Madras High Court
Shri V.C.Arunai Vadivelan vs The Assistant Commissioner Of ... on 5 February, 2021
T.C.A.No.612 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 05.02.2021
CORAM
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
and
THE HONOURABLE MS.JUSTICE R.N.MANJULA
Judgment Reserved On Judgment Pronounced On
11.01.2021 05.02.2021
T.C.A.No.612 of 2019
Shri V.C.Arunai Vadivelan
PAN: BJEPA6920P .. Appellant
-vs-
The Assistant Commissioner of Income Tax,
Non Company Circle - 11,
Chennai. .. Respondent
Appeal under Section 260A of the Income Tax, 1961 against the order
dated 22.03.2018 made in I.T.A.No.2282/Chny/2017 on the file of the
Income Tax Appellate Tribunal Bench 'C', Chennai for the assessment year
2014-15.
For Appellant : Mr.A.S.Sriraman
for Mr.S.Sridhar
For Respondent : M/s.V.Pushpa
Senior Standing Counsel
JUDGMENT
T.S.SIVAGNANAM,J
This appeal filed by the assessee under Section 260A of the Income
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T.C.A.No.612 of 2019
Tax Act, 1961 ['the Act' for brevity] is directed against the order dated
22.03.2018 passed by the Income Tax Appellate Tribunal, 'C' Bench,
Chennai ['the Tribunal' for brevity'] in I.T.A.No.2282/Chny/2017 for the
assessment year 2014-15.
2.The appeal has been filed by raising the following substantial
questions of law:
“1.Whether the respondent/the Assessing Officer
has possessed the power within the scope of section
143(3) Income Tax Act, 1961 for making adhoc
disallowance of expenses despite the availability of the
audited financial statements?
2.Whether the Respondent/the Assessing Officer is
empowered/justified in ignoring the incurring of
expenses through proper banking channel after
complying all statutory prescriptions on the wrong
presumption of non production of few bills and vouchers
pertaining to the expenses incurred and disputed in
completing the assessment u/s. 143(3) of the Income Tax
Act, 1961?
3.Whether the Appellate Tribunal is correct in re-
estimating the adhoc disallowance of expenses without
noticing the judicial trend on the power of the
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T.C.A.No.612 of 2019
respondent/the Assessing Officer in making such
additions in the computation of taxable total income and
further without noticing the availability of complete
details proving the perversity in the recording of facts?”
3.The assessee is the proprietor of M/s.Arun Steel Agencies engaged
in the trading of steel and other related items. The assesee filed the return of
income for the assessment year under consideration, AY 2014-15 declaring
a total income of Rs.1,44,52,330/-. The return was initially processed under
section 143(1), subsequently selected for scrutiny and notice under section
143(3) of the Act was issued. During the course of hearing before the
Assessing Officer, the assessee was directed to furnish the copy of the return
of income along with schedules, profit and loss account, balance sheet, stock
summary ledger, etc. The assessee produced the documents called for. The
Assessing Officer on perusal of the profit and loss account, noted that the
assessee has debited a sum of Rs.6,76,049/- on account of the business
promotion expenses. The assessee was directed to submit details pertaining
to the said business promotion expenses. According to the Assessing
Officer, the assessee did not submit the details to prove the genuineness of
such expenses. Accordingly, 20% of the expenses debited in the profit and
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T.C.A.No.612 of 2019
loss account was disallowed and added back to the returned income.
Further, the Assessing Officer noted that the assessee has debited a sum of
Rs.4,03,770/- towards expenditure on account of the weighing and
unloading charges. The Assessing Officer held that some of the vouchers
were hand made and some vouchers were not available and hence 20% of
the expenses was disallowed and added back to the returned income.
Further, in the profit and loss account, the assessee claimed expenses
towards transport charges to the tune of Rs.2,93,46,961/-, for which bills
were directed to be submitted and on verification of the bills, the Assessing
Officer held that the vouchers were self made/hand written and some
vouchers are not produced. Therefore, 10% of the expenses claimed by the
assessee was disallowed and added back to the returned income. Thus, the
assessment was completed under section 143(3) of the Act vide order dated
28.11.2016.
4.Aggrieved by such, the assessee preferred appeal before the
Commissioner of Income Tax (Appeals)-13 [CIT(A)], Chennai. As noted
above, there were three issues, namely, disallowance of business promotion
expenses, disallowance of weighing and unloading expenses and
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T.C.A.No.612 of 2019
disallowance to the transport charges to the extent indicated. The CIT(A)
confirmed the disallowance of 20% of the business promotion expenses,
restricted the disallowance of weighing and unloading expenses to 15%
instead of 20% and confirmed the disallowance of transport charges by
dismissing the assessee's appeal. On the above terms, the assessee's appeal
was partly allowed. Aggrieved by the same, the assessee preferred appeal
before the Tribunal. The Tribunal by the impugned order while holding that
the entire addition made by the Assessing Officer and as sustained by the
CIT(A) is only on estimate, however considering the submissions of the
assessee that they had genuinely incurred expenses, the Tribunal granted
relief of Rs.6,79,060/- and sustained the addition of Rs.25 lakhs. The
assssee filed miscellaneous petition before the Tribunal under Section 254(2)
of the Act stating that they had specifically contended that the Assessing
Officer during the course of assessment proceedings had scrutinized the bills
and details furnished by the assessee with reference to the books of accounts
but no defects were noticed during the scrutiny. Further, the details and
documents called for by the Assessing Officer was furnished by the assessee
which has been admitted by the Assessing Officer. In such circumstances
there was no reason for an adhoc disallowance by the Assessing Officer. In
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T.C.A.No.612 of 2019
support of their contention that adhoc disallowance should not be made, the
assessee referred to the decision of the Delhi Tribunal in the case of ACIT
vs. Ganpati Enterprises Limited, I.T.A.No.6112 (Delhi) of 2012 dated
15.02.2013 and the decision of the Lucknow Bench of the Tribunal in the
case of Mukesh Kumar Mahawar vs. the Income Tax Officer
(ITA.No.615/LKW/2014 dated 16.09.2015). With these submissions, the
assessee prayed for deleting the adhoc disallowances.
5.Subsequently, another application was filed by the assessee before
the Tribunal on 22.06.2018 reiterating that adhoc disallowance in an
arbitrary manner is not permissible in law. The Tribunal by order dated
26.06.2018 dismissed the miscellaneous petition stating that even before the
Tribunal the assessee has not produced vouchers and other relevant
documents in order to establish the genuineness of the expenses incurred
towards the transport charges. However, considering the submissions made
on behalf of the assessee partial relief was granted and there is nothing to be
rectified in the order passed by the Tribunal. This is how the assessee is
before us by way of this appeal.
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T.C.A.No.612 of 2019
6.We have heard Mr.A.S.Sriraman, learned counsel for the
appellant/assessee and Ms.V.Pushpa, learned senior standing counsel for the
respondent/revenue.
7.The facts which we have noted in the preceding paragraphs would
disclose that the assessee had produced the books of accounts, ledgers,
purchase and sales registers, stock registers, bills, vouchers for expenses
claimed including purchase bills, freight bills as called for by the Assessing
Officer. This is admitted by the Assessing Officer in the assessment order.
If such is the situation, whether the Assessing Officer could have made
adhoc disallowance. Admittedly, the assessee's case was selected for
scrutiny under section 143(3) of the Act. If such is the fact situation, the
Assessing Officer was bound to scrutinize the documents produced and
frame an assessement by granting/refusing eligible/ineligible deduction. We
find that the Assessing Officer has made observation that the vouchers are
self made/hand written and some vouchers are not produced. This in our
opinion appears to be a vague statement. This finding has been recorded by
the Assessing Officer with regard to the amount claimed by the assessee as
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T.C.A.No.612 of 2019
expenses towards transport charges. Given the nature of the industry, we
can take judicial notice of the fact that always computer generated vouchers
may not be issued by the transporters unless they are an organization
owning a large fleet. If the Assessing Officer had any doubt with regard to
the genuinity of any one of the vouchers produced he could have drawn
sample vouchers and called upon the assessee to establish its genuineness.
Without doing so, making an adhoc disallowance by not specifically
assigning any reason to a voucher or bunch of vouchers is not legally
tenable.
8.Before us, the learned counsel for the assessee has produced a
tabulated statement with regard to the deduction lcaim by the assessee under
the head Transport Charges for the assessment year 2011-12, 2012-13,
2013-14, 2014-15 and 2015-16. We find that for the assessment year
2012-13, 2013-14 and 2015-16, there has been no disallowance and
assessment has been completed under section 143(3) based on the
documents produced by the assessee and it is only for the assessment year
under consideration, namely, 2014-15, there has been disallowance of 10%.
The learned counsel has also produced the copy of the service tax ledger
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account for the period from 01.04.2013 to 31.03.2014 evidencing payment
of service tax. Thus, we find that it is not a case where there is no record
available with the assessee to justify their claim and had the Assessing
Officer taken a little effort to examine the correctness of the vouchers, in all
probabilities the assessee might have not been before us by way of this
appeal. Thus, we are convinced that the assessement requires to be re-done
after a thorough verification of all the documents which may be placed
before the Assessing Officer during the denovo consideration including the
documents already placed for consideration.
9.For all the above reasons, the tax case appeal is allowed and the
substantial questions of law are answered in favour of the appellant/assessee
and the matter is remanded to the Assessing Officer for fresh consideration
in terms of the observations made above. No costs.
(T.S.S., J.) (R.N.M., J.)
05.02.2021
Index: Yes/ No
Speaking Order : Yes/ No
cse
To
1.The Assistant Commissioner of Income Tax,
Non Company Circle - 11, Chennai.
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T.C.A.No.612 of 2019
2.The Income Tax Appellate Tribunal Bench 'C', Chennai.
T.S.Sivagnanam, J.
and
R.N.Manjula, J.
cse
Pre-delivery judgment made in
T.C.A.No.612 of 2019
05.02.2021
https://www.mhc.tn.gov.in/judis/
