenses had been incurred for lunch dinner to one to two persons, birthday party expenses, partners stay in hotels. The AO noted that the majority of credit card/cheque payment expenses were also not supported by vouchers. He, therefore, held that these expenses were personal expenses. Thus considering the facts, the AO allowed the expenses of Rs. 1,94,650/- towards business promotion/entertainment and balance of Rs. 6,00,000/- was disallowed as personal expenses. Aggrieved, the assessee carried the matter in appeal before the CIT(A). 12. Before the CIT(A), the assessee had explained that it had to incur expenses in the nature of lunch/dinner for the clients for meeting them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties below. The AO made the disallowance out of the expenses claimed by the assessee under the head business promotion and entertainment expenses on the ground that there is an element of personal expenses and most of the expenses were claimed without vouchers. The CIT(A) observed that on one hand the AO, in his remand report, admitted that the expenses are incurred for the purpose of the business and on the other hand he has contended that proper records are not maintained. He has recommended for estimating reasonable disallowance of expenses. We are of the view that the CIT(A) after considering the facts of the case, submissions of the assessee and remand report submitted by the AO, disallowed 15% out of the expenses, which is proper and, therefore, we do not find any infirmity in the order of the CIT(A). Accordingly, the order of the CIT(A) is confirmed on this count and dismiss the ground raised by the revenue. 16. As regards the ground against the relief of Rs. 40,009/- out of the disallowance of Rs. 50,000/- made out of courier charges, it is seen that the AO disallowed Rs. 50,000/- under the head courier charges against the total claim of Rs. 1,44,612/- on the ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 50,000/-, which is excessive considering the want of supporting evidences for expenses of Rs. 76,161/- out of total expenses of Rs. 2,44,392/-. Since non availability of vouchers is there, the CIT(A) restricted the disallowance to Rs. 25,000/- against the disallowance of Rs. 50,000/- made by the AO. Aggrieved the revenue is in appeal before the Tribunal. 19. After hearing the parties, and perusing the record as well as the orders of the authorities below, the CIT(A) has rightly restricted the disallowance to 25,000/- against the disallowance of Rs. 50,000/- made by the AO on the fact of non-availability of vouchers. Therefore, we do not find any ground to disturb the order of the CIT(A) and the same is confirmed. Accordingly, this ground of revenue is dismissed. 20. As regards the ground against relief of Rs. 43,910/- out of the disallowance made out of festival expenses, it is observed that the AO disallowed the festival expenses of Rs. 43,910/- on the ground that in absence of vouchers such expenses were not allowable. Before the CIT(A), the assessee contended that this expense was genuine-one and was incurred towards purchase of Christmas tree, chocolates and gifts during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, there cannot be any doubt in respect of expenditure for which cheque has been issued by the assessee. Finally, the CIT(A) held that considering the overall background of the case, nature of expenditure and want of vouchers 10% of expenditure shown in cash can be allowed on the ground of reasonability. As such he restricted the disallowance to Rs. 2,265/- against the total disallowance of Rs. 40,088/-. Aggrieved, the revenue is in appeal before us. 23. We have heard the parties, perused the record and gone through the orders of the authorities below. The finding of the CIT(A) was that the AO has wrongly disallowed the expense for want of vouchers whereas there is an evidence on record that Rs. 40,166/- was paid by cheque and only an amount of Rs. 22,645/- was paid by cash for miscellaneous purchases and repair work. After considering the facts on record and considering the submissions of the assessee, the CIT(A) restricted the disallowance to Rs. 2,265/- against the disallowance of Rs. 40,888/-. After considering the facts of the case, we are of the view that the action of the CIT(A) in restricting the disallowance to 2,265/ against the total disallowance of Rs. 40, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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