Income Tax Appellate Tribunal - Jaipur
Bansal Classes Pvt. Ltd., Kota vs Acit, Circle-1, Kota, Kota on 25 November, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES 'A' JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 578/JP/2019
fu/kZkj.k o"kZ@Assessment Year :2014-15
M/s Bansal Classes Pvt. Ltd., cuke ACIT,
794, Mahavir Nagar-II, Kota Vs. Circle-01, Kota
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCB8403D
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Shri B. V. Maheshwari (CA)
jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 14/11/2019
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 25/11/2019
vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Kota dated 07.02.2019 wherein the assessee has taken the following grounds of appeal:-
"1. That the ld. AO grossly erred on law & facts by disallowing out of expenses stating to be unverifiable expenses the ld. CIT(A) also erred in sustaining out of said addition Rs. 7,50,000/-.
2. That the ld. AO grossly erred on law & facts in making addition on account of Caution Money, stating to be paid in Cash. The ld. CIT(A) also erred in sustaining the addition of Rs. 1,000,00/- out of that.
3. That the ld. AO grossly erred on law & facts in making addition on account of Pending Caution Money, The ld. CIT(A) also erred in sustaining the addition of Rs. 1,00,000/-."ITA No. 578/JP/2019
M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota
2. Regarding Ground No. 1, briefly stated, the facts of the case are that during the course of assessment proceedings, the AO observed that the assessee has debited expenses in the nature student promotion expenses and miscellaneous expenses in its profit and loss account. A show cause was issued to the assessee to justify the claim of the said expenses. In response, the assessee submitted its reply however, the same was not found acceptable and as per the Assessing Officer, the expenses are not fully vouched or self vouched and are paid in cash and not subject to verification. Therefore, out of the total expenses of Rs. 1,70,30,336/-, 15% of expenditure was disallowed, which comes to Rs. 25,54,550/- and added to assessee's total income.
3. Being aggrieved, the assessee carried the matter in appeal before ld. CIT(A) and the ld. CIT(A) allowed partly relief to the assessee and disallowance was restricted to Rs. 7.5 lacs and the relevant findings of the ld. CIT(A) reads as under:-
"The student promotion expenses appear to be in the nature of advertising and sales promotion in loose connotation. The coaching Institutes being run commercially do have to go after eligible student population to maximize their feasibility. It is apparent that if these expenses were not incurred or aggressive marketing not done the revenues could have fallen further. However, proper evidences in respect of the same were necessary to justify the claim made to the fullest extent possible.
As regards travelling and miscellaneous expenses, looking to the facts involved that there were not sufficient independent evidences in support of the claim of these expenses, it is also justifiable on the part of the AO to make a reasonable disallowance out of these expenses is justified.2 ITA No. 578/JP/2019
M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota The disallowance @ flat 15% out of the total claim cannot be made unless the A.O highlights certain specific defects in individual claim of expenses and/or proves certain expenses were bogus or inflated. However to be fair to him as well when there were no evidences in support in several of the claims, all he could do is make as estimation for the non business element possible.
In fairness therefore, the disallowance is being restricted to Rs. 7,50,000/- as being reasonable disallowance on account of the discrepancies involved.
The balance disallowance of Rs. 18,04,550/- is directed to be deleted. This ground of appeal is partly allowed."
4. During the course of hearing, the ld. AR submitted that the learned A.O. has made disallowance stating to be the unverifiable expenses. It is very surprising that the expenditure incurred by the assessee from years together, that is called Student Promotion, Travelling and Miscellaneous Expenses which include so many other expenditure, how the learned A.O. can term these expenses as unverifiable expenses. In support, to justify our contention, we have submitted expenditure wise details and the legal position including decision of Udaipur Distillery (SC), Oswal Agro, Adidas India Marketing Pvt. Ltd. and requested to the learned A.O. that there is nothing to disallow unless there is any specific mistake in the expenses, but the learned A.O. has disallowed the same by stating simple words that the expenses are not fully vouched or self-vouched and are in cash. This is totally vague, it is a general remark based on surmises & conjectures even the learned A.O. has not verified the details of expenses submitted in course of assessment. All these are legitimate expenditure, have either been not disallowed in earlier years or 3 ITA No. 578/JP/2019 M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota disallowed, but allowed in appeals by the Hon'ble CIT (Appeals) or the Hon'ble ITAT. The Ld. A.O. disallowed Rs. 2554530/- @ 15% on lump sum basis without pointing out single defect, the Ld. CIT(A) considered our submission, but he repeated the A.O.'s two, three lines and restricted the disallowance on lump sum basis at Rs. 750,000.00 whereas the assessee has filed all the details of expenses, vouchers, etc. and no particular defect was noticed, even though the Ld. CIT(A) also sustained part disallowance on lump sum basis which is totally on surmises & conjectures.
5. It was further submitted that in relation to student promotion and travelling expenses, the same issue came before the Tribunal in the assessee's own case in appeal No. 296/JP/17 and ITA No. 345/JP/17 order dtd. 31.10.2017 and relevant findings read as under:-
"82 We have heard the rival contentions and pursued the material available on record. An adhoc disallowance of 15% of student welfare expenses has been disallowed by the A.O.. the Ld. CIT(A) has again followed the principle of adhocism and confirmed the disallowance of Rs. 5 Lacs out of the amount so disallowed by the A.O. both the A.O. and Ld. CIT(A) has not highlighted specific expenditure which fail the test of business expediency as laid down by the Courts from time to time. Further, no specific instances of expenditure haven been highlighted which could not be verified for want of proper supporting documentation. Merely generalization and holding tat payments have been made in Cash doesn't necessarily lead to disallowance of eligible expenditure. There is no basis for adhocism in the eyes of law. In the result, disallowance made by the A.O. is hereby deleted. The assessee's ground of appeal is allowed and revenue's ground of appeal is dismissed."4 ITA No. 578/JP/2019
M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota
85. As we have held in the context of student welfare expenses, there is no basis for adhocism in the eyes of law. In the instant case, disallowance of 10% of the travel expenses have been made by the A.O. which has been reduced to 5% by the Ld. CIT(A). our findings and directions as contained in context of student welfare expenses shall equally apply in the present case. In the result, disasllowance made by the A.O. is hereby deleted. The assessee's ground of appeal is allowed and revenue's ground of appeal is dismissed."
6. It was further submitted that regarding misc. expenses, the Ld. A.O. disallowed without looking to the nature of expenses, the Misc. expenses is the total of 21 small small head of expenses, all these are direct expense. The Ld. A.O. has alleged self-made vouchers, but this is wrong as the payments are made mostly on outside bills. The basis of disallowance is same as stated above in the case of above two heads (student Promotion & Travelling). That there is no basis except the adhocism hence as decided by Tribunal in the assesee's own case for earlier years, the addition may kindly be deleted.
7. The ld. DR is heard who has relied on the order of lower authorities.
8. We have heard the rival contentions and perused the material available on record. We find that the similar issue relating to adhoc disallowance of expenses has been dealt with by the Co-ordinate Bench in the earlier years. Therefore, following the rule of consistency and in absence of any specific defects highlighted by the AO, the ad-hoc disallowance made by the Assessing Officer is directed to be deleted. In the result, the ground of assessee's appeal is allowed.
9. Regarding Ground No. 2, briefly stated, the facts of the case are that during the course of assessment proceedings, the Assessing Officer observed 5 ITA No. 578/JP/2019 M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota that the assessee has paid the caution money in cash amounting to Rs. 15,84,000/- which is not verifiable as the same is support by self made vouchers and out of the same, to cover any leakage of revenue, a lump sum addition of Rs 2,00,000 was made which on appeal has been restricted to Rs 1 lacs by the ld. CIT(A) against which the assessee is now in appeal before us.
10. During the course of hearing, the ld. AR submitted that the learned A.O. has disallowed amount out of the payment of Caution Money based on surmises and conjectures. He has disallowed on random basis say 15% of the caution money refunded in cash. It was submitted that when any student is admitted for education in our institute, certain amount called Caution Money has been fixed to be received from him. The said amount is deposited by him and it is kept intact till he is in our institute and when he leaves the institute the said Caution Money is refunded to him. Therefore, it is not an income; it is a liability of the institute and hence the balance is shown under the head Current Liabilities. Same is the position every year and whatever the money is refunded to the students, is dealt with in a particular year and it has been handled by 4 different persons. To ensure that the Caution Money is properly refunded to the students and on the basis of their report the treatment is given in the books of accounts. This feature is in every year. There is a strong control on the amount received from the students and it has been checked by the higher management and it is ensured that the amount received as Caution Money from the students, is paid to them properly. The learned A.O. has disallowed stating that there is no proper receipt or evidence. He has also stated that it is paid in cash and all the cases cannot be verified. The Ld. A.O. have neither issued any 133(6) nor called to any student but made his mind that the receipt is fake & in place of refund the money is siphoned. In this matter we submit that we have given details of refund and a copy of the page of the register and the system what we are following in case of refund of 6 ITA No. 578/JP/2019 M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota money. No particular incidence has been noticed by the learned A.O. that the same has not been refunded to the students. He has made up his mind that due to non-legibility of signatures of the recipients, money refunded during the year, cannot be verified in entirety whereas we have submitted that we have strong procedure for refund of Caution Money. We got the signatures of the students or the parents those who take back the Caution Money and all those sheets were filed along with our reply before the learned A.O. We are sorry to state that even in such a situation how he has doubted that whether it was refunded or not? This just is a probability which has no place in Law. There is no concrete finding that the same was not refunded. Therefore any estimate of disallowance, made by him out of the total refund, is totally wrong, baseless, based on his own thinking, hence it should be deleted. We also submit that this is the procedure followed by the Company since its inception. This year the total refund is Rs. 1584000/- and its complete list is given to the Ld. A.O. and he has not found any mistake, then why he made the Lump sum addition of Rs. 2,00,000/- Thus the addition is on surmises & conjuncture which may kindly deleted.
11. It was further submitted that on this issue, the appeals of the assessee Company for the AY 2010-11 to 2013-14 have been allowed by the Tribunal vide order dated 31.10.2017 and the relevant findings of the Tribunal reads as under:
"15. The limited case of the Revenue is that caution money amounting to Rs 1,11,25,500 has been refunded in cash during the year and for which no proper receipt/evidence has been adduced by the assessee and he accordingly stated that 15% of caution money refunded amounting to Rs 16,18,825 is disallowed and added to the assessee's total income. The Revenue is thus not disputing the fact of repayment of the caution 7 ITA No. 578/JP/2019 M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota money by the assessee company to the students. Even before us, the ld DR has not disputed or brought to our notice any facts which prove that the caution money has not been refunded to the students. Where the Revenue is not disputing the fact of repayment of caution money, the question of writing off such liability or forfeiture of such caution money doesn't arise for consideration. Therefore, merely on account of the fact that some of the repayments which have been made by the assessee in cash are not verifiable, the same cannot form the basis for disallowance. During the course of hearing, the assessee has submitted that it has adequate internal controls for repayment of caution money to the students and books of accounts have been audited and no adverse finding has been given by the auditors. Further, details of repayments in terms of caution money ledger, vouchers and other details were submitted during the course of assessment proceedings which is also not disputed by the Revenue. Further, the question of disallowance comes where there is a claim of expenditure at first place which is not the case before us. In the entirety of facts and circumstances of case, we are of the considered view that there is no basis for adhoc disallowance of 15% of caution money which has been refunded to the students during the year. We accordingly set aside the findings of the AO and the ld. CIT(A) and the disallowance of caution money so refunded is deleted in entirety. In the result, ground of assessee's appeal is allowed and ground of Revenue's appeal is dismissed."
12. The ld. DR is heard who has relied on the order of the lower authorities.
13. We have heard the rival contentions and perused the material available on record. We find that the similar issue has been dealt with by the Co-ordinate Bench in the earlier years. Therefore, following the rule of consistency, adhoc 8 ITA No. 578/JP/2019 M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota disallowance made by the Assessing Officer is directed to be deleted. In the result, the ground of assessee's appeal is allowed.
14. Regarding Ground No. 3, the Assessing Officer observed that caution money for financial year 2010-11 and earlier years amounting to Rs. 3,56,500/- is not claimed by the students even after period of 3 to 4 years and therefore, this money is not be paid by the assessee and accordingly the said amount was brought to tax u/s 41(1) of the Act. On appeal, the ld. CIT(A) has restricted the disallowance to Rs. 1 lac against which the assessee is in appeal before us.
15. During the course of hearing, the ld. AR submitted that the addition made by the learned A.O. is without any basis of law and facts. The caution money is refunded in every case and for the overdue caution money, repeatedly the reminders are given for collection thereof and the amount, mentioned by the learned A.O., is refundable and it was refunded in years to come, hence there is no reason to treat the said amount as income. It was further submitted that during the year, the assessee itself has written off Rs 24,95,000 of caution money in respect of cheques not presented by the students and the same has been offered to tax. It was accordingly submitted that there is no basis for adding back additional amount of Rs 3,56,000 by the Assessing officer.
16. It was further submitted that the learned A.O. made addition by invoking Sec. 41(1) of the I.T. Act, 1961. The Sec. 41(1) is applicable if any expenditure or loss claimed in earlier years and the said trading liability is outstanding in that case, if the said amount is either not payable etc, then the said liability is treated as income. In this case, there is no such expenditure claimed in the past, therefore there is no question of invoking Sec. 41(1) of the Act.
9 ITA No. 578/JP/2019M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota
17. The ld. DR is heard who has relied on the finding of the lower authorities.
18. We have heard the rival contentions and perused the material available on record. The ld AR has submitted that in respect of cheques towards refund of caution money which have not been presented by the students, the assessee has itself written off the amount of Rs 24,95,000 and offered the same to tax and therefore, it was contended that there is no basis for making further addition of Rs 3,56,000 and that too, by invoking provisions of section 41(1) of the Act. From perusal of details of caution money refundable appearing at assessee's paperbook page 55, we find that the write off of Rs 24,95,000 is in respect of caution money cheques for the financial year 2012-13 which were issued but not presented for payment by the students. As far as caution money refundable for financial year 2010-11 and earlier years amounting to Rs 3,56,000 is concerned, apparently the cheques issued have been barred by limitation and cannot be presented for payment by the students. Following the treatment as done by the assessee for cheques issued for financial year 2012- 13, the same treatment should have been done for the cheques issued in the earlier period amounting to Rs 3,56,000. No reason has been submitted for the deviation in the accounting treatment so done by the assessee company for earlier years vis-à-vis financial year 2012-13 and infact, the same has also not been examined by the Assessing officer. Further, no doubt the provisions of section 41(1) are not attracted in the instant case, however, the provisions of section 28 may be attracted where the caution money is no more refundable and the character of said receipts would change to receipts arising in course of business and thus in nature of income taxable in the hands of the assessee. Given that these aspects have not been examined by the Assessing officer, we deem it appropriate that the matter needs to be set-aside to the file of the 10 ITA No. 578/JP/2019 M/s Bansal Classes Pvt. Ltd., Kota Vs. ACIT, Kota Assessing officer to examine the same afresh. In the result, the ground is allowed for statistical purposes.
In the result, the appeal of the assessee is disposed off in light of above directions.
Order pronounced in the open Court on 25/11/2019.
Sd/- Sd/-
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(Vijay Pal Rao) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 25/11/2019
*Ganesh Kr.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Bansal Classes Pvt. Ltd., Kota
2. izR;FkhZ@ The Respondent- ACIT, Circle-01, Kota
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No.578/JP/2019} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 11