Income Tax Appellate Tribunal - Jodhpur
Sunita Mine Chem Ind. vs Income Tax Officer on 18 December, 2007
Equivalent citations: (2008)114TTJ(JODH)98
ORDER
Hari Om Maratha, J.M.
1. This appeal by the assessee for asst. yr. 2002-03 is directed against the order of the CIT(A) dt. 2nd July, 2007 raises the following grounds of appeal:
1. In the facts and circumstances of the case and in view of the submission, material and evidence on record, the learned CFT(A) has grossly erred in law and in facts in maintaining the assessee income of the assessee appellant at Rs. 4,31,510 as against Rs. 2,78,470 disclosed by him in the return of income and thereby erred in dismissing the appeal of the assessee.
2. In the facts and circumstances of the case, and without prejudice to the generality of the forgoing ground of appeal No. 1 the learned CIT(A) has erred in law and in facts in maintaining the disallowance of Rs. 70,000 made by the learned AO out of generator running expenses.
3. In the facts and circumstances of the case, and without prejudice to the generality of the forgoing ground of appeal No. 1 the learned CIT(A) has erred in law and in facts in maintaining the disallowance of Rs. 1,77,172 made by the learned AO out of travelling expenses.
4. In the facts and circumstances of the case, and without prejudice to the generality of the forgoing ground of appeal No. 1 the learned CIT(A) has erred in law and in facts in maintaining the disallowance of Rs. 1,68,379 made by the learned AO out of telephone and mobile phone expenses.
5. In the facts and circumstances of the case, and without prejudice to the generality of the forgoing ground of appeal No. 1 the learned CIT(A) has erred in law and in facts in maintaining the disallowance of Rs. 44,638 made by the learned AO out of vehicle maintenance expenses.
6. In the facts and circumstances of the case, and without prejudice to the generality of the forgoing ground of appeal No. 1 the learned CIT(A) has erred in law and in facts in maintaining the disallowance of Rs. 5,252 made by the learned AO out of general expenses.
2. Ground No. (1) is general in nature and the same does not require any adjudication.
3. The facts of ground No. (2) are that the assessee filed its return of income on 7th Oct., 2002 declaring income of Rs. 2,78,470 from his business of manufacturing and trading of guwar gum, tamarind seeds and other herbal products. The assessee has declared GP rate of 11.65 per cent on total turnover of Rs. 18.18 crores as against GP rate of 12.63 per cent on turnover of Rs. 20.65 crores in the preceding asst. yr. i.e., asst. yr. 2001-02. The assessee has claimed generator running expenses at Rs. 46,32,581 as against Rs. 32,93,803 claimed in the immediately preceding assessment year. The AO found that the turnover has decreased but the generator running expenses have been increased. Keeping in view, these facts and these expenses were not fully vouched or partly vouched or supported by internal vouchers. The AO made a lump sum disallowance of Rs. 70,000 to cover up the element of unverifiable nature. The learned CIT(A) also confirmed this addition.
4. I have heard rival submissions and have perused the available materials on record, carefully.
5. It has been submitted by learned Authorised Representative Shri N.R. Mertia that it had processed 37.71 lakh kgs. of seeds as compared to 36.39 lakh kgs. seeds in the preceding asst. yr. 2001 02. This fact is also supported by the documents placed at page Nos. 8 and 10 of assessee's PB. The learned CIT(A) has given the reasoning that the turnover in this year has decreased in terms of money. But in our considered opinion, this is not a valid reasoning. The consumption of power may be obtained through the generator by the assessee or as pointed out from the supply of power by the State Government, which is directly, related to the quantity of seeds processed by the assessee. Admittedly and obviously the assessee has processed 37.71 lakh kgs. of seeds in this year as compared to the 36.39 lakh kgs. seeds in the preceding year. Therefore, consumption of electricity is definitely required more than the last year. The assessee keeps the generator set on stand by and it is not possible to prove on record that electrical supply was erratic during relevant year. I do not agree with learned CIT(A) that there cannot be any co-relation of generator expenses with the quantity of seeds processed. Rather, these are directly related to each other. The other important factor which has been pointed out by the learned Authorised Representative is that liability of Rs. 6,00,000 which included the generator running expenses was paid during relevant year and this was not the ease in the earlier year. The learned CIT(A) has considered this fact but still he had maintained the lump sum addition of Rs. 70,000. It is an admitted fact that the books of accounts of the assessee were not rejected and the production is more in this year. The small amounts of diesel expenses were not verifiable. The lump sum addition of Rs. 70,000 is not based on any logic. Therefore, legally it is not possible to sustain this addition as the two years are not comparable and the reasoning of the assessee are plausible. Therefore, this addition is hereby ordered to be deleted. As a result, this ground of appeal is allowed.
6. The facts of ground No. (3) are that the assessee has claimed traveling expenses of Rs. 8.85 lakhs as against Rs. 4.74 lakhs in the immediately preceding assessment year. The AO has disallowed 1/5th of such expenses amounting to Rs. 1,77,172 on account of personal user of these; expenses. In the first appeal the learned CIT(A) has sustained this addition on the, basis of the facts of the immediately preceding assessment year.
7. I have heard the rival submissions and have perused the evidence on record.
8. It is found that most of the business of the assessee is related to export. The assessee has claimed traveling expenses at Rs. 8.85 lakhs in this year as against Rs. 4.74 lakhs in the immediately preceding assessment year. The disallowance was made on the reasoning that element of personal user of these expenses cannot be ruled out. The learned CIT(A) has observed that the assessee has failed to prove that these expenses were incurred wholly and exclusively for the business purposes only for confirming the impugned disallowance. After considering the entire factual matrix, I am of the opinion that the rationale of impugned disallowance is not logical. By comparing the expenses of one year with the other year is not a valid basis at least for making disallowances of travelling expenses unless these expenses are found to be unexplained or unvouched. The assessee has claimed that these were spent wholly and exclusively towards his business of export. There is no iota of evidence on record which can point out that any part of these expenses was incurred except than for business purposes. In these circumstances, in my considered opinion it is not justifiable to make ad hoc disallowance on the pretext that personal user must have been involved therein. In this regard, Tribunal order of Jodhpur Bench rendered in the case of Ganesh Foundry v. Asstt. CIT (2003) 78 TTJ (Jd) 736 is relevant, a copy of this order has been filed by learned Authorised Representative. It has been held therein that when a disallowance is made with put pointing out an item of disallowable nature it could not be sustained. The facts of this ground are exactly similar to the case of Ganesh Foundry (supra) relied by learned Authorised Representative Therefore, by respectfully following the above decision, I delete the entire addition made in this account and allow ground No. (3) of the appeal of the assessee.
9. The facts of ground No. (4) are that the telephone expenses of Rs. 6,18,706 and mobile phone expenses of Rs. 2,21,734 were claimed by the assessee during this year. On account of personal element involved the AO has disallowed @ 20 per cent was added in the total income of the assessee. This addition was confirmed by the learned CIT(A).
10. After hearing both sides, I am of the considered opinion that the element of personal user in telephone expenses cannot be ruled out but keeping in view the entire facts of this case, I find that the impugned disallowance is on higher side. Instead of 20 per cent disallowance, I restricted the same to 10 per cent and reduce this addition to just half. Therefore, ground No. (4) is partly allowed.
11. Ground No. (5) relates to disallowance out of vehicle maintenance expenses. Disallowance of Rs. 44,638 at the rate of 1/5th of total expenses claimed in vehicle running and maintenance expenses at Rs. 2,23,190 has been disallowed. I find that this disallowance is on higher side and, therefore, I restrict the same to 1/10th and reduce the same to just half in the interest of justice and fair play. As a result, ground No. (5) is also partly allowed.
12. Ground No (6) relates to general expenses. This ground was not really pressed by the learned Authorised Representative, at the time of hearing; therefore, it is dismissed as not pressed.
In the result, the appeal of the assessee is partly allowed.