MEGA FREIGHT MOVERS LIMITED,MUMBAI V. DCIT CIRCLE 7(1)(1), MUMBAI

ITA 1585/MUM/2025

AI Insights

Mega Freight Movers Limited appealed against the order of the National Faceless Appeal Centre (NFAC), which upheld an adhoc disallowance of INR 52,89,542 on various business expenses claimed by the company for the Assessment Year 2012-2013. The disallowance was initially made by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961, citing lack of verification of the expenses. The Tribunal considered the company's arguments and previous rulings on similar issues, ultimately deciding to reduce the disallowance based on established precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 361279 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2012-2013
• Other Referred Cases: ITA No.6761/Mum/2011, ITA No.524/Mum/2013, ITA No.5186/Mum/2013
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: TDS
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.1585/MUM/2025 (Assessment Year: 2012-2013) Mega Freight Movers Limited 39, Mehta Chambers, 127A Kalyan Street, Masjid Bunder, Mumbai - 400009. Maharashtra. [PAN:AABCM9984D] …………. Appellant Deputy Commissioner of Income Tax 7(1)(1), Mumbai Aayakar Bhavan, M.K.Road, Churchgate Mumbai - 400020 Maharashtra. Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Amit Agrawal Smt. Kavita P. Kaushik Date Conclusion of hearing Pronouncement of order : : 22.04.2025 22.05.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the order, dated 19/02/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 31/03/2015, passed under Section 143(3) of the Act for the Assessment Year 2012-2013. 2. The Assessee has raised following grounds of appeal : “1. Under the facts & in the circumstances of the case & in law, the Ld. Commissioner of Income tax (Appeals) was not justified in confirming the adhoc disallowance done by AO of ITA No.1585/Mum/2025 Assessment Year 2012-2013 2 Rs. 52.89,542 (le.1% of total expenditure on freight and lorry hire, loading and unloading and own truck expenses of Rs.52.89 crore). 2. Under the facts & in the circumstances of the case & in law, Ld. Commissioner of Income tax (Appeals) and AO erred in making adhoc disallowance of 1% of above expenses when all expenses were for purpose of appellant's business and were fully supported by vouchers and with proof of payments and on AO's deep scrutiny and investigation, he could not find even a single discrepancy. 3. Under the facts & in the circumstances of the case & in law, Ld. Commissioner of Income tax (Appeals) was not justified in confirming adhoc disallowance done by AO with general statement like \"self made vouchers\" without giving even one single specific payment found without bill or voucher or details. 4. Under the facts & in the circumstances of the case & in law, Id. Commissioner of Income tax (Appeals) and Ld AO were not justified in confirming adhoc disallowance of even diesel expenses, cheque payments and also payments on which income tax TDS was deducted by appellant. 5. Under the facts & in the circumstances of the case & in law, Id. Commissioner of Income tax (Appeals) and Ld. AO ought to have considered that adhoc addition made in the preceding AY 2008-09,AY 2009-10 and AY 2010-11 were already deleted in appeal by Hon Income Tax Appellate Tribunal. 6. Under the facts & in the circumstances of the case & In law, Ld. Commissioner of Income tax (Appeals) was not justified in stating the fact that there was no response by the appellant on 2 dates of hearing:- 06/11/2019 and 12/03/2020.” 3. The relevant facts in brief are that the Assessee-company was, at the relevant time, a transport contractor having own trucks. The Assessee also used to hire trucks from market for transporting rubber pulp, bulk cargo, finished goods from factories all over India. 4. The Assessee filed return of income for the Assessment Year 2012- 2013 on 21/09/2012 declaring total income of INR.1,19,20,150/- which was processed under Section 143(1) of the Act. Thereafter, ITA No.1585/Mum/2025 Assessment Year 2012-2013 3 the case was picked up for regular scrutiny. The Assessing Officer completed assessment under Section 143(3) of the Act vide Assessment Order, dated 31/03/2015, at assessed income of INR.1,72,09,692/- after disallowing 1% of (a) Freight and Lorry Hire Expenses (INR.46,72,71,014/-) (b) Loading and Unloading Expenses (INR.2,43,65,161/-) and (c) Own Truck Expenses (INR.3,73,17,986/-). Thus, the Assessing Officer made aggregate disallowance of INR.52,89,542/-. 5. Being aggrieved, the Assessee preferred appeal before the CIT(A) challenging the above disallowance. However, the CIT(A) dismissed the appeal preferred by the Assessee vide order, dated 19/02/2025. 6. Being aggrieved, the Assessee has preferred the present appeal before the Tribunal challenging the order passed by the CIT(A) on the grounds reproduced at Paragraph 2 above. 7. We have heard both the sides and have perused the material on record. 8. All grounds raised by the Assessee pertain to the solitary disallowance of INR.52,89,542/- made by the Assessing Officer and therefore, the same are being taken up together hereinafter. 9. On perusal of the Assessment Order, we find that the Assessing Officer had made the disallowance of expenses for want of verification and had computed the quantum of disallowance at INR. INR.52,89,542/- being 1% of following expenses aggregating to INR.52,89,54,161/-: Particulars Amount (INR.) Freight and Lorry Hire 46,72,71,014/- Loading and Unloading 2,43,65,161/- Own Truck Expenses 3,73,17,986/- 52,89,54,161/- While making the aforesaid disallowance, the Assessing Officer had observed that similar disallowances were made in the preceding ITA No.1585/Mum/2025 Assessment Year 2012-2013 4 assessment year and the same has been confirmed by the Tribunal. 10. Before CIT(A), it was contended on behalf of the Assessee that in respect of similar disallowance made in the preceding assessment years, the Assessee was granted relief in appellate proceedings. In the appellate proceedings the disallowance made in the assessment proceedings was restricted to 2% of cash expenses (excluding diesel expenses) and therefore, the above observations made by the Assessing Officer were factually incorrect. Reliance was also placed on the Assessee on the decision of the Tribunal in the preceding Assessment Years 2008-2009, 2009-2010 and 2010-2011 in this regard. Vide written submission, dated 10/10/2024, inter alia, following submission were made by the Assessee on merits: “4. Expenses incurred for purpose of appellant’s business: а) All the expenses incurred for purpose of appellants business only and to a single expenditure if for non-business purposes which is also accepted by the Assessing Officer. b) The Assessing Officer during the assessment has not brought on record any finding to prove the expenses as not for business but only made huge adhoc disallowance inspite of accepting that all expenses are for the purpose of business. c) The Assessing Office has not done by independent findings, nor has identified any expenses which were not substantiated or established by Assessee. The disallowance is purely on presumption. d) The nature of business of the Assessee is exactly the same as in the immediately preceding years. There is no change. e) During assessment proceedings more than 1,000 pages details were submitted before AO & not a single discrepancy found. f) Expenditure is incurred by appellant mainly for:  filling Diesel (all bills available and also verified by AO)  Driver's salary (all vouchers available and verified by AO)  Repairs of trucks (all bills available and also verified by AO) ITA No.1585/Mum/2025 Assessment Year 2012-2013 5  Lorry hire paid, (all vouchers available and verified by AO)  Loading/unloading/hamali chg (all vouchers available & verified by AO)  Driver bhatta – i.e. daily allowance for food during the journey) (all vouchers available and verified by AO) g) The truck expenses also include salary to drivers/cleaners. For e.g. if Rs 6,000 salary paid to Driver of truck, then as per AO only Rs. 5940 is genuine and Rs 60 is not genuine which is not correct & unjust. h) Loading & unloading (i.e. Hamali charges) are paid to Daily labourers for loading the material in the truck at origin point & unloading at destination. The AO failed to understand that none of the hamals or labourers accept cheque and are working on daily wages to whom only cash has to be paid. Moreover none of them have bank account or are our regular employees to whom cheques can be given. Moreover Loading and Unloading has to be done all over India, wherever the truck goes as desired by our client, the hamals have to be hired at that particular time, hence it is not possible to give cheques to hamals. At several places, cheques are issued to Mathadi Kamgar Board, even out of which AO has disallowed adhoc 1%. i) Driver Bhatta is paid to the driver @ Rs 100/200 per day for his food expenses during a particular trip which may be 5-10 days. If cheque is given to the driver for his food expenses, how will he pay for the food expenses during the journey. The AO has made a adhoc disallowance of 1% of these expenses inspite of all bills and supporting on record. j) Lorry hire charges are paid for hiring trucks from market, the major amount of which comprises of diesel. Adhoc disallowance of 1% is totally unjustified. k) In the entire transport industry all over India, cash is paid for filling diesel at petrol pump, hamals are paid cash for loading and unloading, drivers and cleaners are paid. We have all supporting/vouchers/bills and not a single specific payment could be pointed out by AO without supporting/vouchers/bills.” 11. However, the CIT(A) was not convinced with the submissions made on behalf of the Assessee and proceeded to confirm the disallowance made by the Assessing Officer observing as under: “The AO has specifically observed in the assessment order that ITA No.1585/Mum/2025 Assessment Year 2012-2013 6 most of the expenses amounting to Rs.52,89,54,161/- were incurred in cash and against self-made vouchers and not verifiable without any supporting bills and hence the contention of the appellant that AO has not brought anything on record against disallowance is far away from the truth. In these circumstances, as the facts of the appellant's business remain the same during the relevant previous years as well, respectfully following the decision of Hon'ble ITAT in the previous years, the addition made by the AO appears to be reasonable and within the limits of addition sustained by the Hon'ble ITAT for the previous years. Therefore, the addition made by the AO of Rs.52,89,542/- on account of 1% disallowance of expenses of Rs.52,89,54,161/-viz. freight & lorry hire, loading & unloading, own truck expenses is hereby confirmed. Ground of appeal nos. 1 to 5 are dismissed.” (Emphasis Supplied) 12. On perusal of above it can be seen that the CIT(A) has confirmed the disallowance by observing that the quantum disallowance made by the Assessing Officer appears to be reasonable and within the limits of addition sustained by the Tribunal in the preceding Assessment Years. In the appellate proceedings before the Tribunal, it was vehemently contended on behalf of the Assessee that the CIT(A) has failed to appreciate that in the preceding assessment years the Tribunal had restricted the disallowance to 2% taking 20% of cash expenses as the base. In this regard reliance was placed by the Learned Authorized Representative for the Assessee on decisions of the Tribunal in the case of the Assessee for the Assessment Years 2008-2009 (ITA No.6761/Mum/2011, dated 22/07/2015), and 2009- 2010 (ITA No.524/Mum/2013, dated 04/05/2016), and 2010-2011 (ITA No.5186/Mum/2013, dated 16/12/2015) [Placed at Page No.3 to 30 of the Paper Book filed by the Assessee]. 13. We have perused the aforesaid decision of the Tribunal and found that the Tribunal had restricted the disallowance in the preceding assessment years in the following manner: (a) Deduction for expenses by way of cheque have been allowed in full ITA No.1585/Mum/2025 Assessment Year 2012-2013 7 (b) 80% of cash expenses have been allowed on the ground that the same have been incurred towards purchase of diesel (c) Out of balance of 20% of cash expenses, disallowance was restricted to 2% of such expenses 14. The relevant extract of the decision of the Tribunal in the case of the Assessee for the Assessment Year 2009-2010 [ITA No.524/Mum/2013, dated 04/05/2016] reads as under: “2. We heard the parties and perused the record. We noticed that identical disallowance have been made by the Assessing Officer in the Assessment Year 2008-09 as well as in AY 2010-11 and the Tribunal has upheld the order of the Ld. CIT(A) in restricting the disallowance to 2% of 20% of the cash expenses. The order relating to Assessment Year 2010-11 has been passed by the coordinate bench of the Tribunal on 16.12.2015 in ITA No. 5186/Mum/2013. Thus, we noticed that the order passed by the Ld. CIT(A) is in line with the decision rendered by the Tribunal, and accordingly we do not find any reason to interfere with the order passed by the Ld. CIT(A) for the year under consideration on this issue. 3. In the result, the appeal filed by the Revenue is dismissed”. (Emphasis Supplied) 15. There is nothing on record to persuade us to take a different view of the matter. Given the fact that there is no change in the facts and circumstances of the present case, respectfully following the decision of the Co-Ordinate Benches of the Tribunal in the case of the Assessee for the preceding assessment years, we restrict the disallowance made by the Assessing Officer to INR.6,82,561/- computed as under: Particulars Amount (INR.) A. Aggregate Expenses 52,89,54,161/- B. Cheque Payments 35,83,13,988/- C. Cash Payments [A-B] 17,06,40,173/- D. 20% of Cash Payments 3,41,28,035/- E. Disallowance @ 2% of D. 6,82,561/- 16. In terms of paragraph 15 above, Ground No. 1 to 5 raised by the ITA No.1585/Mum/2025 Assessment Year 2012-2013 8 Assessee are partly allowed while Ground No. 6 is dismissed. 17. In result, the present appeal preferred by the Assessee is partly allowed. Order pronounced on 22.05.2025. Sd/- Sd/- (Om Prakash Kant) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated : 22.05.2025 Milan,LDC ITA No.1585/Mum/2025 Assessment Year 2012-2013 9 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai "