Dynamic Engineers, Kota, Kota V. ACIT Circle-1, Kota, Circle-1, Kota

ITA 856/JPR/2019

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9841 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA JCIT DHK
• Assessee Lawyers: D KUMAR
• Keywords: Business income; Depreciation; Business expenditure; Corroborative evidences; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 271(1)(c); 40A(3); 37(1); 73; 13

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A 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 NOS. 856, 857 & 858/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2010-11, 11-12 & 12-13. DYNAMIC ENGINEERS, E-20, INDUSTRIAL AREA, OPPOSITE TO MULTIMETALS, KOTA. CUKE VS. THE ACIT, CIRCLE-1/ THE ITO WARD 1(1) KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAAFD 9332 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI D. KUMAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI K.C. GUPTA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11.12.2019. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/12/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED A GAINST THREE SEPARATE ORDERS OF LD. CIT (A) DATED 06.03.2019, 15.03.2019 & 15.03.2019 FOR THE ASSESSMENT YEARS 2010-11 TO 12-13 RESPECTIVELY. FOR THE ASSES SMENT YEAR 2010-11, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING TRADING ADDITION OF RS. 7,61,166/- BY ESTIMATING GP RATE OF 12% INSTEAD IF GP RATE OF 11.06% SHOWN IN AUDITED B OOKS OF ACCOUNTS VIDE HIS ORDER DATED 06/03/2019 ARBITRARILY. (GROUND NUM BER 1 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 2 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING TH E ACTION OF THE AO BY MAKING DISALLOWANCE OF RS. 169408/- OUT OF TRAVELLI NG EXPENSES BY HOLDING THAT THESE EXPENSES WERE FOR NON BUSINESS P URPOSES VIDE HIS ORDER DATED 06/03/2019 ARBITRARILY. (GROUND NUMBER 2 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DISALLOWANCE OF RS. 35365/- OUT OF ADVERTISING EXPENSES BY HOLDING THAT THESE EXPENSES WERE NON SU PPORTED BY BILLS AND VOUCHERS AND WERE NON BUSINESS PURPOSE VIDE HIS ORD ER DATED 06/03/2019 ARBITRARILY. (GROUND NUMBER 3 OF GROUND OF APPEAL F ILED BEFORE CIT(A)) 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DISALLOWANCE OF RS. 2758/- OUT OF INSURANCE EXPENSES BY HOLDING THAT THESE EXPENSES WERE NON SUPPORTED BY B ILLS VIDE HIS ORDER DATED 06/03/2019 ARBITRARILY. (GROUND NUMBER 4 OF GROUND OF APPEAL FILED BEFORE CIT(A). 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DISALLOWANCE OF RS. 3200/- OUT OF DEPRECIATION ON FACTORY BUILDING VIDE HIS ORDER DATED 06/03/2019 AR BITRARILY. (GROUND NUMBER 5 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DISALLOWANCE OF RS. 3200/- OUT OF JEEP HIRE CHARGES BY HOLDING THAT THESE EXPENSES WERE NON SUPPORTED BY B ILLS VIDE HIS ORDER DATED 06/03/2019 ARBITRARILY. (GROUND NUMBER 6 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 3 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DISALLOWANCE OF RS. 9560/- OUT OF SALES TAX PENALTY VIDE HIS ORDER DATED 06/03/2019 ARBITRARILY. (GROUND NUMBER 7 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DISALLOWANCE OF RS. 18750/- ON ACCOUNT OF EMD FORFEITED/WRITTEN OFF VIDE HIS ORDER DATED 06/03/20 19 ARBITRARILY. (GROUND NUMBER 8 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DISALLOWANCE OF RS. 18118/- ON ACCOUNT OF ARBITRATION FEES RAILWAYS VIDE HIS ORDER DATED 06/03/2019 ARBIT RARILY. (GROUND NUMBER 9 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DISALLOWANCE OF RS. 15615/- OUT OF TELEPHONE EXPENSES VIDE HIS ORDER DATED 06/03/2019 ARBITRARILY. (GROUN D NUMBER 10 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DOUBLE ADDITION OF RS. 7681696/- O N ACCOUNT OF FDR INTEREST, RS. 36500/- ON ACCOUNT OF OTHER INCOME SH OWN IN P&L ACCOUNT AND RS. 30750/- ON ACCOUNT OF OFFICE RENT RECEIVED WHEN ALL SUCH INCOMES HAVE ALREADY BEEN CREDITED TO PROFIT AND LOSS ACCOUNT BY THE ASSESSEE HIMSELF AND AO ASSESSED THEM AS INCOME FROM OTHER SOURCES WITHO UT DEDUCTING THESE INCOMES FROM THE BUSINESS INCOME COMPUTED BY THEM V IDE HIS ORDER DATED 4 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 06/03/2019 ARBITRARY. . (GROUND NUMBER 11 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO BY MAKING DISALLOWANCE OF TDS CLAIM OF RS. 3 9535/- BY HOLDING THAT THE SAME IS DISALLOWABLE IN THE F.Y. 2008-09 AND NO SUCH TDS CREDIT WAS ALLOWED BY HIM IN THE SCRUTINY ASSESSMENT COMPLETED OF FY 2008-09 VIDE HIS ORDER DATED 06/03/2019 ARBITRARY. (GROUND NUMBER 12 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 13. THAT THE APPELLANT CRAVES TO ADD, DELETE, ALTER AND AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TI ME OF HEARING. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND A S UNDER :- THAT AO WAS NOT JUSTIFIED IN MAKING ADDITION OF R S. 7,61,166/- BY INVOKING THE PROVISION OF SECTION 145(3) OF THE INC OME TAX ACT, 1961, PARTICULARLY WHEN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE TRUE AND CORRECT AND TRUE PROFIT CAN BE DEDUCED THERE FROM. LEARNED CIT APPEAL ALSO GROSSLY ERRED IN AFFIRMING THE ORDER OF AO. 2. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R ON THE ADMISSION OF ADDITIONAL GROUND. THE ASSESSEE HAS RAISED THE ISSU E OF VALIDITY OF REJECTION OF BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 14 5(3) OF THE IT ACT. WE FIND THAT THE ASSESSEE HAS CHALLENGED THE REJECTION OF BOOKS OF ACCOUNT BEFORE THE LD. CIT (A) AND THE LD. CIT (A) HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE. THEREFORE, THIS IS NOT A FRESH PLEA RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL BUT THIS IS AN ISSUE ARISING FROM THE IMPUGNED ORDER OF THE LD. CIT (A). HENCE IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE ISSUE RAISED IN THE ADDITIONAL GROUND IS ARISING FROM THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, THE SAME IS ADMITTED FOR ADJUDICATION. 5 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. ON MERITS OF THE ADDITIONAL GROUND : 3. ON MERITS OF THE ADDITIONAL GROUND, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS CARRYING ON BUSINESS OF RAILWA Y CONTRACTOR AND MAINTAINS REGULAR BOOKS OF ACCOUNT DULY SUPPORTED BY PURCHASE S, SALES AND EXPENSES VOUCHERS. THE BOOKS OF ACCOUNTS ARE AUDITED. THE AS SESSEE IS ALSO MAINTAINING QUANTITATIVE TALLY AND DETAILS OF OPENING STOCKS, C LOSING STOCKS AND OTHER DETAILS. THE AO HAS RAISED VARIOUS OBJECTIONS FOR REJECTING THE BOOKS OF ACCOUNT, HOWEVER, THESE OBJECTIONS ARE RELATING TO NON-AVAILABILITY OF SOME VOUCHERS FOR PETTY EXPENSES AND PAYMENTS MADE IN CASH. FURTHER, THE AO HAS ALSO RAI SED THE OBJECTION REGARDING SITE- WISE CONSUMPTION REGISTER NOT MAINTAINED BY THE ASS ESSEE. HE HAS SUBMITTED THAT SOME OF THE PURCHASE BILLS ARE NOT AVAILABLE, WHICH ARE ONLY CASES OF MINOR AND PETTY CASH PURCHASES MADE BY THE ASSESSEE. THEREFORE, ON CE THE PAYMENT OF PETTY CASH PURCHASES ARE WITHIN THE LIMIT UNDER SECTION 40A(3) OF THE IT ACT, THE SAME CANNOT BE A GROUND FOR REJECTION OF BOOKS OF ACCOUNT. HE H AS FURTHER SUBMITTED THAT SINCE THE ASSESSEE IS HAVING ITS CONTRACT SITE IN THE REM OTE AREAS, THEREFORE, SOME OF THE CONSUMABLE GOODS, SAND PURCHASES ARE MADE WITHOUT P ROPER BILLS BUT THE SAME ARE SUPPORTED BY SELF MADE VOUCHERS BY THE ASSESSEE. ON CE THE EXPENSES ARE GENUINE AND INCURRED FOR THE PURPOSES OF BUSINESS, THEN DUE TO THE SURROUNDING CIRCUMSTANCES, NON-AVAILABILITY OF THE PROPER BILLS MAY NOT BE A GROUND FOR REJECTION OF BOOKS OF ACCOUNT. SIMILARLY, THE OTHER PAYMENTS MADE AT THE REMOTE SITES REGARDING MESS, RAIL LOADING, STACKING AND CUTTING ARE SUPPORTED BY SELF MADE VOUCHERS DUE TO NON AVAILABILITY OF PROPER VOUCHERS . THE WORK DONE BY THE ASSESSEE IS VERIFIED BY THE SITE SUPERVISOR AND TDS HAS BEEN DEDUCTED, THEREFORE, THE PAYMENTS CANNOT BE SAID TO BE NOT VERIFIABLE. SIMI LARLY, THE PAYMENTS REGARDING 6 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. TRANSPORT EXPENSES AT THE SITE ARE ALSO SUPPORTED B Y SELF MADE VOUCHERS BUT ALL THESE EXPENDITURES ARE VERIFIED BY THE SITE SUPERVI SOR AND ALSO SUBJECTED TO TDS, THEREFORE, THIS CANNOT BE A GROUND FOR REJECTION OF BOOKS OF ACCOUNT. AS REGARDS THE SITE-WISE CONSUMPTION REGISTER, THE LD. A/R HAS SUB MITTED THAT IT IS NOT PRACTICALLY POSSIBLE TO MAINTAIN SITE-WISE CONSUMPTION REGISTER WHEN THE ASSESSEE IS WORKING AT DIFFERENT SITES AND AS PER THE PRACTICE FOLLOWED, T HE ASSESSEE PHYSICALLY VERIFIES THE WORK-IN-PROGRESS AT THE END OF EACH FINANCIAL YEAR. THE CLOSING STOCK-IN-PROGRESS IS DETERMINED BASED ON THE PHYSICAL VERIFICATION OF TH E WORK. THUS THE LD. A/R HAS CONTENDED THAT WHEN THE ASSESSEE IS MAINTAINING BOO KS OF ACCOUNT IN REGULAR COURSE OF BUSINESS DULY SUPPORTED BY THE DETAILS AND VOUCH ERS, THEN THE REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) IS NOT JUSTIFIED. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE AO HAS GIVEN A DETAILED FINDING OF FACT REGARDING THE VARIOUS DEFE CTS IN THE BOOKS OF ACCOUNT AND PARTICULARLY THE CLAIM OF DIRECT EXPENSES CLAIMED B Y THE ASSESSEE. THE ASSESSEE HAS NOT GIVEN A SATISFACTORY REPLY TO THESE OBJECTIONS RAISED BY THE AO. ACCORDINGLY, THE TRUE AND CORRECT PROFIT CANNOT BE DEDUCED FROM THE BOOKS OF THE ASSESSEE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS ENGAGED IN THE RAILWAY CON TRACT WORK AND FILED ITS RETURN OF INCOME ON 28.09.2010 DECLARING TOTAL INCOME OF RS. 1,75,49,603/-. DURING THE SCRUTINY ASSESSMENT, THE AO ASKED THE ASSESSEE TO F URNISH THE BOOKS OF ACCOUNT AS WELL AS OTHER DETAILS AND SUPPORTING EVIDENCES. FR OM PERUSAL OF THE BOOKS OF ACCOUNT AND OTHER DETAILS FILED BY THE ASSESSEE, TH E AO NOTICED VARIOUS DEFECTS WHICH ARE ENLISTED IN PARA 3 OF THE ASSESSMENT ORDE R AS UNDER :- 7 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. I) WHEN RECONCILING THE TDS RECEIPTS, A TDS OF RS . 39,535 (GROSS RECEIPTS 17,44,660) HAS NOT BEEN RELATED TO THE YEA R UNDER CONSIDERATION. IT WAS RELATED TO PREVIOUS YEAR, I.E . AY 2009-10. II) ON PERUSAL OF DIRECT EXPENSES, IT IS FOUND THAT THE FOLLOWING DISCREPANCIES WERE IN THE BOOKS OF ACCOUNT OF THE A SSESSEE FIRM- A) SOME PURCHASE BILLS ARE NOT AVAILABLE AND SOME PAYM ENTS WERE PAID IN CASH. B) CONSUMABLE GOODS, PURCHASES OF SAND WERE MADE IN SE LF MADE VOUCHERS. C) LABOUR CHARGES : ASSESSEE HAS SUBMITTED MUSTER ROLL WHERE ONLY NAME OF PERSON IS APPEARING AND DUE TO FULL PA RTICULARS OF LABOURS, PROPER VERIFICATION IS NOT POSSIBLE. D) EXPENSES ON MESS, RAIL LOADING, STACKING AND CUTTIN G ARE ALSO SUPPORTED BY SELF MADE VOUCHERS WHICH IS NOT VERIFI ABLE IN NATURE. E) TRANSPORTATION EXPENSES; SOME EXPENSES WERE PARTLY SUPPORTED BY THIRD PARTY VOUCHERS. F) SITE-WISE CONSUMPTION REGISTER DID NOT MAINTAIN. THE AO ACCORDINGLY ISSUED A SHOW CAUSE NOTICE DATED 08.03.2013 TO THE ASSESSEE ASKING AS TO WHY THE BOOKS SHOULD NOT BE REJECTED U NDER SECTION 145(3) OF THE ACT. IN RESPONSE, THE ASSESSEE FILED ITS REPLY ON 11.03. 2013 AND CONTENDED THAT SOME OF THE EXPENSES/PURCHASES ARE SUPPORTED ONLY BY SELF M ADE VOUCHERS DUE TO THE REASON THAT THESE ARE PETTY CASH PURCHASES WITHIN THE LIMI T UNDER SECTION 40A(3) OF THE ACT. IT IS PERTINENT TO NOTE THAT THE ASSESSEE CANNOT TA KE SHELTER UNDER SECTION 40A(3) OF THE ACT TO SUBSTANTIATE ITS CLAIM OF PURCHASES AND OTHER EXPENSES WITHOUT PROPER VOUCHERS. PROVISIONS OF SECTION 40A(3) ARE INVOKED IRRESPECTIVE OF AN EXPENDITURE OTHERWISE NOT DISALLOWED UNDER SECTION 37(1) OF THE ACT. THEREFORE, THIS EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED WHEN THE AO HAS SPECIFICALLY RAISED THE QUERY ABOUT THE SUPPORTING EVIDENCE IN RESPECT OF VARIOUS CLAIMS MADE BY THE ASSESSEE. THE SECOND EXPLANATION OF THE ASSESSEE IS THAT THE VARIOUS EXPENDITURES WERE 8 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. INCURRED AT THE REMOTE SITES OF THE ASSESSEE AND, T HEREFORE, THE PROPER VOUCHERS WERE NOT AVAILABLE WITH THE ASSESSEE BUT ONLY SELF MADE VOUCHERS WERE PRODUCED BY THE ASSESSEE IN SUPPORT OF THE CLAIMS. IT IS PERTI NENT TO NOTE THAT THE ASSESSEE IS WORKING AS A RAILWAY CONTRACTOR AND, THEREFORE, THE CLAIM OF THE ASSESSEE FOR INCURRING EXPENDITURE IN THE PROCESS OF EXECUTING T HE CONTRACT WORK IS REQUIRED TO BE SUPPORTED BY PROPER VOUCHERS. IT IS NOT A RARE INC IDENT OF SMALL CLAIM OR ONLY FEW EXPENDITURES BUT THE AO HAS POINTED OUT SO MANY INS TANCES OF THE CLAIM OF EXPENSES RIGHT FROM VARIOUS PURCHASES, CONSUMABLE ITEMS, MES S, RAIL LOADING, UNLOADING, CUTTING EXPENSES, TRANSPORTATION EXPENSES. THEREFO RE, WHEN THERE IS GROSS FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE THE SUPPORTING EVIDENCE AND IT IS NOT AN ISOLATED INSTANCE BUT IT APPEARS TO BE THE CLAIM ON WHOLESAL E BASIS WITHOUT SUPPORTING WITH PROPER VOUCHERS, THEN THE EXPLANATION FURNISHED BY THE ASSESSEE THAT THE ASSESSEE IS EXECUTING THE WORK AT REMOTE SITES CANNOT BE ACCEPT ED. AS REGARDS THE SITE-WISE CONSUMPTION REGISTER, THE AO HAS EXPRESSED HIS INAB ILITY TO VERIFY THE CORRECTNESS OF THE CLOSING STOCK INCLUDING WORK-IN-PROGRESS DUE TO NON-AVAILABILITY OF SITE-WISE CONSUMPTION REGISTER. EVEN THE ASSESSEE IS NOT DIS PUTING THIS FACT THAT IT IS NOT MAINTAINING THE SITE-WISE CONSUMPTION REGISTER AND THE CLOSING STOCK INCLUDING THE WORK-IN-PROGRESS IS DETERMINED ONLY ON PHYSICAL VER IFICATION. THEREFORE, IN THE ABSENCE OF THE PROPER RECORD OF THE CONSUMPTION OF MATERIAL, THE CORRECTNESS OF THE CLOSING STOCK OF THE ASSESSEE COULD NOT BE VERIFIED BY THE AO. WE FURTHER NOTE THAT THE AO HAS RAISED A SPECIFIC OBJECTION REGARDING TD S RECEIPTS NOT RELATING TO THE YEAR UNDER CONSIDERATION BUT RELATES TO THE ASSESSMENT Y EAR 2009-10 AND WHEN THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION ON THIS OBJE CTION, THEN HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED AB OVE, WE DO NOT FIND ANY ERROR OR 9 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. ILLEGALITY IN THE ORDERS OF THE AUTHORITIES BELOW I N REJECTING THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T. GROUND NO. 1 IS REGARDING TRADING ADDITION BY ADOPT ING GP RATE AT 12% AS AGAINST THE GP RATE OF 11.06% DECLARED BY TH E ASSESSEE. 6. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT D URING THE FINANCIAL YEAR THE ASSESSEE HAS DECLARED GP RATE OF 11.06% WHICH IS BE TTER THAN THE GP RATE OF 10.79% DECLARED IN THE LAST YEAR. HE HAS THUS CONT ENDED THAT THE REJECTION OF BOOKS OF ACCOUNT WOULD NOT IPSO FACTO RESULT IN ADDITION IF THE ASSESSEE HAS DECLARED A BETTER RESULT OR IN LINE WITH THE PAST HISTORY OF G P DECLARED BY THE ASSESSEE. THUS THE LD. A/R HAS SUBMITTED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT (A) MAY BE DELETED. 7. ON THE OTHER HAND, THE D/R HAS SUBMITTED THAT TH E AO HAS ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING GP AT 12% WHICH IS VERY REASONABLE AND PROPER HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT AFTER REJECTING T HE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT, THE INCOME OF THE ASSESSEE IS RE QUIRED TO BE ESTIMATED ON SOME REASONABLE AND PROPER BASIS. THE PAST HISTORY OF GP DECLARED BY THE ASSESSEE IS A PROPER GUIDANCE FOR ESTIMATION OF INCOME IN PURSUAN T TO THE REJECTION OF BOOKS OF ACCOUNT. IN THE CASE IN HAND, THE ASSESSEE HAS DEC LARED GP AT 11.06%. THE ASSESSEE ALSO FURNISHED THE COMPARATIVE DETAILS OF GP DECLARED BY THE ASSESSEE FOR THE PRECEDING YEARS INCLUDING CURRENT YEAR AS UNDER :- 10 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. PARTICULARS FY 2007 - 08 FY 2008 - 09 FY 2009 - 10 SALES 9,86,19,448 8,59,02,816 8,08,18,835 GROSS PROFIT 1,18,33,739 92,70,173 89,37,103 NET PROFIT BEFORE INTEREST AND REMUNERATION TO PARTNERS. 55,15,568 51,64,667 41,17,011 GP RATIO 11.99% 10.79% 11.06% FOR THE ASSESSMENT YEAR 2008-09 THE ASSESSEE DECLAR ED GP AT 11.99%, FOR THE ASSESSMENT YEAR 09-10 THE ASSESSEE DECLARED GP AT 1 0.79%. HOWEVER, THERE WAS AN ADDITION MADE BY THE AO AND AFTER THE ADDITION S USTAINED BY THE LD. CIT (A), THE GP FOR THE ASSESSMENT YEAR 2009-10 COMES TO 11.02%. THEREFORE, EVEN IF TAKING THE AVERAGE OF PRECEDING TWO YEARS WHICH COMES TO 1 1.05%, THE GP DECLARED BY THE ASSESSEE AT 11.06% CANNOT BE SAID TO BE AT THE LOWE R SIDE OR ANY SIGNIFICANT DECLINE IN GP. ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE ASSESSEE HAS DECLARED THE GP IN LINE WITH THE PAST HISTORY O F THE ASSESSEE WHICH HAS ATTAINED THE FINALITY, THE ADOPTION OF GP RATE BY THE AO WIT HOUT ANY BASIS CANNOT BE ACCEPTED. HENCE THE TRADING ADDITION MADE BY THE AO IS DELETE D. GROUND NOS. 2 TO 10 ARE REGARDING ADHOC DISALLOWANC E MADE BY THE AO ON ACCOUNT OF VARIOUS EXPENSES FOR WANT OF PROPE R SUPPORTING VOUCHERS. 9. THE FIRST DISALLOWANCE MADE BY THE AO IS REGARDI NG TRAVELLING EXPENSES. THE ASSESSEE HAS CLAIMED A SUM OF RS. 5,96,402/- AS TRA VELLING EXPENSES. THE AO WHILE EXAMINING THE LEDGER ACCOUNT OF THE ASSESSEE, FOUND THAT SHRI SHAILENDRA GUPTA WHO IS PARTNER OF THE ASSESSEE FIRM HAS PERFORMED MONTH LY JOURNEY TO JAMMU, DELHI, KOLKATA AND MUMBAI FOR PERSONAL PURPOSES. ACCORDIN GLY, THE AO HAS IDENTIFIED VARIOUS EXPENSES RELATING TO PERSONAL JOURNEY OF TH E PARTNER OF THE ASSESSEE FIRM AND 11 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. MADE A DISALLOWANCE OF RS. 1,69,408/-. THE LD. CIT (A) HAS CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO. 10. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBM ITTED THAT SINCE THE ASSESSEE IS DOING RAILWAY CONTRACT WORK, IT REQUIRES FREQUEN T TRAVELLING FOR BUSINESS PURPOSES SUCH AS SUBMISSION OF TENDER, PROVIDING SAMPLES, AT TENDING TENDER OPENING MEETING, SUBMISSION OF BILLS ETC. THUS THE LD. A/R HAS SUBMI TTED THAT THERE IS NO BASIS FOR TREATING THESE EXPENSES AS PERSONAL IN NATURE, BUT THE AO HAS ASSUMED THAT CERTAIN JOURNEYS WERE UNDERTAKEN BY THE PARTNER OF THE ASSE SSEE FIRM FOR HIS PERSONAL PURPOSES, HENCE THE DISALLOWANCE MADE BY THE AO IS ARBITRARY AND NOT JUSTIFIED. 11. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED TH AT THE AO HAS VERIFIED THE LEDGER ACCOUNT OF THE ASSESSEE FIRM AND DETECTED VA RIOUS EXPENSES REGARDING THE MONTHLY JOURNEY OF THE PARTNER OF THE ASSESSEE FIRM TO CERTAIN CITIES LIKE JAMMU, DELHI, KOLKATA AND MUMBAI. THE ASSESSEE INSTEAD OF SUPPORTING ITS CLAIM OF EXPENSES HAS RAISED THE OBJECTION THAT THE AO HAS N OT BROUGHT ANY MATERIAL ON RECORD THAT THESE JOURNEYS ARE PERSONAL IN NATURE. THE LD. D/R HAS CONTENDED THAT THE PRIMARY ONUS IS ON THE ASSESSEE TO SUBSTANTIATE THE CLAIM. ONCE THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS, THE BURDEN CANNOT BE SHIFTED TO THE AO. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE THE DISALLOWANCE OF CERTAIN TRAVELLING EXPENSES AS UNDER :- THE ASSESSEE FIRM HAS DEBITED RS. 5,96,402/- AS T RAVELLING EXPENSES. WHILE EXAMINING THE LEDGER ACCOUNT OF THE FIRM, IT HAS BEEN NOTICED THAT SHRI SHAILENDRA GUPTA HAD PERFORMED ALMOST MON THLY JOURNEY TO JAMMU, DELHI, KOLKATA, MUMBAI CENTRAL FOR PERSONAL PURPOSE. ON THIS JOURNEY FOLLOWING DATE WISE EXPENSES WERE DEBITED : - A) 01.05.2009 RS. 45,393 B) 01.10.2009 RS. 42,356 C) 25.09.2009 RS. 8,400 12 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. D) 03.09.2009 RS. 24,714 E) 28.08.2009 RS. 12,000 F) 06.08.2009 RS. 8,561 G) 28.10.2009 RS. 9,534 H) 21.12.2009 RS. 7,950 I) 30.01.2010 RS. 10,500 -------------- TOTAL : RS. 1,69,408 --------------- THE AR OF THE ASSESSEE WAS ASKED TO JUSTIFY THE ABO VE CLAIM. HOWEVER, THE A.R HAS NOT OFFERED ANY SATISFACTORY EXPLANATIO N. EVEN, SOME BILLS WERE RELATED TO THEIR FAMILY TOURS AND MATA VAISNO DEVI DARSHAN. THEREFORE, ABOVE TOTAL EXPENDITURE OF RS. 1,69,408/ - IS DISALLOWED TREATED AS NON BUSINESS EXPENDITURE AND ADDED TO TO TAL INCOME OF THE ASSESSEE. IT IS CLEAR THAT OUT OF THE TOTAL EXPENDITURE OF RS . 5,96,402/-, THE AO SELECTED 9 (NINE) VISITS OF THE PARTNER OF THE ASSESSEE UNDERT AKEN ALMOST MONTHLY BASIS TO JAMMU, DELHI, KOLKATA AND MUMBAI. THE AO HAS ALSO REFERRED THAT SOME BILLS WERE RELATED TO FAMILY TOURS TO MATA VAISNO DEVI DARSHAN . THE ASSESSEE HAS NOT SPECIFICALLY DISPUTED THOSE FACTS AS DETECTED BY TH E AO FROM THE BILLS. ACCORDINGLY, IN THE ABSENCE OF THE CLAIMS DULY SUBSTANTIATED BY THE ASSESSEE TO PROVE THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, THE ASSESSEE HAS NOT DISCHARGED ITS PRIMA RY ONUS. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE A UTHORITIES BELOW QUA THE DISALLOWANCE OF TRAVELLING EXPENSES. 13. ADVERTISEMENT EXPENSES : THE AO HAS MADE A DISALLOWANCE OF RS. 9,200/- ON ACCOUNT OF ADVERTISEMENT EXPENSES FOR WANT OF SU PPORTING BILLS AND VOUCHERS. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT DURI NG THE ASSESSMENT PROCEEDINGS 13 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. THE ASSESSEE SUBMITTED ALL THE RELEVANT DETAILS AND SUPPORTING BILLS AS WELL AS THE BOOKS OF ACCOUNT TO PROVE THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. 14. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED TH AT THE AO HAS SPECIFICALLY POINTED OUT CERTAIN EXPENSES CLAIMED ON ACCOUNT OF ADVERTISEMENT ARE NOT SUPPORTED BY ANY BILL OR VOUCHER. HE HAS RELIED UPON THE ORDE RS OF THE AUTHORITIES BELOW. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS DISCUSSED THIS ISSUE AND MADE A DISALLOWANCE OF RS. 9200/- AS UNDER :- THE ASSESSEE FIRM HAS DEBITED RS. 35,365/- AS ADV ERTISEMENT EXPENSES. WHILE EXAMINING THE LEDGER ACCOUNT OF THE FIRM, IT HAS BEEN NOTICED THAT FOLLOWING EXPENSES WERE DEBITED ONLY. BUT, NEITHER SUPPORTED BY BILLS AND VOUCHERS NOR INCIDENTAL TO T HE BUSINESS. DATE AMOUNT 18.08.2009 RS. 5,000 28.08.2009 RS. 2,100 14.11.2009 RS. 2,100 RS. 9,200 ------------ THEREFORE, ABOVE TOTAL EXPENDITURE OF RS. 9,200/- I S DISALLOWED AND ADDED TO TOTAL INCOME OF THE ASSESSEE. THE AO HAS TAKEN THREE ENTRIES OF EXPENDITURE TOTAL AMOUNTING TO RS. 9,200/- WHICH ARE NOT SUPPORTED BY ANY BILL OR VOUCHER NOR INCIDE NTAL TO BUSINESS. ALTHOUGH THE ASSESSEE HAS OBJECTED TO THE DISALLOWANCE MADE BY T HE AO, HOWEVER, THE ASSESSEE HAS NOT FURNISHED ANY SUPPORTING DOCUMENTARY EVIDEN CE IN RESPECT OF THIS EXPENDITURE OF RS. 9,200/-. THUS IN THE ABSENCE OF SUPPORTING DOCUMENTARY EVIDENCE, THE EXPENDITURE INCURRED ON ACCOUNT OF AD VERTISEMENT CANNOT BE ALLOWED. 14 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 16. INSURANCE EXPENSES : THE AO HAS MADE A DISALLOWANCE OF RS. 2,758/- REGARDING INSURANCE EXPENSES FOR WANT OF SUPPORTING RECEIPTS. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE SUBMITTED COMPLETE INFORMATION SUPPORTED BY DOCUMENTS. THE CASH PAYMENT FOR PETTY EXPENSES A RE ALLOWABLE, THEREFORE, THE DISALLOWANCE MADE BY THE AO IS NOT JUSTIFIED. 17. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED TH AT SINCE THE ASSESSEE HAS NOT PRODUCED THE RECEIPTS FOR PAYMENT OF INSURANCE PREM IUM, THE CLAIM OF RS. 2,758/- CANNOT BE ALLOWED. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE A DISALLOWANCE OF RS. 2,758 /- ON ACCOUNT OF INSURANCE EXPENSES AS UNDER :- ASSESSEE FIRM HAS DEBITED RS. 63,821/- ON ACCOUNT OF INSURANCE EXPENSES. WHILE EXAMINING THE LEDGER ACCOUNT OF THE FIRM, IT HAS BEEN NOTICED THAT ASSESSEE DEBITED RS. 2,758/- ON 30.06. 2009, BUT DID NOT SUPPORTED BY RECEIPT. THEREFORE, RS. 2,758/- IS ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. IT IS CLEAR THAT THE AO HAS MADE THE DISALLOWANCE O N THE GROUND FOR WANT OF SUPPORTING RECEIPT. THE INSURANCE PREMIUM CANNOT B E CLAIMED WITHOUT SUPPORTING RECEIPT AS IT IS BOUND TO BE PAID AGAINST THE RECEI PT. EVEN OTHERWISE, THE ASSESSEE HAS NOT FURNISHED ANY OTHER SUPPORTING EVIDENCE TO SHOW THAT THE PAYMENT WAS MADE FOR TAKING THE INSURANCE AND FOR THE PURPOSE O F BUSINESS OF THE ASSESSEE. ACCORDINGLY, IN THE ABSENCE OF ANY SUPPORTING EVIDE NCE REGARDING THE SAID EXPENDITURE ON INSURANCE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE AUTHORITIES BELOW. 15 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 19. DEPRECIATION ON BUILDING : WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HA S DISALLOWED THE CLAIM OF RS. 3,716/- ON RESIDENTIAL BUILDING AS UNDER :- ASSESSEE FIRM DEBITED DEPRECIATION OF RS. 3,716/- ON BUILDING (RESI.). SINCE DEPRECIATION ON RESIDENTIAL BUILDING IS NOT A LLOWABLE. THOUGH, THE A.R STATED THAT THE QUARTER OF CHOWKIDAR WHO STAY I N THE FACTORY PREMISES. HOWEVER, IT IS NOT ALLOWABLE, BECAUSE THE ASSESSEE HAS ALREADY CHARGED DEPRECIATION ON FACTORY BUILDING. T HEREFORE, RS. 3,716/- IS ADDED TO THE INCOME OF THE ASSESSEE. THE FACTS POINTED OUT BY THE AO THAT THE CHOWKIDAR QUARTER IS IN THE FACTORY PREMISES ITSELF ON WHICH THE ASSESSEE HAS CLAIMED D EPRECIATION WHICH WAS ALLOWED. THEREFORE, A SEPARATE DEPRECIATION ON THE PART OF T HE FACTORY BUILDING CANNOT BE ALLOWED. IN THE ABSENCE OF ANY CONTRARY FACTS BROUG HT BEFORE US, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE AUTHORITIE S BELOW. 20. JEEP HIRE CHARGES : WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R. THE AO HAS MADE A DISALLOWANCE OF RS. 3200/- AS UNDER : - ASSESSEE FIRM HAS DEBITED RS. 3,200/- ON ACCOUNT OF JEEP HIRE CHARGES. WHILE EXAMINING THE LEDGER ACCOUNT OF THE FIRM, IT HAS BEEN NOTICED THAT ASSESSEE DEBITED RS. 3,200/-, BUT DID NOT SUPPORTED BY BILLS AND VOUCHERS. FURTHER, PAYMENT HAS BEEN MADE IN CASH. THEREFORE, MANIPULATION CANNOT BE RULED OUT AND HEN CE, RS. 3,200/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE CLAIMED JEEP HIRE CHARGES OF RS. 3,200 /- BUT THE AO FOUND THAT NO SUPPORTING BILL OR VOUCHER HAS BEEN FURNISHED BY TH E ASSESSEE. EVEN THE PAYMENT WAS CLAIMED TO HAVE BEEN MADE IN CASH. THE ASSESSEE HAS FAILED TO PRODUCE ANY MATERIAL FOR THE CLAIM OF EXPENDITURE INCURRED FOR HIRING OF THE JEEP FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THEREFORE, IN THE ABS ENCE OF ANY SUPPORTING EVIDENCE OR OTHER MATERIAL EVEN TO PROVE THAT THE JEEP WAS A CTUALLY HIRED BY THE ASSESSEE FOR 16 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. THE PURPOSE OF BUSINESS OF THE ASSESSEE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE AUTHORITIES BELOW. 21. SALES TAX PENALTY : WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE THE DISALLOWANCE OF RS. 9,560/- TOWARDS SALES TAX PENALTY AS UNDER :- THE ASSESSEE HAS DEBITED RS. 3,15,759/- IN THE P & L ACCOUNT UNDER THE HEAD OF SALES TAX DEMAND. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.R HAS SUBMITTED COPY OF SALES AS SESSMENT ORDERS AND FOUND THAT OUT OF TOTAL CLAIMED, PENALTY DEMAND S WERE OF RS. ,3,580+3,580+1200= RS. 9,560/-. SINCE, THE PENALTY DEMAND IS NOT ALLOWABLE EXPENSES, HENCE, RS. 9,560/- IS DISALLOWE D AND ADDED TO THE TOTAL INCOME. THE AO HELD THAT THE SAID AMOUNT AS CLAIMED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT UNDER THE HEAD SALES TAX DEMAND IS TOWARD S THE PENALTY NOT ALLOWABLE UNDER SECTION 37(1) OF THE IT ACT. 22. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBM ITTED THAT THIS AMOUNT TOWARDS THE INTEREST FOR DELAY IN SUBMISSION OF RETURN AND DEPOSIT OF TAX IS AN ALLOWABLE EXPENDITURE. ON THE OTHER HAND, THE LD. D/R HAS RE LIED UPON THE ORDERS OF THE AUTHORITIES BELOW. IT IS CLEAR FROM THE ASSESSMENT ORDER THAT THIS AMOUNT IS PART OF THE TOTAL SALES TAX DEMAND ARISING FROM THE SALES-T AX ASSESSMENT ORDER, THEREFORE, THIS IS NOT AN AMOUNT OF PENALTY SEPARATELY LEVIED BY THE SALES TAX AUTHORITY BUT IT IS ONLY A CHARGE OR LEVY FOR IRREGULARITIES IN FILING THE RETURN OR LATE PAYMENT OF TAX. THEREFORE, THIS WOULD BE PART OF THE SALES-TAX DEMA ND AND IS AN ALLOWABLE CLAIM. 23. EMD FORFEITED WRITTEN OFF : THE AO HAS MADE THE DISALLOWANCE OF CLAIM OF RS. 18,750/- ON ACCOUNT OF EARNEST MONEY FORFEITED AND WRITTEN OFF AS UNDER : THE ASSESSEE HAD CLAIMED UNDER THIS HEAD OF RS. 1 8,750/-. IN COURSE OF ASSESSMENT PROCEEDINGS, THE A.R WAS ASKED TO PRO DUCE THE DETAILS. 17 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. THE A.R. ONLY STATED THAT THE ASSESSEE MADE A TENDE R OF FA & CAO, CHURCH GATE AND SINCE, THE TENDER IS LIABLE TO FORF EITED AS PER THE TERMS & CONDITION. THE A.R COULD NOT SUBMIT THE DOCUMENTS . IN ABSENCE OF THE SAME, IT IS DISALLOWED AND ADDED TO THE TOTAL I NCOME. 24. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS EXPLAINED THA T THE ASSESSEE MADE A TENDER WITH FA & CAO MUMBAI, HOWEVER, IT WAS FORFEITED AS PER THE TERMS AND CONDITIONS AND CONSEQUENTLY THE ASSESSEE HAD TO FOREGO THE EAR NEST MONEY DEPOSITED. THE SAID AMOUNT WAS WRITTEN OFF BY THE ASSESSEE IN THE BOOKS AND CLAIMED AS BUSINESS EXPENDITURE. THE AO HAS DISALLOWED THE CLAIM FOR WA NT OF DOCUMENTS. HOWEVER, IF THE AMOUNT DEPOSITED BY THE ASSESSEE IN RESPECT OF THE TENDER AND THE EARNEST MONEY WAS FINALLY FORFEITED BY THE RAILWAY AUTHORIT IES, THEN THE FORFEITURE WOULD BE AN ALLOWABLE BUSINESS EXPENDITURE AS THIS IS THE RE GULAR BUSINESS ACTIVITY OF THE ASSESSEE AND THE EXPENDITURE WAS INCURRED FOR THE P URPOSE OF BUSINESS OF THE ASSESSEE. ONCE THE PAYMENT OF THE SAID AMOUNT IS N OT IN DISPUTE AND THE FORFEITURE OF THE EARNEST MONEY BY THE AUTHORITIES IS ALSO IND EPENDENTLY VERIFIABLE, THEN THE CLAIM OF THE ASSESSEE IS AN ALLOWABLE BUSINESS EXPE NDITURE. 25. ARBITRATION FEE RAILWAYS : THE AO HAS DISALLOWED THE ARBITRATION FEE OF RS. 18,118/- AS UNDER :- THE ASSESSEE HAS DEBITED OF RS. 23,618/- UNDER TH IS HEAD. IN COURSE OF ASSESSMENT PROCEEDINGS, THE A.R HAD ONLY PRODUCE D A BILLS OF RS. 5,500/- ON 23.04.2009 WHICH WAS PAID IN CASH TO K.B .B. MODY FOR TENDER. BUT, A BILL OF RS. 18,118/- WAS NOT PRODUCE D BY THE A.R TO PROVE ACTUAL EXPENSES AND WHETHER IT WAS INCIDENTAL TO BUSINESS OR NOT. SIMPLY, AS PER LEDGER, IT WAS FOUND THAT CASH WAS PAID TO K.B. MODY, BUT PURPOSE OF PAYMENT IS NOT CLEAR. THEREFOR E, THE SUM OF RS. 18,118/- IS DISALLOWED TREATING AS NON BUSINESS EXP ENSES AND ADDED TO THE TOTAL INCOME. 18 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 26. THE AO HAS MADE THE DISALLOWANCE OF THE CLAIM O F RS. 18,118/- FOR WANT OF ANY BILL. THE AO HAS NOTICED THAT THE PAYMENT WAS MADE IN CASH BY THE ASSESSEE TO ONE SHRI K.B. MODY, BUT SINCE THE ASSESSEE HAS NOT PRODUCED THE BILL, THE AO HAS DISALLOWED THE SAID EXPENDITURE AS NON BUSINESS EXP ENDITURE. ONCE THE ASSESSEE HAS CLAIMED THAT THIS EXPENDITURE IS TOWARDS ARBITR ATION FEE AND THE DISPUTE WAS BETWEEN THE ASSESSEE AND RAILWAYS REGARDING THE BUS INESS WORK OF THE ASSESSEE THEN THE SAID EXPENDITURE IS AN ALLOWABLE CLAIM. AC CORDINGLY THE DISALLOWANCE MADE BY THE AO IS DELETED. 27. TELEPHONE EXPENSES : THE AO HAS MADE A DISALLOWANCE OF TELEPHONE EXPENSES AS UNDER :- THE ASSESSEE HAD CLAIMED UNDER THIS HEAD OF RS. 1 ,72,234/-. ON PERUSAL OF DETAILS, IT IS FOUND THAT THE ASSESSEE F IRM HAD CLAIMED THE FOLLOWINGS BILLS OF TELEPHONES WHICH WERE NOT RELAT ED TO BUSINESS 0744-2406761 HOME RS. 1,553/- 0744-2406561 PARTNERS RESIDENCE RS. 1,010/- 94133-52723 SHREE SHIVAM ENTERPRISE RS. 2,586/- 0744-2481723 SHREE SHIVAM ENTERPRISE RS. 1,166/- 0744-3299171 SHAILENDRA GUPTA RS. 2,200/- MOBILE SET RS. 7,100/- CAPITAL EXPENSES -------------- RS. 15,615/- -------------- THE AFORESAID NON BUSINESS BILLS WERE BROUGHT TO TH E NOTICE OF THE A.R. BUT THE A.R DID NOT EXPLAIN PROPERLY. AS THE AFORES AID BILLS ARE NOT RELATED WITH THE BUSINESS, IT IS DISALLOWED AND ADD ED TO THE TOTAL INCOME. BUT, BILL OF MOBILE SET IS CAPITAL IN NATUR E. THEREFORE, DEPRECIATION @ 15% OF RS. 7,100/- I.E. RS. 1065/- I S ALLOWED. 28. THE AO FOUND THAT THE VARIOUS TELEPHONES FOR WH ICH THE ASSESSEE HAS CLAIMED THE EXPENSES ARE AT THE RESIDENCE OF THE PARTNERS A ND SOME OF THE TELEPHONES ARE NOT BELONGING TO ASSESSEE. FURTHER, THE EXPENDITUR E TOWARDS MOBILE SET WAS ALSO 19 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. TREATED AS CAPITAL EXPENDITURE. THE AO HAS ALLOWED THE DEPRECIATION ON THE SAID CAPITAL EXPENDITURE. THE LD. A/R OF THE ASSESSEE HA S SUBMITTED THAT THOUGH THE TELEPHONES WERE INSTALLED AT THE RESIDENCE OF THE P ARTNERS, HOWEVER, THE USE OF THE TELEPHONE AT THE RESIDENCE OF THE PARTNERS FOR BUSI NESS PURPOSES HAS NOT BEEN APPRECIATED BY THE AO. 29. THE LD. D/R HAS RELIED UPON THE ORDERS OF THE A UTHORITIES BELOW. 30. HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE NOT E THAT THE AO HAS MADE THE DISALLOWANCE OF RS. 14,550/- OUT OF THE TOTAL EXPEN SES OF RS. 1,72,234/- ON ACCOUNT OF TELEPHONE EXPENSES. THE AO HAS POINTED OUT SPECI FIC FACTS REGARDING CERTAIN TELEPHONES WHICH WERE INSTALLED AT THE RESIDENCE OF THE PARTNERS AND SOME OTHERS WERE NOT RELATED TO THE ASSESSEE FIRM. THESE FACTS HAVE NOT BEEN DISPUTED BY THE ASSESSEE. FURTHER, THE ASSESSEE HAS ALSO CLAIMED PU RCHASE OF MOBILE SET AS REVENUE EXPENDITURE WHICH WAS DISALLOWED BY THE AO TREATING THE SAME AS CAPITAL EXPENDITURE AND DEPRECIATION ON THE SAID CLAIM WAS ALLOWED. HENCE IN VIEW OF THESE FACTS, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN TH E ORDERS OF THE AUTHORITIES BELOW. 31. GROUND NOS. 11 & 12 ARE NOT PRESSED BY THE LD. A/R OF THE ASSESSEE AND THE SAME ARE DISMISSED AS NOT PRESSED. 32. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 857/JP/2019 A.Y. 2011-12 : 33. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS 2 52066/- OUT 20 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. OF SALES TAX PENALTY ARBITRARILY. (GROUND NUMBER 1 OF GROUND OF APPEAL FILED BEFORE CIT(A). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS 2 3900/- OUT OF CONVEYANCE EXPENSES ARBITRARILY. (GROUND NUMBER 2 O F GROUND OF APPEAL FILED BEFORE CIT(A)) 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS 4 2000/- OUT OF VEHICLE HIRING EXPENSES ARBITRARILY. (GROUND NUMBER 3 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS 5 7331/- OUT OF TRAVELLING EXPENSES ARBITRARILY. (GROUND NUMBER 4 O F GROUND OF APPEAL FILED BEFORE CIT(A)) 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS 8 285/- OUT OF WORKMEN AND STAFF WELFARE EXPENSES ARBITRARILY. (GR OUND NUMBER 5 OF GROUND OF APPEAL FILED BEFORE CIT(A). 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS 4 3721/- OUT OF TELEPHONE AND MOBILE EXPENSES ARBITRARILY. (GROUND NUMBER 6 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 21 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 7. THAT THE APPELLANT CRAVES TO ADD, DELETE, ALTER AND AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL EITHER BEFORE O R AT THE TIME OF HEARING. GROUND NO. 1 IS REGARDING DISALLOWANCE OF SALES TAX PENALTY. 34. THE AO HAS MADE THE DISALLOWANCE OF SALES-TAX P ENALTY IN PARA 1 AS UNDER :- THE ASSESSEE FIRM HAS CLAIMED EXPENDITURE TOWARDS VAT/SALES TAX AMOUNTING TO RS. 564440/-. ON PERUSAL OF DETAILS F ILED, IT WAS NOTICED THAT THERE ARE A SUM OF RS. 2,52,066/- IS PERTAININ G TO SALES TAX PENALTY. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY NOT THI S PENALTY AMOUNT MAY BE ADDED IN TOTAL INCOME OF THE FIRM. THE ASSES SEE HAS SUBMITTED VIDE WRITTEN REPLY DATED 20.03.2014 THAT COPIES OF SALES TAX CHALLANS ALREADY ENCLOSED ON YOUR HONOURS RECORD. ADMITTED LY SALES TAX PENALTY WAS NOT LEVIED ON ACCOUNT OF INFRACTION OF LAW BUT DUE TO NON SUBMISSION OF SALES OR BILLS AT THE TIME OF SURVEY. SALES TAX PAID WAS ON ACCOUNT OF REGULAR ASSESSMENT. A CERTIFICATE IN THI S REGARD IS ENCLOSED. REPLY OF THE ASSESSEE CONSIDERED CAREFULLY BUT NOT FOUND TO BE CONVINCED AND, THEREFORE, AMOUNT OF RS. 2,52,066/- CLAIM FOR SALES TAX PENALTY IS DISALLOWED AND ADDED TO TOTAL INCOME OF THE ASSESSEE BEING NOT ALLOWABLE EXPENDITURE. PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED ON THIS ISSUE FOR FILING INACCURATE PARTICULARS OF INCOME. 35. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE SALES-TAX AMOUNT PAID WAS NOT ON ACCOUNT OF INFRACTION OF LAW BUT ON ACCOUNT OF NON SUBMISSION OF SALES-TAX BILLS AT THE TIME OF SURVEY. THE ASSESSEE DEPOSITE D THE TAX IN ORDINARY COURSE OF BUSINESS WHICH IS AN ALLOWABLE EXPENDITURE UNDER SE CTION 37(1) OF THE ACT. THE LD. A/R HAS SUBMITTED THAT THE WRONG DESCRIPTION OF THE SAID AMOUNT IN THE ACCOUNTS DOES NOT AUTOMATICALLY LEAD TO ADDITION. SINCE THE AMOUNT PAID IS NOT ON ACCOUNT OF PENALTY BUT ON ACCOUNT OF REGULAR ASSESSMENT, THE S AME CANNOT BE DISALLOWED AS PENALTY FOR INFRACTION OF LAW. 22 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 36. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 37. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. IF THE SAID AMOUNT IS PART OF THE DEMAND A RISING FROM SALES TAX ASSESSMENT, THEN IT WILL PARTAKE THE CHARACTER OF SALES-TAX AND NOT THE PENALTY. HOWEVER, IF THE SAID AMOUNT IS ON ACCOUNT OF PENALTY SEPARATELY LEV IED BY THE SALES TAX AUTHORITIES, THEN IT CANNOT PARTAKE THE CHARACTER OF SIMPLE SALE S-TAX PAYMENT. ACCORDINGLY, THE AO IS DIRECTED TO VERIFY THE FACT FROM THE RECORD W HETHER THE SAID AMOUNT OF RS. 2,52,066/- IS ARISING FROM SEPARATE PENALTY ORDER P ASSED BY THE SALES TAX AUTHORITIES OR IT IS ONLY A DEMAND UNDER THE SALES TAX ASSESSME NT ORDER. ACCORDINGLY, IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE ASSESSMENT YEA R 2010-11, THIS ISSUE IS SET ASIDE TO THE RECORD OF THE AO. GROUND NO. 2 IS REGARDING DISALLOWANCE OF CONVEYANC E EXPENSES. 38. THE AO HAS MADE THE ADHOC DISALLOWANCE OF 10% A MOUNTING TO RS. 23,900/- IN PARA 2 AS UNDER :- THE ASSESSEE HAS CLAIMED CONVEYANCE EXPENSES OF R S. 2,39,472/-. ON PERUSAL OF VOUCHERS MAINTAINED BY THE ASSESSEE UNDE R THIS HEAD, IT IS NOTICED THAT ENTIRE EXPENDITURE HAS BEEN INCURRED I N CASH AND MOSTLY VOUCHERS ARE SELF MADE WHICH ARE NOT HAVING RELIABI LITY AND GENUINENESS/BUSINESS EXPEDIENCY OF SAID EXPENSES. T HE ASSESSEE FIRM HAS MAINTAINED TWO CARS WHICH ARE KEPT BY THE PARTN ERS OF THE FIRM AND ENTIRE EXPENDITURE HAS BEEN CLAIMED UNDER THIS HEAD BY THE FIRM. THE PARTNERS HAVE NOT MAINTAINED ANOTHER CARS FOR THEIR PERSONAL USE AS WELL AS THEIR FAMILY MEMBERS. THE ASSESSEE WAS ASKE D TO EXPLAIN AS TO WHY NOT AN ADHOC DISALLOWANCE OF 10% OUT OF THESE E XPENSES MAY BE MADE AND ADDED IN ITS TOTAL INCOME. THE ASSESSEE HA S SUBMITTED WRITTEN REPLY DURING COURSE OF HEARING ON 20.03.201 4 STATING THEREIN THAT NO ELEMENT OF ANY PERSONAL EXPENDITURE INVOLVE D IN THESE EXPENSES AND THESE PAYMENTS WERE NECESSARY AND INCI DENTAL TO THE BUSINESS OF ASSESSEE. 23 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. REPLY OF THE ASSESSEE CONSIDERED BUT NOT FOUND TENA BLE AND LOOKING TO DEFECTS POINTED OUT ABOVE AN ADHOC DISALLOWANCE OF 10% I.E. RS. 23,900/- IS MADE OUT OF TOTAL EXPENDITURE CLAIMED R S. 2,39,472/- AND ADDED TO TOTAL INCOME OF ASSESSEE. THE AO HAS MADE THIS DISALLOWANCE ON THE GROUND THA T THE EXPENDITURE WAS INCURRED IN CASH AND SUPPORTED BY SELF MADE VOUCHERS. THEREF ORE, THE AO HAS DOUBTED THE RELIABILITY AND GENUINENESS OF THE EXPENSES. FURTHE R THE AO NOTED THAT THE PARTNERS WHO ARE USING THE FIRMS CARS ARE NOT MAINTAINING S EPARATE CARS AND, THEREFORE, THE PERSONAL USE OF THE FIRMS CARS WAS ALSO NOT RULED OUT. 39. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEES BOOKS OF ACCOUNT ARE DULY AUDITED AND NO DEFECT WAS POINTED OUT EITHER BY THE AUDITOR OR BY THE AO. THEREFORE, THE EXPENDITURE CL AIMED ON ACCOUNT OF CONVEYANCE CHARGES CANNOT BE DISALLOWED ON ADHOC BASIS. IN SU PPORT OF HIS CONTENTION HE HAS RELIED UPON THE FOLLOWING DECISIONS :- I) INCOME TAX OFFICER VS. C.V. RAMNARAYANAN (2016) 46 CCH 73 (MUM TRIBUNAL) II) SUNITA MINE CHEM IND. VS. INCOME TAX OFFICER (2008) 114 TTJ 98 (JODH TRIB) III) ASSISTANT COMMISSIONER OF INCOME TAX VS. ALL IED CONSTRUCTION (2007) 106 TTJ 616 (DELHI TRIB) 40. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 41. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE THE ADHOC DISALLOWANCE @ 1 0% OF THE EXPENSES ON THE GROUND THAT THE RELIABILITY AND GENUINENESS OF THE EXPENSES IS DOUBTED. HE HAS ALSO DOUBTED THE PERSONAL USE OF THE TWO CARS OF THE PAR TNERSHIP FIRM BY THE PARTNERS. 24 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. THUS IT IS CLEAR THAT THE AO HAS MADE THE DISALLOWA NCE ONLY ON THE BASIS OF SUSPICION AND DOUBT WITHOUT POINTING OUT A SPECIFIC CLAIM OF EXPENDITURE IS NOT GENUINE. ACCORDINGLY, THE ADHOC DISALLOWANCE MADE BY THE AO IS NOT JUSTIFIED, THE SAME IS DELETED. GROUND NO. 3 IS REGARDING ADHOC DISALLOWANCE OF VEH ICLE HIRING EXPENSES. 42. THE AO HAS MADE THE DISALLOWANCE OF VEHICLE EXP ENSES IN PARA 3 AS UNDER :- THE ASSESSEE FIRM HAS CLAIMED HIRE CHARGES RS. 4, 20,000/- TOWARDS A JEEP AND CAR. ON PERUSAL OF DETAILS FILED BY THE AS SESSEE FIRM, IT HAS NOTICED THAT THESE VEHICLES HAVE BEEN PROVIDED BY T HE HUF OF A PARTNER OF THIS FIRM NAMELY SHRI MADAN MOHAN GUPTA AND MADE AN AGREEMENT WITH FIRM FOR HIRING OF MOTOR VEHICLES. THIS AGREEM ENT IS NEITHER NOTARIZED NOR REGISTERED. THE ASSESSEE WAS ASKED TO FILE JUSTIFICATION FOR HIRING OF VEHICLES AND IN TURN DURING THE COURS E OF HEARING ASSESSEE FILED WRITTEN REPLY TRYING TO JUSTIFY THE VEHICLE R ENT PAYMENT BUT IT IS NOT FOUND FULLY SATISFACTORY AND 10% OF IT I.E. RS. 42, 000/- IS DISALLOWED AND ADDED TO TOTAL INCOME OF ASSESSEE TREATING IT O N HIRE SIDE. 43. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE ADHOC DISALLOW ANCE @ 10% OF THE EXPENSES ON THE GROUND THAT THE VEHICLES HAVE BEEN PROVIDED BY THE HUF OF THE PARTNERS OF THE FIRM, THOUGH THIS FACT GIVES A GENUINE REASON F OR CONDUCTING AN ENQUIRY ON THE CLAIM OF ASSESSEE AND TO VERIFY THE CLAIM AS PER TH E PROVISIONS OF SECTION 40A(2) OF THE ACT. THE AO THOUGH DOUBTED THE CORRECTNESS OF THE CLAIM, HOWEVER, HE HAS NOT UNDERTAKEN THE ENQUIRY TO DETERMINE WHETHER THE PAY MENT MADE BY THE ASSESSEE IS EXCESSIVE IN COMPARISON TO THE FAIR MARKET PRICE. THEREFORE, IN THE ABSENCE OF SUCH A FINDING BY THE AO THAT THE PAYMENT MADE BY THE AS SESSEE TO THE RELATED PARTIES IS 25 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. EXCESSIVE IN COMPARISON TO THE FAIR MARKET PRICE OF THE SERVICES PROVIDED BY THE RELATED PARTIES, THE ADHOC DISALLOWANCE IS NOT JUST IFIED. IF THE AO HAS TANGIBLE REASONS TO DOUBT THE CLAIM OF THE ASSESSEE, THEN EI THER THE CLAIM SHOULD HAVE BEEN DISALLOWED AS BOGUS OR TO BE DISALLOWED UNDER SECTI ON 40A(2) OF THE ACT. IN THE ABSENCE OF ANY SUCH FINDING ON THE PART OF THE AO, THE ADHOC DISALLOWANCE IS NOT JUSTIFIED. THE SAME IS DELETED. GROUND NO. 4 IS REGARDING DISALLOWANCE OF TRAVELLIN G EXPENSES. 44. THE AO HAS MADE THE DISALLOWANCE OF TRAVELLING EXPENSES IN PARA 4 AS UNDER :- THE ASSESSEE HAS CLAIMED CONVEYANCE EXPENSES OF R S. 5,62,351/-. ON PERUSAL OF VOUCHERS MAINTAINED BY THE ASSESSEE U NDER THIS HEAD, IT IS NOTICED THAT ENTIRE EXPENDITURE HAS BEEN INCURRE D IN CASH AND VOUCHERS ARE SELF MADE WHICH ARE NOT HAVING RELIABI LITY AND GENUINENESS/BUSINESS EXPEDIENCY OF SAID EXPENSES. T HE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. THE ASSESSEE FILED REPL Y DURING THE COURSE OF HEARING STATING THAT OUT OF THESE EXPENSES RS. 2,75 ,692/- HAVE BEEN INCURRED BY THE STAFF MEMBERS FOR THEIR OUTSTATION TOURS AND RS. 2,86,659/- WERE PAID AGAINST THE BILLS OF PARTNERS AND ALL THESE PAYMENTS WERE NECESSARY AND INCIDENTAL TO THE BUSIN ESS OF ASSESSEE. REPLY OF THE ASSESSEE CONSIDERED BUT NOT FOUND SATI SFACTORY AND LOOKING TO DEFECTS POINTED OUT ABOVE AS WELL AS PER SONAL JOURNEYS OF PARTNERS, AN ADHOC DISALLOWANCE OF 20% OUT OF RS. 2 ,86,659/- INCURRED BY PARTNERS I.E. RS. 57,331/- IS MADE AND ADDED TOT AL INCOME OF ASSESSEE. THE AO HAS MADE DISALLOWANCE @ 20% OF CERTAIN EXPEN SES ON ACCOUNT OF PERSONAL JOURNEY OF THE PARTNERS. 45. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AN IDENTICAL ISSUE HAS BEEN CO NSIDERED BY US FOR THE ASSESSMENT YEAR 2010-11. ACCORDINGLY, IN VIEW OF OUR FINDING O N THIS ISSUE, THE SAME IS CONFIRMED. 26 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. GROUND NO. 5 IS REGARDING DISALLOWANCE ON ACCOUNT O F WORKMEN AND STAFF WELFARE EXPENSES. 46. THE AO HAS MADE THE DISALLOWANCE @ 10% OF THE E XPENSES IN PARA 5 AS UNDER :- DURING THE YEAR THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 82,852/- UNDER THIS HEAD BUT NO SPECIFIC DETAILS REGARDING B USINESS EXPEDIENCY BY ASSESSEE HAVE BEEN PROVIDED. IT HAS STATED THAT VERY SMALL PAYMENT WERE MADE ON ACCOUNT OF TEA, COFFEE, MILK, EDIBLES ETC. AND ALL THESE PAYMENTS WERE NECESSARY AND INCIDENTAL TO THE BUSIN ESS OF ASSESSEE. FURTHER, ALL THE EXPENSES HAVE BEEN INCURRED IN CAS H AND VOUCHERS MAINTAINED BY ASSESSEE ARE SELF MADE, WHICH CANNOT BE STATED RELIABLE/GENUINE. BEING THE BUSINESS EXPEDIENCY/GEN UINENESS OF THESE EXPENSES IS NOT VERIFIABLE, AN AMOUNT OF RS. 8,285/ - WHICH COMES TO 10% OF THESE EXPENSES ARE HEREBY DISALLOWED AND ADD ED TO TOTAL INCOME OF ASSESSEE. 47. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE AN ADHOC DISAL LOWANCE OF 10% OF WORKMEN AND STAFF WELFARE EXPENSES ON THE GROUND OF SELF MA DE VOUCHERS. SINCE THE AO HAS MADE ADHOC DISALLOWANCE BASED ON SUSPICION OF CORRE CTNESS AND GENUINENESS OF THE CLAIM WITHOUT POINTING OUT A SPECIFIC INCIDENT OF B OGUS CLAIM, ACCORDINGLY IN VIEW OF OUR FINDING IN GROUND NO. 2 REGARDING DISALLOWANCE OF CONVEYANCE EXPENSES, ADHOC DISALLOWANCE MADE BY THE AO IS NOT SUSTAINABLE. THE SAME IS DELETED. GROUND NO. 6 IS REGARDING DISALLOWANCE OF TELEPHONE EXPENSES. 48. THE AO HAS MADE THE ADHOC DISALLOWANCE OF 20% O F TELEPHONE EXPENSES IN PARA 6 AS UNDER :- 27 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. A SUM OF RS. 2,18,607/- HAS BEEN CLAIMED AS EXPEN DITURE TOWARDS TELEPHONE & MOBILE EXPENSES DURING THE YEAR. NO SEP ARATE LAND PHONES/MOBILE HAVE BEEN MAINTAINED BY THE PARTNERS FOR THEIR PERSONAL CALLS/AFFAIRS. NO CALL REGISTER HAS BEEN MAINTAINED . HENCE, IN LACK OF DETAILS REGARDING PERSONAL EXPENSES OF PARTNERS OF THE FIRM ON TELEPHONE AND MOBILE EXPENSES @ 20% WHICH COMES TO RS. 43,721/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. 49. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE REASONS GIVEN BY THE AO TH AT NO SEPARATE LAND PHONES/MOBILE HAVE BEEN MAINTAINED BY THE PARTNERS FOR THEIR PERSONAL USE IS CONTRARY TO THE REASONS FOR A SIMILAR DISALLOWANCE MADE BY THE AO FOR THE ASSESSMENT YEAR 2010-11. ACCORDINGLY, THE ADHOC DIS ALLOWANCE ON THE GROUND OF PERSONAL USE WITHOUT POINTING OUT THE SPECIFIC FACT OF PERSONAL USE IS NOT JUSTIFIED. THE SAME IS DELETED. 50. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 858/JP/2019 ASSESSMENT YEAR : 2012-13 : 51. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS 30158/- OUT OF OTHE R EXPENSES ARBITRARILY. (GROUND NUMBER 1 OF GROUND OF APPEAL FILED BEFORE C IT(A)) 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE A CTION OF THE AO IN MAKING DISALLOWANCE OF RS 40615/- OUT OF CONVEYANCE EXPENS ES ARBITRARILY. (GROUND NUMBER 2 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 28 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE A CTION OF THE AO IN MAKING DISALLOWANCE OF RS 28392/- OUT OF FESTIVAL CELEBRAT ION EXPENSES ARBITRARILY. (GROUND NUMBER 3 OF GROUND OF APPEAL FILED BEFORE C IT(A)) 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE A CTION OF THE AO IN MAKING DISALLOWANCE OF RS 1,44,431/- OUT OF TRAVELLING EXP ENSES ARBITRARILY. (GROUND NUMBER 4 OF GROUND OF APPEAL FILED BEFORE CIT(A)) 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE A CTION OF THE AO IN MAKING DISALLOWANCE OF RS 32775/- OUT OF WORKMEN AND STAFF WELFARE EXPENSES ARBITRARILY. (GROUND NUMBER 5 OF GROUND OF APPEAL F ILED BEFORE CIT(A)) 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) KOTA ERRED IN CONFIRMING THE A CTION OF THE AO IN MAKING DISALLOWANCE OF RS 22666/- OUT OF TELEPHONE AND MOB ILE EXPENSES ARBITRARILY. (GROUND NUMBER 6 OF GROUND OF APPEAL FILED BEFORE C IT(A)) 7. THAT THE APPELLANT CRAVES TO ADD, DELETE, ALTER AND AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. GROUND NOS. 1 TO 6 ARE REGARDING ADHOC DISALLOWANCE MADE BY THE AO IN RESPECT OF VARIOUS EXPENSES. 52. THE AO HAS MADE THE ADHOC DISALLOWANCE @ 20% OF VARIOUS EXPENSES IN PARA 1 TO 6 AS UNDER :- 29 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 30 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 31 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. 53. IT IS CLEAR FROM THE FINDINGS OF THE AO THAT TH E AO HAS MADE THE ADHOC DISALLOWANCE ON THE BASIS OF SUSPICION AND DOUBT WI THOUT POINTING OUT A SPECIFIC ITEM OF EXPENSES EITHER BOGUS OR NOT INCURRED FOR BUSINE SS PURPOSES OF THE ASSESSEE. FURTHER, THE DISALLOWANCES OF VARIOUS EXPENSES RAIS ED IN GROUND NOS. 4 TO 6 ARE IDENTICAL TO DISALLOWANCES MADE BY THE AO FOR THE A SSESSMENT YEAR 2011-12. THUS, IN VIEW OF OUR FINDINGS ON THESE ISSUES FOR THE ASS ESSMENT YEAR 2011-12, THESE ISSUES ARE DECIDED ON THE SAME TERMS. EXCEPT TRAVE LLING EXPENSES, ALL OTHER DISALLOWANCES MADE BY THE AO ARE DELETED. 54. AS REGARDS THE DISALLOWANCES ON ACCOUNT OF GENE RAL EXPENSES, WELCOME EXPENSES AND WORSHIP EXPENSES IN GROUND NO. 1, DISA LLOWANCE OF CONVEYANCE EXPENSES IN GROUND NO. 2 AND DISALLOWANCE ON ACCOUN T OF FESTIVAL CELEBRATION EXPENSES IN GROUND NO. 3, THE AO HAS MADE AN ADHOC DISALLOWANCE WITHOUT POINTING OUT A SPECIFIC EXPENSE EITHER FOUND BOGUS OR NOT IN CURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THEREFORE, SUCH AN APPROA CH OF THE AO MAKING DISALLOWANCES WITHOUT GIVING SPECIFIC FINDING CANNO T BE ACCEPTED. ACCORDINGLY GROUND NOS. 1, 2 & 3 ARE ALLOWED AND DISALLOWANCES MADE BY THE AO ARE DELETED. 55. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 56. IN THE TOTALITY, APPEALS OF THE ASSESSEE ARE PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/201 9. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKWO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31/12/2019. 32 ITA NOS. 856, 957 & 858/JP/2019 M/S. DYNAMIC ENGINEERS, KOTA. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. DYNAMIC ENGINEERS, KOTA. 2. IZR;FKHZ@ THE RESPONDENT-THE ACIT, CIRCLE-1/ITO WARD 1(1), KO TA. 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 NOS. 856, 857 & 858/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR