Deendayal Industries Ltd., Gwalior V. Dy. C.I.T., Circle-3, Gwalior

ITA 30/AGR/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9593 (ITAT-AGRA)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: WASHIM ARSHAD
• Keywords: Commercial expediency; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 40A(3); 271(1)(b); 139; 92; 191; 44AB; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER ITA NO.30/AGR/2015 ASSESSMENT YEAR: 2010 - 11 M/S. DEENDAYAL INDUSTRIES LTD. 6, INDUSTRIAL AREA, TANSEN ROAD, GWALIOR (M.P.) VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3, GWALIOR. PAN: AAACD6533E APPELLANT RESPONDENT ASSESSEE BY: MAHESH AGRAWAL, ADV. REVENUE BY: WASHIM ARSHAD, SR. DR DATE OF HEARING: 09/03/2017 DATE OF PRONOUNCEMENT: 31 /03/2017 ORDER PER, DR. MITHA LAL MEENA, AM: THIS APPEAL , BY THE ASSESSEE , IS DIRECTED AGAINST THE ORDER DATED 21 - 11 - 2014 OF THE COMMISSIONER OF INCOME TAX (APPEALS), GWALIOR [HEREIN AFTER REFERRED TO AS THE CIT (A)], IN RESPECT OF THE ASSESSMENT YEAR 20 1 0 - 11 , WHEREIN , T HE GROUNDS OF APPEAL , READ S AS UNDER 1. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED TO UPHOLD THE ADDITION OF RS. 80,024/ - MADE BY THE LD AO U/S 40A(3) OF THE ACT. HE HAS FAILED TO APPRECIATE THE CIRCUMSTANCES COMPELLING THE ASSESSEE TO MAKE SUCH PAYMENTS IN CASH. ITA NO.30/AGR/2015 2 2. THAT THE LD CIT(A) HAS ERRED IN LAW AND FACTS TO CONFIRM THE DISALLOWANCE OF RS.2,00,000/ - OUT OF TOTAL DISALLOWANCE MADE BY THE LD AO AT RS.4,09,304/ - ON ADHOC BASIS W ITHOUT REJECTING THE BOOKS AND POINTING OUT ANY SPECIFIC INSTANCE OF UNVERIFIABLE OR UNVOUCHED EXPENSE. 3. THAT THE ORDERS OF THE AUTHORITIES BELOW BE SET ASIDE AND THE IMPUGNED ADDI TI ON OF RS. 80,024/ - AND 2,00,000/ - BE DELETED. 4. THAT THE APPELLANT CRAVES Y OUR HONOU R S KIND PERMISSION TO ADD, DELETE OR MODIFY ANY GROUND OF APPEA L, AS THE NEED BE, AT THE TIME OF HEARING. 2. IN GROUND NO.1 , THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 80,024/ - MADE BY THE ASSESSING OFFICER U/S 40A (3) AND UPHOLD BY THE CIT ( APPEALS) WITHOUT APPRECIATING THE FACTS OF THE CASE . 2.1 . D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO, ON PERUSAL OF LEDGER FOR STAFF WELFARE , VEHICLE RUNNING AND MAINTENANCE EXPENSE, NOTED THE FOLLOWING PAYMENTS, EXCEEDING RS.20,000/ - , MADE IN CASH . SR. NO DATE OF PAYMENT PARTICULARS AMOUNT PAID IN CASH 1 22/02/2010 PAID TO JAGDISH CHAND FOR UNIFORM MATERIAL 30552/ - 2 22/02/2010 PAID FOR UNIFORM STICHING 27,172/ - 3 04/08/2009 PAID TO M/S SUMIDHA VEHICLES PVT LTD 22,300/ - TOTAL 80,024/ - BEING N OT SATISFIED WITH THE ASSESSEES EXPLANATION AND REASON S FOR THE ABOVE PAYMENTS IN CASH, THE AO MADE THE AFORESAID DISALLOWANCE U/S 40A(3) OF THE ACT . ITA NO.30/AGR/2015 3 2.2 . IN APPEAL, W HILE CONFIRMING THE ADDITION , THE LD. CIT (A), INTER ALIA, OBSERVED , VIDE PARA 6.2 , AS UNDER 6.2 I HAVE GONE THROUGH THE WRITTEN SUBMISSION CAREFULLY. THE CASE OF THE APPELLANT DOES NOT FALL IN ANY OF THE EXEMPTIONS ALLOWED UNDER RULE 6DD. HENCE, I AM OF THE OPINION THAT THE DISALLOWANCE IS RIGHTLY MADE BY THE AO. ACCORDINGLY, THE DISALLOWANCE OF RS. 80,024/ - MADE BY THE AO IS HEREBY CONFIRMED. 2.3 . BEFORE US THE LD AR REITERATED SUBMISSION S A S MADE BEFORE THE CIT ( APPEALS). HE SUBMITTED THAT ASSESSEE WAS COMPELLED TO MAKE CASH PAYMENTS , AS IN THE FIRST TWO CASES , PAYEE DID NOT HAVE BANK ACCOUNT AND IN THE THIRD CASE , PAYEE REFUSED TO ACCEPT CHEQUE OR DD AND INSISTED FOR CASH PAYMENT. THUS , THE CASH PAYMENT EXCEEDING 20,000/ - WAS MADE UNDER THE COMPELLING CIRCUMSTANCES. HE FURTHER CONT ENDED THAT THE PURPOSE OF SEC. 40A ( 3) WAS TO CHECK BLACK MONEY AND NOT TO DISALLOW GENUINE EXPENSES. IT IS FURTHER SUBMITTED THAT EVEN IF HIS CASE WAS NOT COVERED BY RULE 6DD, IT WA S COVERED BY THE PROVISO TO SEC 40 A (3A) , INSERTED WITH EFFECT FROM 01/10/2009 AND WHICH EQUALLY APPLIES TO SEC 40 A (3) ALSO. 2.4. PER CONTRA LD DR RELIED ON THE IMPUGNED ORDER . 2. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL ON RECORD AND CONSIDERED THE CASES CITED BEFORE US. IT IS AN UNDISPUTED FACT THAT THE ITA NO.30/AGR/2015 4 IMPUGNED PAYMENT S HAVE ALL BEEN MA DE IN CASH EXCEEDING RS. 20000/ - . THE ISSUE TO BE DECIDED BY US IS WHETHER THE PAYMENTS MADE BY ASSESSEE IN CASH, IN EXCESS OF RS. 20000/ - IS ALLOWABL E AS AN EXPENSE OR NOT U/S 40A(3) . PROVISION OF SECTION 40A ( 3) READS AS UNDER: WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE BANK CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT EXCEEDS TWENTY THOUSAND RUPEES NO DEDUCT ION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. 2.5.1 THE LD AR OF THE ASSESSEE CONTENDED THAT T HERE IS ALSO A PROVISO APPENDED TO SUB SECTION 3(A) OF SECTION 40A WHICH IS EQUALLY APPLI CABLE TO SUB SECTION (3) ALSO, AND IT READS AS UNDER - PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFIT AND GAIN OF BUSINESS OR PROFESSION UNDER SUB SECTION (3) AND THIS SUB SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS FROM THE BARE PERUSAL OF THE PROVISION OF THE P ROVISO TO THE RELEVANT SECTION, IT IS SEEN THAT EXCEPTION TO THE SUBSTANTIAL PROVISION OF THE SAID SECTION ARE CARVED OUT BY IT. FIRSTLY IT PROVIDES FOR SUCH CASES AND U NDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED. WE ARE AWARE OF THE FACT THAT SUCH CIRCUMSTANCES ARE PROVIDED UNDER RULE 6DD OF THE INCOME TAX RULES. HOWEVER, THE SAID PROVISO EXTENDS FURTHER & PROVIDES ALSO FOR SUCH CIRCUMSTANCES HAVING REGARD TO THE NATU RE & EXTENT OF BANKING FACILITIES AVAILABLE. WE OBSERVE THAT THE A.O. HAS GIVEN ASSESSEE THE DUE BENEFIT OF THIS PROVISION. THOUGH WE ALSO OBSERVE THAT HE HAS GIVEN THE SAME UNDER RULE 6DD (I) OF THE INCOME TAX ACT RULES. GOING FURTHER IN THE SAID PROVISO, WE OBSERVE THAT IT PROVIDES FOR CIRCUMSTANCES IN CONSIDERATION OF BUSINESS EXPEDIENCY & OTHER RELEVANT FACTORS. THIS IS KIND OF A RESIDUAL CLAUSE WHERE BY LOOKING TO ITA NO.30/AGR/2015 5 THE BUSINESS EXPEDIENCY AND OTHER FACTORS THE RELIEF TO THE ASSESSEE MAY BE GIVEN ON THIS COUNT. 2.5.2 . IT IS SEEN FROM THE CONFIRMATION AND AFFIDA VITS FILED BY THE PAYEES REVEALING THE FACT AS REGARDS TO THE REFUSAL TO ACCEPT CHEQUE OR BANK DRAFT , TH AT COMPELLING CIRCUMSTANCES , COMPELLED THE ASSESSEE TO MAKE CASH PAYMENTS . IN OUR VIEW , T HESE FACT AND CIRCUMSTANCES , WITH THE SUPPORT OF DOCUMENTARY EVIDENCES , ARE ENOUGH TO SHOW THAT THE ASSESSEE HAD TO MAKE CASH PAYMENT OUT OF BUSINESS EXPEDIENCY. WE FIND THE FACT THAT NOWHERE IN THE REMAND REPORT OF THE A.O. OR CIT (A) IN HIS ORDER WHILE DISMISSING THE APPEAL OF THE ASSESSEE, HAD DOUBTED THE VERACITY OF THESE DOCUMENTS. THE CONTENTS OF THESE DOCUMENTS HAVE NOT BEEN CONVERTED BY ANY OF THE LOWER AUTHORITIES . WE KNOW TH AT THE INTENT OF THE LEGISLAT U R E IN ENACTING THIS PROVISION WAS TO CHECK EVASION OF TAXES , SO THAT , NO PAYMENT IS MADE FROM UNDISCLOSED SOURCES AND ALSO THE PAYMENT FROM BANKING CHANNELS LEAVE A TRAIL OF THE TRANSACTION. IT CAN NEVER BE THE INTENTION OF LA W MAKERS TO PUNISH THE ASSESSEE INVOLVED IN GENUINE TRANSACTION. 2.6 . THE HONBLE APEX COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH ETC VS. INCOME TAX OFFICER REPORTED IN 191 ITR 0667 HAD OBSERVED IN PARA 5 AS UNDER THE TERMS OF S. 40A(3) ARE NOT ABSOLUTE. CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE ITA NO.30/AGR/2015 6 SATISFACTION OF THE ASSESSING OF FIC ER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN S. 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED THE CASH PAYMENT. RULE 6DD PROVIDES THAT , AN ASSESSEE CAN BE EXEMPTED FROM THE REQUIREMENT OF PAYMENT BY A CROSSED CHEQUE OR CROSSED BANK DRAFT IN THE CIRCUMSTANCES SPECIFIED UNDER THE RULE. IT WILL BE CLEAR FROM THE PROVISIONS OF S. 40A(3) AND R. 6DD THAT THEY ARE INTENDED TO REGUL ATE BUSINESS TRANSACTIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES TO USE BLACK MONEY FOR BUSINESS TRANSACTIONS. [SEE MUDIAM OIL CO. VS. ITO (1973) 92 ITR 519 (AP) : TC18R.450]. IF THE PAYMENT IS MADE BY A CROSSED CHEQUE DRAWN ON A BANK OR A CROSSED BANK DRAFT, THEN IT WILL BE EASIER TO ASCERTAIN, WHEN DEDUCTION IS CLAIMED, WHETHER THE PAYMENT WAS GENUINE AND WHETHER IT WAS OUT OF THE INCOME FROM DISCLOSED SOURCES. IN INTERPRETING A TAXING STATUTE, THE COURT CANNOT BE OBLIVIOUS OF T HE PROLIFERATION OF BLACK MONEY WHICH IS UNDER CIRCULATION IN OUR COUNTRY. ANY RESTRAINT INTENDED TO CURB THE CHANCES AND OPPORTUNITIES TO USE OR CREATE BLACK MONEY SHOULD NOT BE REGARDED AS CURTAILING THE FREEDOM OF TRADE OR BUSINESS. 2.6.1 . THE EXPLANATION OF THE ASSESSEE THAT THE EXPENDITURE IS MADE IN CASH UNDER THE CIRCUMSTANCES THAT THE PAYEES EITHER DID NOT HAVE BANK ACCOUNTS OR DID NOT ACCEPT CHEQUE/BANK DRAFTS IS NOT FOUND FALSE BY ANY OF THE LOWER AUTHORITIES. GENUINENESS OF THE P AYME NT FOR THE EXPENDITURE IS ALSO NOT DOUBTED AND THE PAYEES ARE IDENTIFIABLE. THEREFORE, OBSERVATIONS OF THE HONBLE APEX COURT ARE CLEARLY APPLICABLE TO THE PRESENT CASE. WE ALSO FIND FORCE IN THE ARGUMENT OF THE LD AR THAT THE CASE IS ALSO COVERED BY THE PROVISO TO SEC 40A ( 3A). AGRA BENCH OF THE ITAT IN THE CASE OF TEJVEER SINGH VS. ITO, MATHURA IN ITA NO.329/AGRA/2015 HAS HELD AS UNDER: ITA NO.30/AGR/2015 7 WE ARE ALSO IN AGREEMENT WITH THE LD CIT (A) THAT THE CASE LAWS CITED BY THE ASSESSEE RELATE TO A PERIOD BEFORE THE AMENDMENT TO RULE 6 DD. HOWEVER, WE ALSO OBSERVE THAT BY THE SAID AMENDMENT TO RULE 6DD THE EXPENDITURE AS TO THE BUSINESS EXPEDIENCY WAS THOUGH TAKEN OUT FROM THE RULES. IT WAS ADDED TO THE SUBSTANTIVE PROVISION WITH THE INSERTION OF A PROVISO WHICH WE ARE REFERRING TO HEREIN ABOVE. THEREFORE, IN THE RESULT, WHERE THE COURTS WERE ALLOWING THE CASH PAYMENTS WITH THE AID RULE OF 6DD(J), THE SAME CAN NOW BE ALLOWED WITH THE AID OF PROVISO TO THE SECTION 40A(3) OF THE ACT. 2.7 . I T IS EVIDENT THAT THE FACTUM OF THE GENUINENESS OF PAYMENTS AND IDENTITY OF THE PAYEES HAS NOT BEEN DOUBTED BY THE LOWER AUTHORITIES AND THAT THE PRINCIPLE OF COMMERCIAL EXPEDIENCY OF THE PAYMENT HAS BEEN IGNORED . THEREFORE, W E FIND THAT THE CASE OF THE ASSESSEE IS COVERE D BY THE ABOVE DECISIONS. 2.7.1 . FOLLOWI NG THE DECISION OF THE ITAT , AGRA BENCH, AGRA IN THE CASE OF TEJVEER SINGH VS. ITO, MATHURA , IN ITA NO.329/AGRA/2015 , WE HOLD THAT ORDER OF THE LD CIT(A) IS NOT BASED ON FINDING OF FACTS OR CORRECT APPLICATION OF LAW. WE, ACCORDINGLY HOLD THAT CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 80,024/ - MADE BY THE LD AO U/S 40A(3) OF THE ACT. THE ADDITION OF RS. 80024/ - MADE U/S 40A ( 3) OF THE ACT IS DELETED . THUS, THE 1 ST GROUND OF APPEAL IS ALLOWED. ITA NO.30/AGR/2015 8 3 . THE N EXT GROUND OF APPEAL PERTAINS TO CONFIRMING THE DISALLOWANCE OF RS.2,00,000/ - OUT OF TOTAL DISALLOWANCE MADE BY THE LD AO AT RS.4,09,304/ - ON ADHOC BASIS WITHOUT REJECTING THE BOOKS OF ACCOUNT AND POINTING OUT ANY SPECIFIC INSTANCE OF UNVERIFIABLE OR UNVOUCHED EXPENSE. 3.1 ON PERUSAL OF TRADING, PROFIT & LOSS ACCOUNT ANNEXED WITH THE RETURN THE AO OBSERVED THAT THE ASSESSEE HAS INCURRED FOLLOWING EXPENSES - SR NO PARTICULARS AMOUNT (RS) 1 CONVEYANCE EXPENSES 165449/ - 2 POSTAGE & TELEGRAM EXP 177161/ - 3 TELEPHONE & TRUNK CALLS 662803/ - 4 STATIONERY AND PRINTING 572967/ - 5 MISC EXP E NSE 442575/ - 6 VEHICLE RUNNING AND MAINTENANCE EXPNS 349248/ - 7 REPAIRS TO OTHERS EXPNS 190111/ - 8 HOTEL LODGING & BOARDING EXPNS 140634/ - 9 HOSPITALITY EXP E NSE 27742/ - TOTAL 2728690/ - HE DISALLOWED 15% OF THE EXPENSES INTER - ALIA OBSERVING AS UNDER: - THE ASSESSEE WAS ASKED TO JUSTIFY THE ABOVE EXPENSES WITH THE SUPPORTIVE DOCUMENTARY EVIDENCES . THE ASSESSEE THOUGH PRODUCED FEW BILLS AND VOUCHERS OF EXPENSES BUT COMPLETE VOUCHERS OF ABOVE EXPENSES WERE NOT PRODUCED, AS SUCH THESE EXPENSES REMAINED TO BE VERIFIED. VIDE ORDER SHEET ENTRY DATED 18/03/2013 , THE ASSESSEE WAS SPECIFICALLY ASKED WHY ON ACCOUNT OF MISSING OF THESE BILLS AND VOUCHERS (NO T BEING MENTIONED HERE THE NO. AND DATE OF MISSING BILLS AND VOUCHERS) OF THE ABOVE EXPENDITURE , 15% OF THESE EXPENSES ITA NO.30/AGR/2015 9 MAY NOT BE DISALLOWED AND ADDED TO THE TOTAL INCOME. THE AR OF THE ASSESSEE COULD NOT F ILE ANY REPLY IN THIS REGARD RATHER THIS FACT WAS ADMITTED BY HIM. SINCE THE ASSESSEE PRODUCED SOME OF THE BILLS AND VOUCHERS OF THE ABOVE EXPENSES AND CONSIDERING OTHER FACTS OF THE CASE, 15% OF THESE EXPENSES I.E. RS. 409304/ - ARE BEING DISALLOWED FOR WA NT OF PROPER VERIFICATION AND JUSTIFICATION OF THESE EXPENSES AND TO COVER UP ALL POSSIBLE LEAKAGES OF REVENUE AN D INCOME, HENCE THE SAME IS ADD ED TO THE INCOME OF THE ASSESSEE. 3.2. ON APPEAL, THE LD. CIT(A), WHILE UPHOLDING ADHOC DISALLOWANCES AT RS. 2,00,000/ - , INTER - ALIA , OBSERVED IN PARA 7.2 AS UNDER : AFTER GOING THROUGH THE ASSESSMENT ORDER AND WRITTEN SUBMISSION CAREFULLY, I AM OF THE CONSIDERED OPINION THAT SOME DISALLOWANCE OUT OF THESE EXPENSES WAS REQUIRED TO BE MADE BY THE AO. HOWEVER, THE D ISALLOWANCE APPEARS TO BE ON HIGHER SIDE. THEREFORE, I AM OF THE CONSIDERED OPINION THAT IT WOULD BE FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE TO RS.2,00,000/ - . ACCORDINGLY, THE DISALLOWANCE IS RESTRICTED TO RS.2,00,000/ - AND APPELLANT GETS RELIEF O F RS.2,09,304/ - 3.3 . THE LD AR SUBMITTED THAT THE ASSESSEE IS A LIMITED COMPANY AND ITS ACCOUNTS WERE AUDITED UNDER THE COMPANIES ACT AS WELL AS U/S 44AB OF THE INCOME TAX ACT ; AND THE AUDITORS HAVE NOT POINTED OUT ANY SHORTCOMINGS OR DEFECT IN THE ACCOUNT S OR MAINTENANCE OF VOUCHERS ETC ; AND T HE AO HAS ALSO NO T REJECTED THE BOOKS OF ACCOUNT OR POINTED OUT ANY SPECIFIC BILL OR VOUCHER THAT COULD NOT BE VERIFIED ; AND N O EXPENSE IS ALLEGED TO BE FOR NON BUSINESS PURPOSE OR OF CAPITAL NATURE ; AND THE AO S OBSERVATION THAT ASSESSEE DID NOT RESPOND TO THE QUERY RAISED VIDE ORDER SHEET ENTRY DATED 18/03/2013, IT WAS HIS SUBMISSION THAT NO SUCH QUERY ITA NO.30/AGR/2015 10 WAS EVER RAISED ON THE ALLEGED DATE OR ANY OTHER DATE THROUGH THE ORDER SHEET , AND BROUGHT TO OUR NOTICE THE COPY OF ORDER SHEET FILED IN PAPER BOOK AT PG. 48 TO 52 ; AND THAT THE CIT ( APPEALS) HAS ALSO NOT APPRECIATE D ASSESSEES SUBMISSIONS AND HAS SUSTAINED THE DISALLOWANCE AT RS.2,00,000/ - IN MECHANICAL AND ARBITRARY MANNER WITHOUT ASSIGNING ANY COGENT REASON O R LOGIC. 3.4 PER CONTRA LD DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 3.5 . WE FIND THAT THE DISALLOWANCE MADE BY THE AO IS ON ADHOC BASIS @ 15% OF CERTAIN EXPENSES WITHOUT POINTING OUT ANY SPECIFIC DISCREPANCY IN THE BILLS OR VOUCHER S . BOOKS OF ACCOUNT ARE ALSO NOT REJECTED BY THE AO. NO SUCH SHOW CAUSE AS ALLEGED, VIDE ORDER SHEET ENTRY DATED 18/03/2013, BY THE AO WAS FOUND FROM THE RECORDS . THE ALLEGED ORDER SHEET ENTRY FOR 18/03/2013, APPEARING ON PB/ 52 , IS AS UNDER 18/03/13 SHRI NITIN PAHARIA CA ATTENDED THE PROCEEDINGS AND FURNISHED REPLY OF THE LAST QUERY. THE CASE HAS BEEN DISCUSSED. T HE LD CIT (APPEALS) HA S ALSO FAILED TO GIVE ANY COGENT REASON WHILE CONFIRMING SUCH ADHOC DISALLOWANCE ON ESTIMATE BASIS, WHICH CANNOT BE JUSTIFIED. I T IS TR UE THAT EXPENDITURE CAN BE DISALLOWED IF IT IS NOT INCURRED FOR BUSINESS PURPOSE S OR EXPENDITURE OF CAPITAL OR PERSONAL NATURE. NO SUCH ALLEGATION IS MADE BY EITHER OF THE LOWER AUTHORITIES . ITA NO.30/AGR/2015 11 3.5 . 1 I N THE CASE OF MONARK FOODS PVT LTD VS ACIT REPORTED AS 54 TTJ 0405 , ITAT, AHMEDABAD C BENCH, IT IS OBSERVED IN PARA 5 THAT: 5.3 AFTER GOING THROUGH THE ORDERS OF THE LEARNED DEPARTMENTAL AUTHORITIES AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE LEARNED REPRESENTATIVES, WE ARE OF THE VIEW THA T NO SUCH AD HOC DISALLOWANCE CAN BE VALIDLY SUSTAINED. THE AO HAS NOT POINTED OUT A SINGLE INSTANCE OF ANY SUCH EXPENSE WHICH IS NOT SUPPORTED BY A VOUCHER OR IS OF A DISALLOWABLE NATURE. THE ACCOUNTS MAINTAINED BY THE ASSESSEE HAVE BEEN AUDITED IN ACCORD ANCE WITH THE PROVISIONS CONTAINED IN IT ACT. THE BOOKS OF ACCOUNTS HAS BEEN ACCEPTED AS TRUE AND CORRECT FOR THE PURPOSES OF COMPUTATION OF INCOME FROM BUSINESS. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION IN SUSTAINING SUCH AN AD HOC OR LUMP SUM DISALLO WANCE WITHOUT ANY BASIS. THE AO IS, THEREFORE, DIRECTED TO DELETE THE SAME. 3.5.2 . RECENTLY, IN SIMILAR CIRCUMSTANCES, THIS BENCH IN THE CASE OF VIGYOR OVERSEAS VS ITO, 1(1), AGRA (ITA NO. 113/AGRA/2016) HAS ALSO OBSERVED, VIDE PARA 7 OF THE ORDER, AS UNDER THUS , IT IS SEEN THAT THE AO DID NOT POINT OUT ANY DEFECT OR DISCREPANCIES IN THE BOOKS OF ACCOUNTS. NO EXPENSE WAS OBJECTED TO AS BEING OF A DISALLOWABLE NATURE. THE DISALLOWANCE WAS ON ADHOC BASIS. IN SPITE THERE OF THE CIT(A) HELD THAT THE ELEMENT OF PERSONAL USE COULD NOT BE RULED OUT. THE PAYMENTS HAVING BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES, IT WOULD BE INCORRECT TO SAY THAT THE CROSS VERIFICATION OF EXPENSES WAS NOT POSSIBLE . 3.5.3 . IN CONCLUSION, WE FIND THAT THE ACCOUNTS MAINTAINED BY THE ASSESSEE HAVE BEEN AUDITED IN ACCORDANCE WIT H THE PROVISIONS CONTAINED IN THE ACT. THE BOOKS OF ACCOUNT HAVE BEEN ACCEPTED AS TRUE AND CORRECT FOR THE PURPOSES OF COMPUTATION OF INCOME FROM BUSINESS. WE, THEREFORE, DO ITA NO.30/AGR/2015 12 NOT FIND A NY JUSTIFICATION IN SUSTAINING SUCH AN AD HOC OR LUMP - SUM DISALLOWANCE BY THE LD CIT ( A) WITHOUT ANY BASIS. T HEREFORE , WE ARE OF THE CONSIDERED VIEW , THAT NO SUCH ADHOC DISALLOWANCE , CAN BE JUSTIFIED. ACCORDINGLY, THE ADHOC DISALLOWANCE CONFIRMED BY THE BY THE CIT (A) AT RS. 2,00,000 / - OUT OF VARIOUS EXPENSES IS DELETED. THUS, THE GROUND NO. 2 ND IS ALLOWED. 4. GROUND NO. 3 RD AND 4 TH ARE GENERAL IN NATURE WHICH REQUIRE NO SPECIFIC ADJUDICATION. 5. IN THE RESULT, APPEAL IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 31 /03/2017. SD/ - SD/ - (A.D. JAIN) (DR. MITHA LAL MEENA) JUCICIAL MEMBER ACCOUNTANT MEMBER D ATED: 31 /03/2017 *DOC COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR