Income Tax Appellate Tribunal - Ahmedabad
Sewasons Enterprise Ltd., Ahmedabad vs Department Of Income Tax on 17 September, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD
"D" BENCH
Before: Shri D.K. Tyagi, Judicial Member and
Shri T.R. Meena, Accountant Member
I.T.A. No.3202/Ahd/2011
A.Y. 2007-08
M/s Sewasons Enterprises Ltd. Vs. The I.T.O.,
Plot No.356, Ward-8(1),
Gokul Park, Ward 12-B, Ahmed abad
Tagore Road, Gandhidham
PAN-AADCS0042C
(Appellant) (Respondent)
with
I.T.A. No.2675/Ahd/2011
A.Y. 2007-08
The I.T.O., Vs. M/s Sewasons Enterprises Ltd.
Ward-8(1), Plot No.356,
Ahmed ab ad Gokul Park, Ward 12-B,
Tagore Road , Gandhidham
PAN-AADCS0042C
(Appellant) (Respondent)
Department by : Smt. R. Ilavansi, Sr. D.R.
Assessee by : Shri Tushar Hemani, A.R.
Date of hearing : 17.09.2012
Date of p ronouncement : 26.10.2012
आदे श/ORDER
PER : D.K. TYAGI, JUDICIAL MEMBER
These are cross appeals against the order of ld. CIT(A)-XIV, Ahmedabad dated 19.08.2011. These cross appeals are being disposed of by passing a consolidated order.
I.T.A. No.3202/Ahd/2011, A.Y. 2007-08 with 2 I.T.A. No.2675/Ahd/2011, A.Y. 2007-08
2. Ground No.1 in cross appeals relates to disallowance of Rs.25,01,932/- made by the A.O. on account of trip and diesel expenses.
3. The A.O., while making this addition, has observed as under in his assessment order:-
"As the assessee has failed to justify the reasonableness of diesel expenses as well as the fact that it failed to explain the deficiencies pointed out in respect of trip expenses, 20% of the diesel and tip expenses amounting to Rs.25,01,932/- (20% of Rs.12509666) are disallowed and added to the total income."
4. Before ld. CIT(A) the assessee made following submissions:-
"After rejecting books of accounts, the ld. AO has disallowed Rs.25,01,932/- out of total trip & diesel expenditure of Rs.1,25,09,666/-. In this connection, the Appellant submits that out of total trip & diesel expenditure of Rs.1,25,09,666/- consisted of trip expenditure of Rs.29,09,217/- and diesel expenditure of Rs.96,00,449/-. During the course of assessment proceedings, the Appellant had submitted summary sheet showing details of total trip & diesel expenditure which were supported with the evidences/vouchers. However, it was the observation of the ld. AO that that certain trip expenditure out of total trip expenditure of Rs.29,09,217/- was not supported by the vouchers, however, the ld. AO found to be satisfied with the claim of diesel expenditure of rs.96,00,449/- which is forming major portion of total trip & diesel expenditure. Based on unsupported vouchers for trip expenditure only, the ld. AO rejected books of accounts and not for the diesel expenditure. The Appellant submits that when the ld. AO has accepted the claim of the Appellant in respect of diesel expenditure, how it can be part of ad hoc disallowance of 20%. Hence, the Appellant submits tht no disallowance can be in respect of diesel expenditure as the Appellant has submitted and furnished all the evidences/vouchers in respect thereof and the ld. AO has accepted the same.
So far as ad hoc disallowance of trip expenditure is concerned, the Appellant submits like this. The ld. AO has mentioned on page no.7 of body of assessment order that the Appellant has shown trip expenditure of Rs.29,09,217/- and test check covers trip expenditure to the extent of rs.2,87,105/- only and the discrepancy of Rs.70,910/- was found in respect of trip expenditure. In this connection, the Appellant vide letter dated I.T.A. No.3202/Ahd/2011, A.Y. 2007-08 with 3 I.T.A. No.2675/Ahd/2011, A.Y. 2007-08 24/12/2009 submitted and explained to the ld. AO that the Appellant has to incur certain expenditure on the trip such as repairs and maintenance expenditure, incidental / accidental expenditure at remote places, out of pocket expenditure of drivers where supporting thereof cannot be obtained, however, for that matter the same is accounted for in the summary sheet maintained for each trip which is verified and vouched by the accounts department of the Appellant and subsequently by the Company and Tax Auditors. It is further submitted that out of total trip expenditure, diesel expenditure accounts for 77% whereas trip expenditure accounts for 23% and the variation for unsupported expenditure accounts for 3 to 4% of total trip expenditure, which is very reasonable and plausible having regard to the nature of the business of the Appellant. Therefore, the Appellant submits that disallowance made by the ld. AO is required to be deleted.
Alternatively, it is submitted that in own case of the Appellant, the Hon'ble Rajkot Bench of Tribunal has restricted the addition to the extent of Rs.1,00,000/- as against addition of Rs.32,44,796/- made by the ld. AO in respect of unsupported similar kind of expenditure."
5. After taking into consideration these submissions of the assessee ld. CIT(A) deleted the addition made by the A.O. on account of disallowance on diesel expenses i.e. 20% of Rs.96,00,449/- which comes to Rs.19,20,085/- and sustained the remaining addition of Rs.5,81,842/- on account of trip expenses.
6. Before us Revenue is in appeal against the relief given by ld. CIT(A) of Rs.19,20,089/- deleting the addition made by the A.O. on diesel expenses while assessee is in appeal against confirming the disallowance of Rs.5,81,843/- made by the A.O. on account of trip expenses.
7. After hearing both the parties and perusing the record we find that the A.O. has disallowed 20% of the diesel expenses claimed by the assessee on the ground that though assessee received discount on diesel purchase but has I.T.A. No.3202/Ahd/2011, A.Y. 2007-08 with 4 I.T.A. No.2675/Ahd/2011, A.Y. 2007-08 claimed expenses for the full value of the amount without taking into consideration the amount of discount received by him. Ld. CIT(A) has given relief to the assessee as during the appellate proceedings he found the findings of the A.O. that assessee received discount on disel purchase as factually incorrect. We have also gone through the vouchers of diesel expenses and found that there is no mention of any discount being given to the assessee. Ld. D.R. also failed to point out any such discount being given to the assessee. Therefore, we are not inclined to interfere with the order passed by ld. CIT(A) giving relief of Rs.19,20,089/- to the assessee on this account.
8. As far as the trip expenses are concerned, the A.O. has made this disallowance when he found that certain percentage of the miscellaneous trip expenses were not vouched and ld. CIT(A) has confirmed this disallowance disregarding the Hon'ble Tribunal's order in assessee's own case in respect of earlier year wherein on similar facts the addition of Rs.32,44,796/- was restricted to Rs.1,00,000/- only. Ld. CIT(A) has observed that the order of the Tribunal in earlier year is not applicable since the A.O. has made disallowance on the basis of sample verification in that year whereas in the concerned year the disallowance is based on factual findings. This observation of ld. CIT(A) is factually incorrect as we find that during the year under appeal also the A.O. has made disallowance on the basis of sample verification only which is evident from page 12 of his own order wherein ld. CIT(A) has mentioned "A.O. has disallowed 20% out of diesel and trip expenses and Rs.1,25,09,666/-. He made sample verification of the trip and I.T.A. No.3202/Ahd/2011, A.Y. 2007-08 with 5 I.T.A. No.2675/Ahd/2011, A.Y. 2007-08 diesel expenses voucher and noticed certain discrepancies". At page 13 ld. CIT(A) further observed as under:-
"Regarding the trip expenses, the disallowance made by the A.O. is on the right footing. He made sample verification and on the basis of that verification, he found that certain percentage of the miscellaneous trip expenses were un-vouched and on that basis he made the disallowance."
Since the facts of this year are similar to that of earlier year, ld. CIT(A) is not justified in not following the order of the Tribunal. Following the earlier order we restrict this disallowance to Rs.1,00,000/-. We hold accordingly. This ground taken by the Revenue is dismissed while that of the assessee is partly allowed.
9. Ground Nos.2, 3 and 4 in assessee's appeal are general and therefore do not require any adjudication on our part.
10. Ground No.2 in Revenue's appeal relate to disallowance of Rs.5,18,263/- on account of repairs and maintenance expenses.
11. The A.O., while making this disallowance has observed as under:-
"As the assessee has failed to prove the reasonableness of diesel expenses incurred on account of repair and maintenance expenses of Rs.25,91,318/- which has been paid to its sisters concern - Agrawal Riders Pvt. Ltd., therefore, a sum of Rs.5,18,263/- being 20% of the expenses is also added to the total income."
12. Before ld. CIT(A) assessee relied on the following written submissions:-
"After rejecting books of accounts, the ld. AO has disallowed Rs.25,01,932/- out of total trip & diesel expenditure of Rs.1,25,09,666/-. In this connection, the Appellant submits that out of total trip & diesel expenditure of Rs.1,25,09,666/- consisted of trip expenditure of Rs.29,09,217/- and diesel expenditure of I.T.A. No.3202/Ahd/2011, A.Y. 2007-08 with 6 I.T.A. No.2675/Ahd/2011, A.Y. 2007-08 Rs.96,00,449/-. During the course of assessment proceedings, the Appellant had submitted summary sheet showing details of total trip & diesel expenditure which were supported with the evidences/vouchers. However, it was the observation of the ld. AO that that certain trip expenditure out of total trip expenditure of Rs.29,09,217/- was not supported by the vouchers, however, the ld. AO found to be satisfied with the claim of diesel expenditure of Rs.96,00,449/- which is forming major portion of total trip & diesel expenditure. Based on unsupported vouchers for trip expenditure only, the ld. AO rejected books of accounts and not for the diesel expenditure. The Appellant submits that when the ld. AO has accepted the claim of the Appellant in respect of diesel expenditure, how it can be part of ad hoc disallowance of 20%. Hence, the Appellant submits that no disallowance can be in respect of diesel expenditure as the Appellant has submitted and furnished all the evidences/vouchers in respect thereof and the ld. AO has accepted the same.
So far as ad hoc disallowance of trip expenditure is concerned, the Appellant submits like this. The ld. AO has mentioned on page no.7 of body of assessment order that the Appellant has shown trip expenditure of rs.29,09,217/- and test check covers trip expenditure to the extent of Rs.2,87,105/- only and the discrepancy of Rs.70,910/- was found in respect of trip expenditure. In this connection, the Appellant vide letter dated 24/12/2009 submitted and explained to the ld. AO that the Appellant has to incur certain expenditure on the trip such as repairs and maintenance expenditure, incidental / accidental expenditure at remote places, out of pocket expenditure of drivers where supporting thereof cannot be obtained, however, for that matter the same is accounted for in the summary sheet maintained for each trip which is verified and vouched by the accounts department of the Appellant and subsequently by the Company and Tax Auditors. It is further submitted that out of total trip expenditure, diesel expenditure accounts for 77% whereas trip expenditure accounts for 23% and the variation for unsupported expenditure accounts for 3 to 4% of total trip expenditure, which is very reasonable and plausible having regard to the nature of the business of the Appellant. Therefore, the Appellant submits that disallowance made by the ld. AO is required to be deleted.
Alternatively, it is submitted that in own case of the Appellant, the Hon'ble Rajkot Bench of Tribunal has restricted the addition to the extent of Rs.1,00,000/- as against addition of Rs.32,44,796/- made by the ld. AO in respect of unsupported similar kind of expenditure."
I.T.A. No.3202/Ahd/2011, A.Y. 2007-08 with 7 I.T.A. No.2675/Ahd/2011, A.Y. 2007-08 After taking into consideration the submissions of the assessee ld. CIT(A) has deleted this addition.
13. After hearing both the parties we find that the A.O. has not made the addition by holding that the assessee has failed to prove the reasonableness of the expenses incurred under the head "repair and maintenance expenses". The A.O. has not pointed out any specific point to prove that the expenses were not reasonable. Before making this addition the A.O. has not brought any material on record to suggest that the expenses incurred by the assessee were not reasonable. He has made no inquiry to arrive at the conclusion that the expenses incurred by the assessee under the head repair and maintenance were unreasonable. In the light of these facts, the addition was uncalled for only on the ground that repair and maintenance work was carried out through assessee's sisters concern. The disallowance made by the A.O., therefore, has rightly been deleted by ld. CIT(A) and therefore, the order passed by him is hereby upheld. This ground of the Revenue is dismissed.
14. In the result, assessee's appeal is partly allowed and Revenue's appeal is dismissed.
Order pronounced in open Court on 26.10.2012
Sd/- Sd/-
(T.R. Meena) (D.K. Tyagi)
Accountant Member Judicial Member
True copy
N.K. Chaudhary, Sr. P.S.
Copy of the Order forwarded to:
1. The applicant
2. The Respondent
3. The CIT Concerned
I.T.A. No.3202/Ahd/2011, A.Y. 2007-08
with 8
I.T.A. No.2675/Ahd/2011, A.Y. 2007-08
4. The Ld. CIT (Appeals)
5. The DR, Ahmedabad
6. The Guard File
By order
AR,ITAT,Ahmedabad