Excel Commodity & Derivative Pvt. Ltd., Kolkata V. ITO, Ward-5(3), Kolkata, Kolkata

ITA 596/KOL/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2433 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-09-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 26-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PINAKI MUKHERJEE
• Keywords: Set aside
• Section: 144; 145(3)

Judgement Text

1 ITA NO. 596/KOL/2019 EXCEL COMMODITY & DERIVATI VE P. LTD., AY- 2015-16 , SMC , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: K OLKATA ( ) . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 596/KOL/2019 ASSESSMENT YEAR: 2015-16 EXCEL COMMODITY & DERIVATIVE PVT. LTD. (PAN: AAECA4882H) VS INCOME-TAX OFFICER, WARD-5(3), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 02.09.2019 DATE OF PRONOUNCEMENT 04.09.2019 FOR THE APPELLANT SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT SHRI PINAKI MUKHERJEE, ADDL. CIT , SR. DR ORDER THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A)-2, KOLKATA DATED 05.02.2019 FOR AY 2015-16 ON THE FOLL OWING GROUNDS: 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO WAS NOT JUSTIFIED IN MAKING AN AD HOC ADDITION AN AMOUNTING TO RS.3,47,4 02/- BEING 10% OF RS.34,74,027/- UNDER THE HEAD OTHER TRADING EXPENSES. 2. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. AO WAS NOT JUSTIFIED IN MAKING AN AD HOC ADDITION AN AMOUNTING TO RS.87,239 /- BEING 10% OF RS.8,72,390/- UNDER THE HEAD GENERAL EXPENSE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL. 2. THE MAIN ISSUE INVOLVED IN THIS APPEAL OF ASSESS EE IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE ON ACCOUNT OF TRADIN G EXPENSES AND GENERAL EXPENSES CLAIMED BY THE ASSESSEE TO THE TUNE OF RS.43,46,417 /- WHICH THE AO/LD. CIT(A) DISALLOWED TO THE TUNE OF RS.4,34,641/- BEING 10% OF THE CLAIM . 3. BRIEF FACTS OF THE ISSUE AS NOTED BY AO ARE THAT IN THE P&L ACCOUNT, THE ASSESSEE COMPANY DEBITED EXPENSES UNDER THE HEAD OTHER TRADI NG EXPENSES OF RS.34,74,027/- AND GENERAL EXPENSES OF RS.8,72,390/- TOTALING TO RS.43 ,46,417/- WHICH COULD NOT BE VERIFIED 2 ITA NO. 596/KOL/2019 EXCEL COMMODITY & DERIVATI VE P. LTD., AY- 2015-16 PROPERLY DURING THE COURSE OF ASSESSMENT PROCEEDING S FOR WANT OF PROPER EVIDENCES. THE AO FOUND THAT DURING THE COURSE OF TEST CHECKING, S OME BILLS, VOUCHERS WERE MISSING AND SOME ARE SELF-MADE IN RESPECT OF AFORESAID EXPENSES . ACCORDINGLY, THE AO ASKED THE ASSESSEE TO EXPLAIN WHY PART OF THE SAID EXPENDITUR E SHOULD NOT BE DISALLOWED. ACCORDING TO AO, THE ASSESSEE COULD NOT EXPLAIN THE SAME PROPERL Y. HENCE, 10% OF THE SAID EXPENDITURE WHICH COMES TO RS.4,34,641/- WAS DISALLOWED ON ESTI MATE BASIS AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFER RED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER: I HAVE CONSIDERED THE GROUNDS OF APPEAL, STATEMEN T OF FACTS AND SUBMISSION OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLATE COMPANY AS WELL AS THE ORDER OF THE ASSESSING OFFICER FRAMED IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD BEFO RE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. THE AO HAS MENTIONED THAT T HE DURING THE TEST CHECKING, SOME BILLS, VOUCHERS ARE MISSING AND SOME ARE SELF-MADE IN RESP ECT OF AFORESAID EXPENSES. I AGREE WITH THE AO THAT WITHOUT SUPPORTING BILLS AND VOUCHERS I T CANNOT BE HELD THAT THE EXPENSES WERE INCURRED EXCLUSIVELY FOR THE PURPOSE OF THE BUSINES S OF THE ASSESSEE. KEEPING IN VIEW OF THE FACTS AS MENTIONED ABOVE, IN THE ABSENCE OF ANY COG ENT MATERIAL EVIDENCE, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER AND THE SAME IS HEREBY UPHELD. IN VIEW OF ABOVE, THIS GROUND OF APPEAL IS DISMISSED. AGGRIEVED, ASSESSEE IS BEFORE THE TRIBUNAL 4. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE CAREFULLY. IT IS NOTED THAT THE ASSESSEE COMPA NYS ACCOUNTS ARE AUDITED AND THE AO WHILE SCRUTINIZING THE EXPENSES CLAIMED BY THE ASSE SSEE DISALLOWED THE SAME TO THE TUNE OF RS. 4,34,641/- WHICH WAS 10 PERCENTAGE OF THE EXPEN SES CLAIMED BECAUSE THE ASSESSEE PRODUCED BEFORE THE AO SELF-MADE DEBIT VOUCHERS. IT IS ALSO NOTED THAT THE AO COULD HAVE VENTURED INTO ESTIMATION ONLY AFTER REJECTING THE B OOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) AND THEREAFTER BY BEST JUDGMENT ASSESSMENT U/S. 144 OF THE ACT. HERE IN THIS CASE, THE AO HAS NOT PASSED ANY ORDER U/S. 144 OF THE ACT. THE A O THUS WITHOUT REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS GONE FOR ESTIMATION ON SUSPICION AND CONJECTURES THAT THE ASSESSEE MAY BE INFLATING ITS EXPENSES WITH THE SEL F-MADE VOUCHERS. WHILE SCRUTINIZING THE EXPENDITURE IF THE EXPENSES CLAIMED ARE NOT HAVING ANY NEXUS TO THE BUSINESS OF THE ASSESSEE OR IF THERE IS DEFICIENCY IN THE VOUCHERS OR THERE IS NO BILLS SUPPORTING THE INCURRENCE OF AN EXPENDITURE, AT THE MOST EXPENSES TO THE EXTENT THA T ARE NOT SUPPORTED BY THE VOUCHERS CAN BE HELD TO BE NON-GENUINE AND CAN BE DISALLOWED BY THE AO; AND ITEM-WISE THE AO COULD HAVE 3 ITA NO. 596/KOL/2019 EXCEL COMMODITY & DERIVATI VE P. LTD., AY- 2015-16 DISALLOWED THE EXPENDITURE RATHER THAN GOING FOR AD HOC DISALLOWANCE ON PERCENTAGE BASIS OF THE EXPENSES CLAIMED BY THE ASSESSEE WHICH ACTION O F THE AO IS ARBITRARY IN NATURE AND CANNOT BE SUSTAINED. THEREFORE, I SET ASIDE THE LD. CIT(A)S ORDER WHEREIN HE HAD CONFIRMED THE EXPENSES CLAIMED @ 10% OF EXPENSES WHICH IS AN AD HOC DISALLOWANCE. THEREFORE, THE AD-HOC DISALLOWANCE IS DIRECTED TO BE DELETED. OTHE R GROUND OF APPEAL I.E. GROUND NO. 3 IS GENERAL IN NATURE SO DISMISSED. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 4TH SEP TEMBER, 2019. SD/- (ABY. T. VARKEY) JUDICIAL MEMBER DATED :4 TH SEPTEMBER , 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. EXCEL COMMODITY & DERIVATIVE PV T. LTD., CENTRE POINT,21, HEMANT BASU SARANI, 3 RD FLOOR, ROOM -309, KOLKATA-700 001. 2 RESPONDENT ITO, WARD-5(3), KOLKATA 3. 4. CIT(A)- 2, KOLKATA (SENT THROUGH E-MAIL) CIT-, , KOLKATA. 5. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR