Anil Kumar Goyal, New Delhi V. ACIT, Circle-58(1), New Delhi

ITA 2092/DEL/2022

AI Insights

The case involves Anil Kumar Goyal, a deceased assessee engaged in the business of trading various commodities through his proprietary concern, M/s. Goyal Sugar Shop. For the assessment year 2017-18, the assessee declared a total income of Rs.29,04,976. The case was selected for limited scrutiny due to high revenue from operations and large cash deposits during the demonetization period. During the assessment, the Assessing Officer made an ad-hoc disallowance of 30% on claimed business expenses due to alleged insufficient evidence for verification. The Commissioner of Income-Tax (Appeals) partially sustained this disallowance. The Tribunal, however, found the disallowance unjustified and based on general allegations rather than specific evidence, leading to the allowance of the appeal.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 300802 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-11-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 29-08-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.2092/Del/2022 Assessment Year: 2017-18 Anil Kumar Goyal through Legal Heir, B-1, Sagar Apartment, 6-Tilak Marg, New Delhi Vs. ACIT, Circle-14, New Delhi. PAN :AAAPK3080C (Appellant) (Respondent) ORDER This is an appeal by the assessee against the order dated 27.07.2022 of learned Commissioner of Income-Tax (Appeals)-26, New Delhi for the assessment year 2017-18. 2. The dispute in the present appeal is confined to ad hoc disallowance made out of business expenses. Assessee by Shri Ruchesh Sinha, Adv. Respondent by Shri Narpat Singh, Sr. DR Date of hearing 15.11.2022 Date of pronouncement 28.12.2022 2 ITA No.2092/Del/2022 3. Briefly the facts are, the deceased assessee was engaged in the business of trading in sugar, atta, maida, suzi, besan, gur, sakkar, bura, rice, pulses etc. through his proprietary concern M/s. Goyal Sugar Shop. For the assessment year under dispute, assessee filed his return of income on 03.11.2017 declaring total income of Rs.29,04,976. The assessee’s case was selected for limited scrutiny to examine the following: i) High Revenue from operation (including other income and no scrutiny in preceding five assessment years; ii) Large value of cash deposits during demonetization period reported. 4. In course of assessment proceedings, the Assessing Officer noticed that as per the financial statement, the assessee has declared total turnover of Rs.78,80,05,864 and gross profit of Rs.1,00,42,525. Thus, the gross profit ratio works out to 1.27%. Whereas in the immediately preceding assessment year, as against total turnover of Rs.58,42,98,842 assessee had shown with gross profit ratio of 1.30%. After calling for various details, the Assessing Officer noted that the assessee had claimed expenses of Rs.50,59,305 under various heads. Alleging that the assessee failed to furnish evidences, such as, 3 ITA No.2092/Del/2022 bills/invoices/vouchers/salary registers and PAN of employees, because of which, complete verification of the expenses was not possible, the Assessing Officer disallowed 30% out of the total expenses claimed and added back an amount of Rs.15,17,792. The assessee contested the foresaid disallowance before learned Commissioner (Appeals). 5. After considering the submissions of the assessee in the context of facts and material on record, learned Commissioner (Appeals) granted partial relief to the assessee by deleting the disallowance made out of lease rent expenses of Rs.2,03,100 and depreciation of Rs.1,99,472. 6. I have considered rival submission and perused the material available on record. 7. Undisputedly, assessee’s case was selected for limited scrutiny to examine two issues, firstly, high revenue from operations and secondly large value of cash deposits during demonetization period. It is clear from record that the Assessing Officer did not find anything adverse on the aforesaid two issues. However, he has picked up a completely different item, being the expenditure claimed by the 4 ITA No.2092/Del/2022 assessee, and made a purely ad-hoc disallowance of 30% out of expenses claimed. Though, the Assessing Officer has alleged that the assessee did not furnish various evidences to establish the genuineness of expenses, however, the allegation of the Assessing Officer is purely of general nature without specifying which evidences were called for and the assessee failed to submit them. As it appears, the main factor which persuaded the Assessing Officer to make the ad hoc disallowance is slight variation in the gross profit and net profit ratio compared to the preceding assessment years. As could be seen from the observation of the Assessing Officer, in comparison to the gross profit ratio and net profit ratio of 1.30% and 0.39% respectively in assessment year 2016-17, in the impugned assessment year, the assessee has shown gross profit and net profit ratio of 1.27% and 0.30% respectively. Such a marginal difference in gross profit and net profit ratio, in my view, cannot lead to any disallowance out of expenses, that too on purely ad-hoc basis. Be that as it may, it is evident, in course of proceedings before the first appellate authority, the assessee had furnished detailed explanation supported by evidence in respect of expenses claimed under various heads. However, without 5 ITA No.2092/Del/2022 properly appreciating the submissions of the assessee and evidences furnished, learned Commissioner (Appeals) has sustained major part of disallowance. In fact, in the concluding part of her order, learned Commissioner (Appeals) has accepted that the assessee filed details of expenses incurred during the year along with few sample copies of vouchers. By making certain allegations, assessee’s explanation has been rejected. This, in my view, is unjustified and certainly cannot give scope for any ad hoc disallowance. Since, the disallowance made is purely on ad-hoc basis and on conjectures and surmises, I am inclined to delete the disallowance sustained by learned Commissioner (Appeals). 8. In the result, the appeal is allowed. Order pronounced in the open court on 28 th December, 2022. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 28 th December, 2022. Mohan Lal 6 ITA No.2092/Del/2022 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi