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TMI Blog2017 (3) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... been found to be incorrect by the AO or CIT(A). We therefore direct that the addition sustained by CIT(A) to the extent it relates to disallowance of 10% of total expenditure of ₹ 17,07,826/- excluding the sums paid by way of penalty, be deleted. Addition under the head "Cash Destroyed by Fire" - Held that:- As in connection with the assessee’s right to enter the warehouse after the incident of fire that the assessee has clearly set out the fact that it had kept cash collections also in the godown that suffered fire accident though the writ petition had been filed by the assessee in the month of July, 2010. In the given circumstances the best evidence that the AO could have obtained regarding the correctness of the claim of the assessee for destruction of cash in fire would have been to make enquiries from the persons from whom the assessee claimed to have received cash. Admittedly the AO did not take recourse to such an action but merely rejected the explanation offered by the assessee. This approach of the AO in our view was not proper. The entry relating to the loss of cash having been made in the books of account of the assessee only on 31.03.2010, in our view, is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that out of the vouchers produced evidencing expenditure of ₹ 75,000/-, ₹ 32,180/- was liable to be allowed for the reasons given in the chart given above. According to the AO, the remaining expenditure under this head would also be of the same pattern as the expenditure whose vouchers were verified on a test check basis. According to the AO therefore the same ratio of disallowance of expenses as were made on expenditure verified on test check basis should be made. Applying the same ratio, the disallowance out of the distribution charges of ₹ 17,07,826/- would be ₹ 7,32,771/-. The AO issued a show cause notice proposing to disallow a sum of ₹ 7,32,771/-. 5. The assessee in reply to the aforesaid show cause notice submitted that the payment of ₹ 3,000/- is against 26 slips of ₹ 100/- each (plus incidental expenses of ₹ 400/- ) issued by the Govt. of West Bengal MTV Cell Department for the alleged minor traffic violations in respect of the delivery vans of the assessee. The Assessee submitted that these payments were not against any proved violation/infraction of law but were merely a payment in settlement of a contemplated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the carriage of goods to the outside vehicles taken on hire when Assessee s own vehicles were not sufficient due to pressure of work. The Vehicles were summoned from the road side parking in such emergent situations. The vehicles in question operate in the unorganized sector and do not have any office address. It was pointed out that the vehicle number are duly mentioned in the vouchers and the recipient of hire charges has also duly signed the voucher at the back. It was submitted it would be impossible for the Assessee to keep the name and address proof of each and every person with whom Business transaction is being made. Business Practice is to be considered before questioning any business expense. So, all the three Vouchers as mentioned above are for the business purpose and genuine in nature. In the circumstances, no disallowance is called for. 7. The AO however did not deal with the above objections specifically and he disallowed a sum of ₹ 7,32,771/- observing as follows: The submission of the assessee has been considered carefully. In respect of payment to Govt: is it seen that the payment was in the nature of Penalty and therefore, it is not allowable. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isplaying a device, word or figure and having a red ground or border) placed or erected for the purpose of regulating motor vehicle traffic under sub-section (1) of section 116. Section 177 in The Motor Vehicles Act, 1988 177. General provision for punishment of offences.-Whoever contravenes any provision of this Act or of any rule, regulation or notification made thereunder shall, if no penalty is provided for the offence be punishable for the first offence with fine which may extend to one hundred rupees, and for any second or subsequent offence with fine which may extend to three hundred rupees. Section 122 in The Motor Vehicles Act, 1988 122. Leaving vehicle in dangerous position.-No person in charge of a motor vehicle shall cause or allow the vehicle or any trailer to be abandoned or to remain at rest on any public place in such a position or in such a condition or in such circumstances as to cause or likely to cause danger, obstruction or undue inconvenience to other users of the public place or to the passengers. Section 129 in The Motor Vehicles Act, 1988 129. Wearing of protective headgear.-Every person driving or riding (otherwise than in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibited by law and which are not compensatory in nature cannot be allowed as a deduction u/s.37(1) read with Explanation thereto. Perusal of the various statutory provisions of the MV Act under which the payment in question were made were for offences committed by the employees of the Assessee for which the Assessee was vicariously liable. These payments were not compensatory in nature. Therefore these sums cannot be allowed as a deduction. We uphold the order of the CIT(A) to this extent. 12. As far as the disallowance of the remaining sum sustained by the CIT(A), the disallowance sustained by CIT(A) deserves to be deleted. Admittedly the sample vouchers in which the AO found defects had registered vehicle numbers that were hired by the assessee for carriage of goods. This provided enough information for the AO to make further enquiries. In the circumstances under which the carriage was hired by the assesee it is not possible to insist on all details being given in the voucher. The explanation of the assessee has not been found to be incorrect by the AO or CIT(A). We therefore direct that the addition sustained by CIT(A) to the extent it relates to disallowance of 10% of total e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash on account of fire, all the relevant pages of Cash Book and that entry in Cash Book dt. 15.2.10 wherein the entry reflects that the Assessee collected cash against dues from customer, as detailed below: Customer of Amount (Rs) i) Reckitt Benckiser Product 1,72,413.00 ii) Glaxo Smithline Product 3,44,662.00 5,17,093.00 The Assessee also brought to the notice of the AO that it had filed a writ petition in the High Court of Calcutta on 27.07.2010 praying for direction to the landlord and the Police and Fire Department to permit the Assessee and or their agents, authorised men entry into the tenanted warehouse premises. The Assessee highlighted the fact that in the said writ petition, it was clearly mentioned that three companies of the group viz., Aparna Agency Ltd., Aparna Distributors (P) Ltd. and Sales Services were transacting business from the said premises and there was loss of stocks and market credit bill was to the tune of ₹ 5 crores and cash rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e observation /finding of the AO in the assessment order and the other materials brought on record. I do not find any merit in the argument put forth by the appellant. It is noted that in the documentary evidences filed by the appellant, no where it was mentioned that cash was destroyed by fire in the case of the appellant. I also find force in the contention of the AO. that if the cash was destroyed by fire on 13.02.2010, then the entry passed on 31.03.2010 on account of such loss did not reflect the correct position of cash. Further, it is not the case of the appellant that a separate cash book was maintained in respect of the said premises. Therefore, it is seen that the appellant has failed to prove by sufficient documentary evidences the loss claimed in respect of fire. In the light of the above discussion and observation, I hold that the action of the A.O. in making the disallowance of ₹ 5,17,093.09 was correct and thus the disallowance so made is upheld. Hence, this ground of appeal of the appellant is dismissed. 18. Aggrieved by the order of CIT(A) the assessee has raised ground no.2 before the Tribunal. We have heard the submissions of the ld. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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