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TMI Blog2020 (1) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee which has attained the finality, the adoption of GP rate by the AO without any basis cannot be accepted. Hence the trading addition made by the AO is deleted. Adhoc disallowance made by the AO on account of various expenses for want of proper supporting vouchers - Travelling Expenses disallowed - HELD THAT:- AO selected 9 (nine) visits of the partner of the assessee undertaken almost monthly basis to Jammu, Delhi, Kolkata and Mumbai. The AO has also referred that some bills were related to family tours to Mata Vaisno Devi Darshan. The assessee has not specifically disputed those facts as detected by the AO from the bills. Accordingly, in the absence of the claims duly substantiated by the assessee to prove that the expenditure was incurred wholly and exclusively for the purpose of business of the assessee, the assessee has not discharged its primary onus. Accordingly, we do not find any error or illegality in the orders of the authorities below qua the disallowance of travelling expenses. Advertisement expenses - HELD THAT:- AO has taken three entries of expenditure total amounting to ₹ 9,200/- which are not supported by any bill or voucher nor incidenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Railway authorities, then the forfeiture would be an allowable business expenditure as this is the regular business activity of the assessee and the expenditure was incurred for the purpose of business of the assessee. Once the payment of the said amount is not in dispute and the forfeiture of the Earnest money by the authorities is also independently verifiable, then the claim of the assessee is an allowable business expenditure. Arbitration Fee Railways - HELD THAT:- AO has noticed that the payment was made in cash by the assessee to one Shri K.B. Mody, but since the assessee has not produced the bill, the AO has disallowed the said expenditure as non business expenditure. Once the assessee has claimed that this expenditure is towards arbitration fee and the dispute was between the assessee and railways regarding the business work of the assessee then the said expenditure is an allowable claim. Accordingly the disallowance made by the AO is deleted. Telephone expenses - HELD THAT:- AO has pointed out specific facts regarding certain telephones which were installed at the residence of the partners and some others were not related to the assessee firm. These facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance is not justified. The same is deleted. Disallowance on account of Workmen and staff welfare expenses - HELD THAT:- AO has made an adhoc disallowance of 10% of Workmen and Staff welfare expenses on the ground of self made vouchers. Since the AO has made adhoc disallowance based on suspicion of correctness and genuineness of the claim without pointing out a specific incident of bogus claim, accordingly in view of our finding in Ground No. 2 regarding disallowance of Conveyance expenses, adhoc disallowance made by the AO is not sustainable. The same is deleted. Disallowances on account of general expenses, welcome expenses and Worship expenses - HELD THAT:- AO has made an adhoc disallowance without pointing out a specific expense either found bogus or not incurred for the purpose of business of the assessee. Therefore, such an approach of the AO making disallowances without giving specific finding cannot be accepted. - ITA Nos. 856, 857 & 858/JP/2019 - - - Dated:- 31-12-2019 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri D. Kumar (Advocate) For the Revenue : Shri K.C. Gupta (JCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO by making disallowance of ₹ 3200/- out of Jeep Hire charges by holding that these expenses were non supported by bills vide his order dated 06/03/2019 arbitrarily. (Ground number 6 of ground of appeal filed before CIT(A)) 7. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO by making disallowance of ₹ 9560/- out of sales tax penalty vide his order dated 06/03/2019 arbitrarily. (Ground number 7 of ground of appeal filed before CIT(A)) 8. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO by making disallowance of ₹ 18750/- on account of EMD forfeited/written off vide his order dated 06/03/2019 arbitrarily. (Ground number 8 of ground of appeal filed before CIT(A)) 9. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional ground. The assessee has raised the issue of validity of rejection of books of account by invoking the provisions of section 145(3) of the IT Act. We find that the assessee has challenged the rejection of books of account before the ld. CIT (A) and the ld. CIT (A) has decided this issue against the assessee. Therefore, this is not a fresh plea raised by the assessee before the Tribunal but this is an issue arising from the impugned order of the ld. CIT (A). Hence in the facts and circumstances of the case when the issue raised in the additional ground is arising from the impugned orders of the authorities below, the same is admitted for adjudication. On merits of the additional ground : 3. On merits of the additional ground, the ld. A/R of the assessee has submitted that the assessee is carrying on business of Railway Contractor and maintains regular books of account duly supported by purchases, sales and expenses vouchers. The books of accounts are audited. The assessee is also maintaining quantitative tally and details of opening stocks, closing stocks and other details. The AO has raised various objections for rejecting the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the various defects in the books of account and particularly the claim of direct expenses claimed by the assessee. The assessee has not given a satisfactory reply to these objections raised by the AO. Accordingly, the true and correct profit cannot be deduced from the books of the assessee. He has relied upon the orders of the authorities below. 5. We have considered the rival submissions as well as the relevant material on record. The assessee is engaged in the railway contract work and filed its return of income on 28.09.2010 declaring total income of ₹ 1,75,49,603/-. During the scrutiny assessment, the AO asked the assessee to furnish the books of account as well as other details and supporting evidences. From perusal of the books of account and other details filed by the assessee, the AO noticed various defects which are enlisted in para 3 of the assessment order as under :- i) When reconciling the TDS receipts, a TDS of ₹ 39,535 (gross receipts 17,44,660) has not been related to the year under consideration. It was related to previous year, i.e. AY 2009-10. ii) On perusal of direct expenses, it is found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es right from various purchases, consumable items, mess, rail loading, unloading, cutting expenses, transportation expenses. Therefore, when there is gross failure on the part of the assessee to produce the supporting evidence and it is not an isolated instance but it appears to be the claim on wholesale basis without supporting with proper vouchers, then the explanation furnished by the assessee that the assessee is executing the work at remote sites cannot be accepted. As regards the site-wise consumption register, the AO has expressed his inability to verify the correctness of the closing stock including work-in-progress due to non-availability of Site-wise Consumption Register. Even the assessee is not disputing this fact that it is not maintaining the site-wise consumption register and the closing stock including the work-in-progress is determined only on physical verification. Therefore, in the absence of the proper record of the consumption of material, the correctness of the closing stock of the assessee could not be verified by the AO. We further note that the AO has raised a specific objection regarding TDS receipts not relating to the year under consideration but relates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92,70,173 89,37,103 Net Profit before interest and remuneration to partners. 55,15,568 51,64,667 41,17,011 GP Ratio 11.99% 10.79% 11.06% For the assessment year 2008-09 the assessee declared GP at 11.99%, for the assessment year 09-10 the assessee declared GP at 10.79%. However, there was an addition made by the AO and after the addition sustained by the ld. CIT (A), the GP for the assessment year 2009-10 comes to 11.02%. Therefore, even if taking the average of preceding two years which comes to 11.05%, the GP declared by the assessee at 11.06% cannot be said to be at the lower side or any significant decline in GP. Accordingly in the facts and circumstances of the case, when the assessee has declared the GP in line with the past history of the assessee which has attained the finality, the adoption of GP rate by the AO without any basis cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ledger account of the firm, it has been noticed that Shri Shailendra Gupta had performed almost monthly journey to Jammu, Delhi, Kolkata, Mumbai Central for personal purpose. On this journey following date wise expenses were debited :- a) 01.05.2009 ₹ 45,393 b) 01.10.2009 ₹ 42,356 c) 25.09.2009 ₹ 8,400 d) 03.09.2009 ₹ 24,714 e) 28.08.2009 ₹ 12,000 f) 06.08.2009 ₹ 8,561 g) 28.10.2009 ₹ 9,534 h) 21.12.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee firm has debited ₹ 35,365/- as advertisement expenses. While examining the ledger account of the firm, it has been noticed that following expenses were debited only. But, neither supported by bills and vouchers nor incidental to the business. Date Amount 18.08.2009 ₹ 5,000 28.08.2009 ₹ 2,100 14.11.2009 ₹ 2,100 ₹ 9,200 Therefore, above total expenditure of ₹ 9,200/- is disallowed and added to total income of the assessee. The AO has taken three entries of expenditure total amounting to ₹ 9,200/- which are not supported by any bill or voucher nor incidental to business. Although the assessee has objected to the disallowance made by the AO, however, the assessee has not furnished any supporting documentary evidence in respect of this expenditure of ₹ 9,200/-. Thus in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on factory building. Therefore, ₹ 3,716/- is added to the income of the assessee. The facts pointed out by the AO that the Chowkidar quarter is in the factory premises itself on which the assessee has claimed depreciation which was allowed. Therefore, a separate depreciation on the part of the factory building cannot be allowed. In the absence of any contrary facts brought before us, we do not find any error or illegality in the orders of the authorities below. 20. Jeep Hire charges : We have heard the ld. A/R as well as the ld. D/R. The AO has made a disallowance of ₹ 3200/- as under :- Assessee firm has debited ₹ 3,200/- on account of jeep hire charges. While examining the ledger account of the firm, it has been noticed that assessee debited ₹ 3,200/-, but did not supported by bills and vouchers. Further, payment has been made in cash. Therefore, manipulation cannot be ruled out and hence, ₹ 3,200/- is added to the total income of the assessee. The assessee claimed Jeep hire charges of ₹ 3,200/- but the AO found that no supporting bill or v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e details. The A.R. only stated that the assessee made a tender of FA CAO, Church Gate and since, the tender is liable to forfeited as per the terms condition. The A.R could not submit the documents. In absence of the same, it is disallowed and added to the total income. 24. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. The assessee has explained that the assessee made a tender with FA CAO Mumbai, however, it was forfeited as per the terms and conditions and consequently the assessee had to forego the Earnest money deposited. The said amount was written off by the assessee in the books and claimed as business expenditure. The AO has disallowed the claim for want of documents. However, if the amount deposited by the assessee in respect of the tender and the earnest money was finally forfeited by the Railway authorities, then the forfeiture would be an allowable business expenditure as this is the regular business activity of the assessee and the expenditure was incurred for the purpose of business of the assessee. Once the payment of the said amount is not in dispute and the forfeiture of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Shree Shivam Enterprise ₹ 1,166/- 0744-3299171 Shailendra Gupta ₹ 2,200/- Mobile set ₹ 7,100/- Capital Expenses ₹ 15,615/- The aforesaid non business bills were brought to the notice of the A.R. But the A.R did not explain properly. As the aforesaid bills are not related with the business, it is disallowed and added to the total income. But, bill of mobile set is capital in nature. Therefore, depreciation @ 15% of ₹ 7,100/- i.e. ₹ 1065/- is allowed. 28. The AO found that the various telephones for which the assessee has claimed the expenses are at the residence of the partners and some of the telephones are not belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Vehicle Hiring expenses arbitrarily. (Ground number 3 of ground of appeal filed before CIT(A)) 4. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of ₹ 57331/- out of travelling expenses arbitrarily. (Ground number 4 of ground of appeal filed before CIT(A)) 5. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of ₹ 8285/- out of workmen and staff welfare expenses arbitrarily. (Ground number 5 of ground of appeal filed before CIT(A). 6. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of ₹ 43721/- out of telephone and mobile expenses arbitrarily. (Ground number 6 of ground of appeal filed before CIT(A)) 7. That the appellant craves to add, delete, alter and amend or modify any of the grounds of appeal either before or at the time of hearing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of simple Sales-tax payment. Accordingly, the AO is directed to verify the fact from the record whether the said amount of ₹ 2,52,066/- is arising from separate penalty order passed by the Sales Tax Authorities or it is only a demand under the Sales Tax assessment order. Accordingly, in view of our finding on this issue for the assessment year 2010-11, this issue is set aside to the record of the AO. Ground No. 2 is regarding disallowance of Conveyance expenses. 38. The AO has made the adhoc disallowance of 10% amounting to ₹ 23,900/- in para 2 as under :- The assessee has claimed conveyance expenses of ₹ 2,39,472/-. On perusal of vouchers maintained by the assessee under this head, it is noticed that entire expenditure has been incurred in cash and mostly vouchers are self made which are not having reliability and genuineness/business expediency of said expenses. The assessee firm has maintained two cars which are kept by the partners of the firm and entire expenditure has been claimed under this head by the firm. The partners have not maintained another cars for their personal use as well as their family m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adhoc disallowance made by the AO is not justified, the same is deleted. Ground No. 3 is regarding adhoc disallowance of vehicle hiring expenses. 42. The AO has made the disallowance of vehicle expenses in para 3 as under :- The assessee firm has claimed hire charges ₹ 4,20,000/- towards a jeep and car. On perusal of details filed by the assessee firm, it has noticed that these vehicles have been provided by the HUF of a partner of this firm namely Shri Madan Mohan Gupta and made an agreement with firm for hiring of motor vehicles. This agreement is neither notarized nor registered. The assessee was asked to file justification for hiring of vehicles and in turn during the course of hearing assessee filed written reply trying to justify the vehicle rent payment but it is not found fully satisfactory and 10% of it i.e. ₹ 42,000/- is disallowed and added to total income of assessee treating it on hire side. 43. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. The AO has made adhoc disallowance @ 10% of the expenses on the ground that the vehicles have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l on record. An identical issue has been considered by us for the assessment year 2010-11. Accordingly, in view of our finding on this issue, the same is confirmed. Ground No. 5 is regarding disallowance on account of Workmen and staff welfare expenses. 46. The AO has made the disallowance @ 10% of the expenses in para 5 as under :- During the year the assessee has claimed expenses of ₹ 82,852/- under this head but no specific details regarding business expediency by assessee have been provided. It has stated that very small payment were made on account of tea, coffee, milk, edibles etc. and all these payments were necessary and incidental to the business of assessee. Further, all the expenses have been incurred in cash and vouchers maintained by assessee are self made, which cannot be stated reliable/genuine. Being the business expediency/genuineness of these expenses is not verifiable, an amount of ₹ 8,285/- which comes to 10% of these expenses are hereby disallowed and added to total income of assessee. 47. We have heard the ld. A/R as well as the ld. D/R and considered the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 40615/- out of Conveyance expenses arbitrarily. (Ground number 2 of ground of appeal filed before CIT(A)) 3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of ₹ 28392/- out of festival celebration expenses arbitrarily. (Ground number 3 of ground of appeal filed before CIT(A)) 4. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of ₹ 1,44,431/- out of travelling expenses arbitrarily. (Ground number 4 of ground of appeal filed before CIT(A)) 5. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota erred in confirming the action of the AO in making disallowance of ₹ 32775/- out of workmen and staff welfare expenses arbitrarily. (Ground number 5 of ground of appeal filed before CIT(A)) 6. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) Kota er ..... X X X X Extracts X X X X X X X X Extracts X X X X
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