D P LOGISTICS PVT LTD,MUMBAI V. DCIT-6(1)(1),MUMBAI, MUMBAI

ITA 2597/MUM/2025

AI Insights

D P Logistics Pvt. Ltd., engaged in customs clearance and logistics, appealed against the order of the CIT(A) which confirmed an ad-hoc disallowance of 5% on total expenses amounting to Rs. 2.02 crore for AY 2013-14. The disallowance was initially made by the assessing officer due to the expenses being incurred in cash and supported by self-made vouchers. The CIT(A) upheld this decision, citing lack of corroborative documentary evidence. The Tribunal, after reviewing the submissions and previous similar cases, decided to reduce the disallowance to 2%, emphasizing the need for a balanced approach to avoid revenue leakage while acknowledging the nature of the business which necessitates cash transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 668999 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAMKOSURI
• Assessee Lawyers: DHARMESH SHAH; REFERRING PAGE NO. OF PB
• Keywords: Principle of natural justice

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 2597/MUM/2025 (AY : 2013-14) (Physical hearing) D P Losgistics Pvt. Ltd. 601-602, Raikar Chamber, K D Marg, Govandi (East), Mumbai – 400088. [PAN No. AACCD7172M] Vs DCIT-6(1)(1), Mumbai Appellant / Assessee Respondent / Revenue Assessee by Sh. Dharmesh Shah, Advocate Revenue by Sh. Annavaram Kosuri, Sr. DR Date of hearing 23.06.2025 Date of pronouncement 23.06.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order ofld. CIT(A) dated 30.03.2025 for A.Y. 2013-14. The assessee has raised following grounds of appeal: “1. The ld. CIT(A) has erred in law and in facts in passing order u/s 250 of the Act and partly confirming the addition made by the ld. AO. 2. The ld. CIT(A) has erred in law and in facts in passing the order u/s 250 of the Act without complying with the principles of natural justice. 3. The ld. CIT(A) has erred in law and in facts in confirming the disallowance of Rs. 10,13,306/- made by Ld. Assessing Officer on ad-hoc basis. 4. The appellant craves leave to add to amend, alter or delete all or any of the foregoing grounds of appeal.” 2. Brief facts of the case are that assessee is a company, engaged in the business of Custom clearance and in logistic business. The assessee filed its return of income for AY 2013-14 on 24.09.2013 declaring income of Rs. 1.05 ITA No. 2597/Mum/2025 D P Logistics Pvt. Ltd. 2 crore. Case was selected for scrutiny. During assessment, the assessing officer noted that assessee has debited expenses of Rs. 2.02 crore. On verification of certain bills of expenses, the assessing officer was of the view that expenses were incurred in cash and were supported self-made vouchers. The assessing officer disallowed 5.00% of total expenses. The assessing officer worked out of disallowance of Rs. 10,13,306/-. Aggrieved by the order of assessing officer, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detailed written submission. The assessee stated that through books of accounts are audited. Expenses were recorded in the books which are supported with proper ledger. The ld. CIT(A) on considering the submission of assessee confirmed the action of assessing officer and held that assessee failed to provide corroborating documentary evidence or independent confirmation. The cash expenses are unverifiable. Further, aggrieved the assessee is filed present appeal before Tribunal. 3. We have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and learned Senior Departmental Representative (ld. Sr. DR) for the revenue. The ld. AR of the assessee submits that assessee company is in the business of customs clearance and related support services. During the relevant financial year, the assessee made miscellaneous expenses loading and unloading expenses, examination fees and SB processing fees. Such expenses were collected from various clients. Majority of expenses were incurred in cash. The ld. AR of the assessee by referring page no. 11 of PB, ITA No. 2597/Mum/2025 D P Logistics Pvt. Ltd. 3 which contains the details of entire expenses incurred by the assessee submits that all the expenses incurred by assessee are supported by bills and vouchers. The assessee issued receipts to its clients on receipts or non- receipts basis. The ld. AR of assessee also carried us through various bills showing details of expenses based on receipt and non-receipt. The ld. AR of the assessee submits that similar ad-hock disallowance @ 20% of expenses were made in AY 2010-11, however, on further appeal before ld. CIT(A) similar ad hoc disallowance was deleted in order dated 02.09.2016. No further appeal is filed by revenue. The ld. AR submits that there is no basis of such ad-hoc disallowances. The disallowances based merely on suspicious without pointing out any specific defects in the bills or vouchers. The ld. AR of the assessee submits that no such disallowance is justified. 4. On the other hand, the ld. Sr. DR for the revenue supported the order of lower authorities. The ld. Sr. DR submits that majority of expenses claimed by assessee was incurred in cash. The assessee is relying upon self-serving vouchers of such expenses. The assessee has debited huge expenses of Rs. 2.02 crore. The assessing officer is very reasonable in making disallowance only @ 5%. On the contention that similar disallowances in AY 2010-11 were deleted, the ld Sr DR for the revenue submits that each year is separate and ITA No. 2597/Mum/2025 D P Logistics Pvt. Ltd. 4 independent and expenses has to be examined on the basis of evidences. The assessee does not deserve any relief. 5. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. The assessing officer made disallowance of 5.00 % of total expenses by holding that bills of several expenses were verified and find that cash payment is supported by self-made vouchers. The assessing officer made disallowance of 5.00 % of total expenses. The ld. CIT(A) upheld the action of assessing officer by holding that assessee failed to provide corroborative document and independent confirmation. Before us, the ld. AR of the assessee vehemently argued that their books of accounts are audited. The nature of business of assessee require cash expenses for cargo handling transport and services, examination fees, loading and unloading expenses. On careful consideration of facts of the case, we find that the lower authorities made ad-hoc disallowance by general observation without specific bills or vouchers. We find that assessee has shown return of income of Rs. 1.05 crore. We further find that similar ad- hoc disallowance was made in AY 2010-11, however, on further appeal, the entire disallowance was deleted. Thus, considering overall facts and circumstances of the case, in our view to avoid the possibility of revenue ITA No. 2597/Mum/2025 D P Logistics Pvt. Ltd. 5 leakage, the disallowance @ 2.00% of total expenses would be sufficient to meet the end of justice, thus, the assessee is allowed part relief. In the result, the grounds of appeal raised by the assessee are partly allowed. 6. In the result, the appeal of assesseeis partly allowed. Order pronounced in the open Court on 23/06/2025. Sd/- PRABHASH SHANKAR ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated:23/06/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "