ORIENTAL EARTHMOVERS PRIVATE LIMITED, JAIPUR V. ASSISTANT COMMISSIONER, CIRCLE-2, JAIPUR

ITA 1015/JPR/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8441 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 31-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Assessee Lawyers: RAHUL PANDYA

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH ES B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1015/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2014-15 ORIENTAL EARTHMOVERS PRIVATE LIMITED 40-41, MAHALAXMI NAGAR, AJMER ROAD, OPP. HEERAPURA POWER HOUSE, JAIPUR. CUKE VS. THE ITO, WARD-2(5), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACO 4491 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI RAHUL PANDYA (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI K. C. GUPTA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 09/01/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 13/01/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)- I, JAIPUR DATED 29.06.2018 AGAINST THE SUSTENANCE O F DISALLOWANCE OF VARIOUS EXPENSES MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2014-15. 2. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF 20% OF VARIOUS EXP ANSES NAMELY SALES PROMOTION EXPENSES, CONVEYANCE EXPENSES, MISC. EXPE NSES AND REPAIR & MAINTENANCE EXPENSES @ 20%. ON APPEAL, THE LD. CIT( A) HAS RESTRICTED THE DISALLOWANCES TO 10% HOWEVER, THE ASSESSEE STILL FE EL AGGRIEVED WITH THE SAID ORDER OF THE LD. CIT(A) AND HENCE IS IN BEFORE THE TRIBUNAL. 3. REGARDING SALE PROMOTION EXPENSES OF RS. 1,58,87 3/-, IT WAS SUBMITTED BY THE LD AR THAT THESE EXPENSES RELATES TO DEMONSTRATION OF ITA NO. 1015/JP/2018 ORIENTAL EARTHMOVERS PVT. LTD. VS. ITO 2 MACHINERY, CONFERENCE EXPENSES AND OTHER SALE EXPEN SES INCURRED FOR CUSTOMERS OF THE COMPANY AND ALL THE DETAILS ARE DU LY SUPPORTED BY VOUCHERS. REGARDING CONVEYANCE EXPENSES OF RS. 79,4 09/-, IT WAS SUBMITTED THAT THE SAME CONSISTENT OF CONVEYANCE PAID TO STAF F, EXPENSES OF VARIOUS DELIVERY VANS , MOTOR BIKE PETROL REIMBURSEMENT TO DEPOT INCHARGE OF VARIOUS OFFICES AND PERSONNEL OF THE ASSESSEE COMPA NY. ALL THESE EXPENSES INCURRED FOR BUSINESS PURPOSES DULY SUPPORTED BY VO UCHERS AND BILLS EXCEPT FOR SMALL PAYMENT MADE FOR LOCAL CONVEYANCE. REGARD ING REPAIR AND MAINTENANCE EXPENSES OF RS. 60,299/-, IT WAS SUBMIT TED THAT THE SAME RELATES TO BUILDING REPAIR, WARRANTY REPAIR & MAIN TENANCE, REPAIR OF VEHICLES, MACHINERY REPAIR & COMPUTER REPAIR CHARGE S, ETC. DULY SUPPORTED BY VOUCHERS. IT WAS FURTHER SUBMITTED THAT THE ASSE SSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE AFORESAID EX PENSES SO INCURRED BY THE COMPANY FOR THE PURPOSES OF ITS BUSINESS AND HAS TH US MADE DISALLOWANCES ON PURE ADHOC BASIS. THE LD. CIT(A) HAS ALSO NOT ST ATED ON WHAT BASIS, HE HAS SUSTAINED 10% OF THE EXPENSES SO DISALLOWED BY THE AO. IT WAS FURTHER SUBMITTED THAT THE IN ASSESSEE OWN CASE FOR ASSESSM ENT YEAR 2012-13 IN ITA NO. 732/JP/2017 DATED 24.04.2019, THE TRIBUNAL HAS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE WHEREIN SIMILAR ADHOC DIS ALLOWANCE MADE BY THE ASSESSING OFFICER WERE DELETED AND THE RELEVANT FIN DINGS READS AS UNDER:- 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE EXPENSES HAVE BEEN DISALLOWED PURELY ON AN ADHOC BASIS AND EVEN THE LD CIT(A) HAS RETURNED A FINDING THAT THE AO HAS NO MATERIAL TO MAKE THE SUB JECT DISALLOWANCE. IN ABSENCE OF ANY FINDING THAT THE EXPENSES ARE BOG US OR NOT INCURRED FOR THE PURPOSES OF THE ASSESSEES BUSINESS, THE AD HOC DISALLOWANCE SO MADE IS DIRECTED TO BE DELETED. IN THE RESULT, THE GROUND OF APPEAL IS ALLOWED. 4. PER CONTRA, THE LD. DR RELIED ON THE FINDINGS OF THE ASSESSING OFFICER AND SUBMITTED THAT THE SALE PROMOTION EXPENSES OF R S. 1,58,873/- WERE ITA NO. 1015/JP/2018 ORIENTAL EARTHMOVERS PVT. LTD. VS. ITO 3 CLAIMED BY THE ASSESSEE ON THE BASIS OF INTERNAL VO UCHERS AND ITS IS NOT POSSIBLE TO ASCERTAIN CLEARLY WHETHER THESE EXPENSE S WERE MADE FOR BUSINESS PURPOSES EXCLUSIVELY. SIMILARLY, REGARDING OTHER EXPENSES, THE LD. DR RELIED ON THE FINDING OF THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE SOME OF THE VOUCHERS FOR THESE EXPENSES ARE NOT SUP PORTED BY PROPER BILLS/RECEIPTS AND ARE EITHER MADE IN CASH OR THROU GH INTERNAL VOUCHERS WHERE NO SIGNATURE OF ANY RECIPIENT IS FOUND. NO LO GBOOK FOR CONVEYANCE PAYMENT HAS BEEN MAINTAINED BY THE ASSESSEE AND THE REFORE, IT IS NOT POSSIBLE TO ASCERTAIN CLEARLY WHETHER THESE EXPENSE S WERE MADE FOR BUSINESS PURPOSES EXCLUSIVELY. IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE FAILED TO EXPLICITLY PROVE BUSINESS EXPEDI ENCY OF THIS EXPENSES AND THEREFORE, THE ASSESSING OFFICER WAS RIGHT IN MAKIN G REASONABLE DISALLOWANCE OF 20% OF THESE EXPENSES. IT WAS FURTH ER SUBMITTED THAT THE LD. CIT(A) ALREADY REDUCED THE DISALLOWANCE TO 10% AND THEREFORE, NO FURTHER RELIEF MAY BE GRANTED TO THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS A SETTLED PROPOSITION T HAT WHETHER A PARTICULAR EXPENDITURE IS REQUIRED TO BE INCURRED OR NOT IS TH E DOMAIN AND PREROGATIVE OF THE COMPANYS MANAGEMENT AND NOT THAT OF THE REV ENUE. AT THE SAME TIME, THE ASSESSING OFFICER IS WELL WITHIN HIS JURI SDICTION TO VERIFY WHETHER THE EXPENDITURE SO CLAIMED HAS ACTUALLY BEEN INCURRED F OR THE PURPOSES OF BUSINESS AND WHAT DOCUMENTATION IS SUBMITTED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. IT IS THEREFORE, INCUMBENT ON PART OF THE ASSESSING OFFICER, WHERE HE INTENDS TO DISALLOW ANY EXPENSES, TO BRING OUT SPECIFIC DEFECT AND RECORD A FINDING THAT A PARTICULAR EXPEN SE HAS NOT BEEN INCURRED FOR THE PURPOSES OF BUSINESS OR THE EXPENSE IS BOGU S IN NATURE. IN CASE OF VOLUMINOUS TRANSACTIONS, SOME DEFINED AUDIT METHODO LOGY AND ADEQUATE SAMPLE SIZE MAY BE ADOPTED TO VERIFY THE EXPENSES. IN THE INSTANT CASE, THE CASE OF THE REVENUE IS THAT THE ASSESSEE HAS FAILED TO EXPLICITLY PROVE BUSINESS EXPEDIENCY OF ALL THESE EXPENSES IN NATURE OF SALES PROMOTION, CONVEYANCE, REPAIR & MAINTENANCE AND MISC. EXPENSES AND THEREFORE, THE ITA NO. 1015/JP/2018 ORIENTAL EARTHMOVERS PVT. LTD. VS. ITO 4 ASSESSING OFFICER WAS RIGHT IN MAKING REASONABLE DI SALLOWANCE OF 20% OF THESE EXPENSES. INCURRING CERTAIN EXPENDITURE IN CA SH CANNOT BE A SOLE BASIS FOR DISALLOWANCE AS IS THE CASE OF MAKING THE PAYME NT THROUGH CHEQUE CANNOT BE SOLE BASIS FOR CLAIM OF EXPENDITURE. THE MODE OF PAYMENT NO DOUBT HELPS IN SPEEDY VERIFICATION OF EXPENDITURE A ND IN PARTICULAR, THE VERIFICATION OF RECIPIENT OF SUCH PAYMENT. AT THE SAME TIME, WHERE THE EXPENSE IS OTHERWISE FOUND ELIGIBLE TO BE INCURRED FOR PURPOSES OF BUSINESS, MERELY THE FACT THAT THE PAYMENT HAS BEEN MADE IN C ASH CANNOT BE A SOLE BASIS FOR DISALLOWANCE. SIMILARLY, THE EXPENSES SUP PORTED BY INTERNAL VOUCHERS CANNOT BE A SOLE BASIS FOR DISALLOWANCE AS THERE MAY BE SITUATIONS WHERE EXTERNAL DIRECT EVIDENCE IN FORM OF BILLS/INV OICES ARE NOT PRACTICALLY POSSIBLE TO SUBMIT FOR VERIFICATION IN WHICH CASE C IRCUMSTANTIAL EVIDENCE/SITUATIONS SHOULD HAVE BEEN CONSIDERED INC LUDING WHETHER THE INTERNAL VOUCHERS WHERE AUTHENTICATED BY RESPONSIBL E MANAGEMENT PERSONNEL SUPPORTS THE INCURRENCE OF PARTICULAR EXP ENDITURE. THEREFORE, IN SUCH CASES, UNLESS THERE IS A CLEAR FINDING THAT TH E EXPENSES ARE BOGUS OR NOT INCURRED FOR THE PURPOSES OF THE ASSESSEES BUS INESS, THE ADHOC DISALLOWANCE CANNOT BE SUSTAINED. IN THE INSTANT CA SE, THE QUESTION IS HOW THE ASSESSING OFFICER HAS ARRIVED AT THE FIGURE OF 20% OF SUCH EXPENDITURE NOT SATISFYING THE BUSINESS EXPEDIENCY TEST AND 80% OF THE EXPENDITURE SATISFYING THE SAID TEST AND SIMILARLY, WHAT IS THE BASIS FOR REDUCING THE SAME TO 10% BY THE LD CIT(A). THE REASONABILITY HAS TO B E DETERMINED VIS--VIS THE DEFECT SO DETERMINED IN CLAIM OF A PARTICULAR E XPENSE AND NOT IN TERMS OF PERCENTAGE OF EXPENSES AS THE SAME WILL VARY FRO M CASE TO CASE. IN THE INSTANT CASE, WE DONOT FIND ANYTHING ON RECORD WHIC H SUPPORT SUCH DETERMINATION OF 20%/10% AND THAT TOO, ACROSS ALL E XPENSES UNDER CONSIDERATION BY THE REVENUE WHICH LEADS TO THE CON CLUSION THAT SUCH DETERMINATION IS ON AN ADHOC BASIS AND ANY DISALLOW ANCE ON SUCH ADHOC BASIS CANNOT BE SUSTAINED IN EYES OF LAW. IN THE R ESULT, THE GROUND OF APPEAL IS ALLOWED. ITA NO. 1015/JP/2018 ORIENTAL EARTHMOVERS PVT. LTD. VS. ITO 5 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/01/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 13/01/2020 *SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ORIENTAL EARTHMOVERS PVT. LTD., JAIP UR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD-2(5), JAIPUR. 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. 1015/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR