M/S GAUTAM ENGINEERING COMPANY, SRINAGAR V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3, SRINAGAR

ITA 2/ASR/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9553 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 02-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 148; 143(3); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 M/s Gautam Engineering Co, Sharika Bhawan, Exchange Road, Srinagar. [PAN: AAEFG5123A] (Appellant) Vs. Asstt. CIT, Circle-3, Srinagar. (Respondent) Appellant by None. Respondent by Ms. Amanpreet Kaur, Sr.DR Date of Hearing 26.09.2022 Date of Pronouncement 30.09.2022 ORDER Per:Anikesh Banerjee, JM: The instant appeal of the assessee is directed against the order of the ld. Commissioner of Income Tax(Appeals), NFAC, Delhi, [in brevity the CIT(A)] bearing appeal No.DIN & Order No.ITBA/NFAC/S/250/2021-22/1036729460(1), date of order 03.11.2021, the order passed u/s 250 of the Income Tax Act 1961, [in I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 2 brevity the Act] for A.Y. 2012-13.The impugned order was originated from the order of the ld. Asstt. Commissioner of Income Tax, Circle-3, Srinagar, (in brevity the AO) order passed u/s 143(3)/147 of the Act date of order 06.11.2019. 2. The assessee has raised the following grounds which are as follows: “1. That the worthy CIT(A) is not justified in confirming the adhoc addition of Rs. 9,53,484/-made by Ld A.O which is 20% of travelling expenses amounting to Rs. 42,70,275/-. The CIT (A) failed to consider this aspect that in original assessment order framed u/s 143(3) dated 27.03.2015, the Ld A.O has already made an adhoc disallowance of 10% of expenses for want of vouchers on expenses. It is change of opinion and worthy CIT (A) is not lawful in his action in confirming the addition in order framed u/s 143(3) read with sec 147 of Income Tax Act, 1961. 2. That without prejudice to the merits of case, section 147 is meant for income which has escaped assessment and not for change of opinion. Thus, action of Ld. A.O is unjustified. And CIT(A) is not justified in confirming the application of section 148 of the Income Tax Act,1961. I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 3 That the appellant craves, leave to add, alter, amend or vary and/or withdraw any or all of the aforesaid grounds of Appeal or at time of hearing of the above appeal.” 2. The brief fact of the case is that the assessee has primarily raised two grounds in his appeal. First one is the legal and another one is a factual ground. In factual ground the addition was made by disallowance @20% on travelling expenses which was claimed by the assessee amount to Rs.42,70,275/- in the P & L a/c of the assessee. The addition was made @ 20% of the said expenses i.e. Rs.42,70,275/- whichis worked out amount to Rs.9,53,484/-. In the legal ground,the jurisdiction of notice u/s 148 was also challenged by the assessee before the revenue authorities and before ITAT. Being aggrieved, the assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) upheld the order of the ld. AO. 3. Aggrieved assessee filed an appeal before us. 4. During the appeal hearing, none was present on behalf of the assessee. The matter was taken up with the consent of the ld. Sr. DR for adjudication. During A.Y. 2012-13, the assessee claimed travelling expenses Rs.42,70,275/- in relation to the turnover 73.29 crore. In relation to the other years the claim was higher I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 4 inthis year. For clarity of factualaspectwe are reproducing the appeal order para 4 as below: “4.0. The affirmations of the AO in the assessment order for the additions made as detailed of this order are as under: “During the course of the assessment proceedings and the perusal of the material available on record, It was found that the assessee in its profit and loss account for the year ending 31.03.2012 has debited the expenditure under head 'Travelling Allowance' to the tune of Rs.42,70,275/-. In respect of this claim, the assessee has taken plea of floods of September 2014 and stated in its reply that the records of their business got damaged in devastating floods of 2014. It is a fact that floods had in undated that business premises of the assessee as is evident from the documentary evidences furnished by the assessee during the original assessment proceedings. Therefore, the contention that vouchers may have been damaged is already taken cognizance of at the time of completion of original assessment on 27.03.2015. However, the rationale of the quantum of the expenditure under the head travelling Expenses have not been explained at all. It is seen that travelling expenses claimed at Rs.42,70,275/- in relation to sales turnover of Rs.73.29 crore is unusually high as compared to the preceding two assessment years as depicted in the below chart. I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 5 Assessment year Travelling Expenses claimed Turnover 2010-11 2636883 56.33 crore 2011-12 2369374 70.71 crore 2012-13 4270275 73.29 crore From the above chart it is evident that the expenses under the head travelling have been exponentially increased for the relevant assessment year in relation to the preceding year even when there is no major difference in the turnover. Therefore, in view of non- availability of corroborative evidence, the quantum of claim clearly looks exaggerated. The relevant expenditure cannot be therefore, allowed in full. In order to plug leakages of revenue on this account, I disallow 20 % of the expenditure - being without satisfactory rationale and exaggerated in relation to turnover.” 5. The issue was duly discussed by the ld. CIT(A) and the total disallowance of 20% on travelling expenses was upheld which is worked out amount of Rs.9,53,484/-. 6. The ld. Sr. DR argued and relied on the order of the ld. CIT(A) in page no. 6 which is extracted below: I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 6 “The assessee firm failed to produce the books of accounts and could not substantiate the claim of these expenditures amounting to Rs. 3695996/- by producing any supporting documentary evidence in this regard, the version/explanation of the counsel of the assessee could not be accepted as such, that he could not furnish the proper documentary evidence in support of these expenditures due to floods of September 2014. In absence of proper bills and vouchers and in order to plug the leakage of revenue, I found it appropriate to restrict these expenditures up to 90% and disallow the 10% of these expenses claimed by assessee firm. The explanation given by the counsel has been considered and after discussion he has agreed for disallowance of these unvouched expenses @ 10% of the expenditure claimed under these heads. Accordingly, a disallowance of Rs. 369600/- is made on account of unvouched expenses debited to the Profit and Loss Account and added back to the returned income of assessee firm.” This disallowance was accepted to buy, though the books of accounts were duly audited and expenses were duly supported by vouchers but perished due to devastating floods in Srinagar. Even record of income tax submerged in water and the Income tax office remained in water almost thirty feet for a month together. I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 7 The copy of original assessment order u/s 143(3) is attached as Annexure 'S’ and visible of all these facts. The perusal of the above clearly depicts that the Ld. A.O has done complete scrutiny of Profit and loss account and thereafter considered only abovementioned expenses on which ten percent disallowance was made and added back to returned income of assessee.” 7. Related to the legal ground the finding of the ld. CIT(A) in para 6, page no. 8 is extracted below: “6.0. In the ground no.2 the assessee challenged the re-opening of assessment. In this regard, the decision of the Hon’ble Apex court in the case of Raymond Woollen Mills Ltd. vs Income-Tax Officer AndOrs. dated 17 December 1997 in (1999) 236 CTR SC 34, 1999 236 ITR 34 (SC) is gone through. The decision of the Hon’ble Supreme Court is reproduced as under: “We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts opinion on the I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 8 merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. ” 6.1. In this case the AO had found that the assessee had not produced supporting evidence in respect of the expenditure booked to profit & loss account. Here, the AO has got reason to investigate the genuineness of expenditure booked and to excavate the facts. As held by the Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. vs Income-Tax Officer And Ors.(Supra) sufficiency or correctness of the material is not at all a matter for reopening the assessment. Therefore, the AO has rightly re-opened the assessment to verify the genuineness of claimof the expenditure. Thus, the Ground no.2 is dismissed.” 8. We heard the submission of the ld. Sr. DR, considering the order of the revenue authorities the related to disallowance of the travelling expenses the disallowance of 20% of total expenses not supported any such documentary evidence. The assessee submitted the advisory of the CBDT to Assessing officer F. No. 225/303/2014/IT not to make high pitched scrutiny assessment in Jammu &Kashmirdue to destruction of record, Books of Accounts during flood. The I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 9 assessee was unable to submit the documentary evidence before the revenue authorities to substantiate his claim. The assesssee’s claim was that during original asse4ssment U/s 143(3) dated 27/03/2015 the disallowance of expenses under same head was made by the ld. AO @10%. There is no such any proper finding of lacuna for disallowance of the expenses @ 20%. Considering this there is no such any specific finding for addition, the same addition amount of Rs.953,484/- is liable to be deleted. 9. Related to the legal ground, we find there is no infirmity in the order of the ld. CIT(A). The reopening of assessment u/s 148 is proper and as per the law. In the result the appeal of the assessee is dismissed. 8. In the result, the assessee’s Ground no-1 is allowed& Ground no-2 is dismissed. Accordingly, the appeal bearing ITA No.02/Asr/2022 is partly allowed. Order pronounced in the open court on 30.09.2022 Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant I.T.A. No.02/Asr/2022 Assessment Year: 2012-13 10 (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By Order