2020 (2) TMI 942 - AT - Income Tax

Addition on account of service charges receipts - ad hoc disallowance of vehicle and telephone expenses on estimated basis - Rectification u/s 154 - HELD THAT - No basis has been given by any of the lower authorities for making ad hoc addition on account of service charges income. Even during the course of scrutiny assessment no defect was pointed out by the A.O. in the books of account nor the same were rejected. In absence of any specific defect or discrepancy no valid addition can be made. In the present case the Authorities Below have failed to point out any specific instance of suppression of service income or any discrepancy or mistake in any manner. Under these circumstances no such addition was legally maintainable. Even the order of the ld. CIT(A) for the A.Y. 2009-10 clearly indicates that the addition was made by the A.O. on presumption without pointing out any defect. Even the rectification order passed by the ld CIT(A) U/s 154 of the Act reversing his earlier findings appears to be not legally sustainable in so far as there was no apparent mistake in his earlier order which could be rectified in garb of Section 154 of the Act. However without commenting on the order passed by the ld. CIT(A) U/s 154 for the A.Y. 2009-10 reversing his earlier order passed I do not find any merit in the ad hoc addition made during the years under consideration. Accordingly the A.O. is directed to delete the addition Disallowance has been made by the lower authorities on estimate basis and without pointing out any specific mistake or instance of disallowable nature of expenditure. Keeping in view the totality of facts and circumstances of the case I restrict the disallowance on account of vehicle expenses to the extent of Rs. 25, 000/- and Rs. 2, 500/- on account of telephone expenses.

Summary

Issues:
- Ad hoc addition on account of service charges receipts
- Ad hoc disallowance of vehicle and telephone expenses on estimated basis

Ad Hoc Addition on Account of Service Charges Receipts:
The appeal involved challenges against separate orders of ld. CIT(A)-3, Jaipur for A.Y. 2012-13 and 2013-14 regarding ad hoc addition on service charges receipts and disallowance of vehicle and telephone expenses. The Assessing Officer (A.O.) added Rs. 6.00 lacs for service charges in A.Y. 2012-13, estimating additional income due to claimed free service charges. The ld. CIT(A) upheld this, citing the appellant's dealership nature and past sustained additions. The appellant argued that detailed ledger accounts were produced during assessment, showing proper accounting without discrepancies. They contended that without specific mistakes, additions based on presumptions were unjustified. The appellant referenced the acceptance of audited books by the department, emphasizing the absence of book result rejection under section 145(3) of the Act. The appellant also highlighted past appeal orders where similar additions were deleted due to lack of evidence or basis.

Ad Hoc Disallowance of Vehicle and Telephone Expenses:
In A.Y. 2012-13, the A.O. made ad hoc disallowances of Rs. 60,000 for vehicle expenses and Rs. 8,000 for telephone expenses, later reduced by the ld. CIT(A) to Rs. 50,000 and Rs. 5,000, respectively. Similarly, in A.Y. 2013-14, the A.O. added Rs. 1,50,000 for petrol expenses and Rs. 10,000 for telephone expenses, reduced by the ld. CIT(A) to Rs. 1,00,000 and Rs. 7,500. The appellate tribunal found these disallowances were made on an estimated basis without specific instances of disallowable expenses. Consequently, the tribunal restricted the disallowances to Rs. 25,000 for vehicle expenses and Rs. 2,500 for telephone expenses in A.Y. 2012-13, and to Rs. 50,000 for petrol expenses and Rs. 3,000 for telephone expenses in A.Y. 2013-14. The tribunal directed the A.O. to adhere to these revised disallowances.

In conclusion, the appellate tribunal partially allowed both appeals, directing the deletion of the ad hoc additions on service charges and revising the disallowances on vehicle and telephone expenses based on specific reasoning and limitations. The judgment emphasized the necessity of concrete evidence and specific defects to justify such additions or disallowances, referencing past decisions and legal precedents to support its findings.