TMI Blog2015 (6) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... hentic, since the said audit report have not been challenged by the AO at all. Therefore, simply on the ground that in previous year, the assessee made surrender cannot be the basis for disallowance which smacks of arbitrariness, which is the sworn enemy of Article 14 of the Constitution and the Ld. CIT(A) has rightly deleted the adhoc disallowances - Decided against revenue. Disallowance of expenses under the head Freight & Octroi, Staff & Workers welfare, traveling expenses, Diwali expenses, telephone expenses and Repair & maintenance CIT(A) deleted the addition - Held that:- We concur with the Ld. CIT(A) that AO disallowed expenditure under these heads without any material or reasons brought on record, so it is unsustainable in the eyes of law. So, we are inclined to confirm the order of the Ld. CIT(A) on this issue - Decided against revenue. - ITA No.4165/Del/2009, ITA No.2785/Del/2010 - - - Dated:- 22-5-2015 - SHRI J.S.REDDY AND SHRI A. T. VARKEY, JJ. For the Appellant : Vikram Sahay, Sr. DR For the Respondent : Vijay Gupta, CA ORDER PER A. T. VARKEY, JUDICIAL MEMBER These appeals filed by the revenue are against the order dated 28.08.2009 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the previous record of the assessee found that in the preceding assessment year i.e. for A.Y 2005-06, an addition of ₹ 5,00,000 (five lacs ) was made by the AO under this head because of the fact that assessee could not produce supporting evidences and surrendered the said amount. So according to the Ld. DR, the AO rightly concluded that plea of the assessee regarding loss of vouchers in fire incident may be true, but looking at the track record of the assessee, it seems that assessee is in the habit of not keeping the complete records of expenses/purchases, so the AO disallowed a sum of ₹ 1O,OO,OOO/- ( ten lacs ) under this head, which according to the DR is reasonable and the Ld. CIT(A) erred in deleting the same, so he pleads that the impugned order may be reversed and the AO s order be upheld. 6. On the other hand, the ld AR submitted that the AO in para-1 of her order examined the genuineness of the amounts of ₹ 29,14,80,232/- and ₹ 7,75,91,523/- debited under the head Purchases and Vendor Purchases respectively. According to the A.O., for the verification of these amounts, the assessee had produced only ledger account and cash book but no vouch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to ld AR, though the AO remarked as No addition is required under this head in her order and without rejecting the books of accounts maintained by the assessee, has made addition which is per-se, arbitrary and is purely on estimate / guess work basis without any legitimate basis or reason. 6.2 The Ld. AR pointed out that the NP rate declared in this instant year is better being at 3.16 per cent as against 1.93 per cent in the immediately preceding year. According to him, it is settled position of law that even when the books of accounts are rejected, addition is not automatic, and if the NP rate declared in the current year is better than the past year, no further addition can be justified made in the declared results. According to him, AO cannot make an assessment on pure guesswork without reference to any material evidence as has been decided by Hon ble Supreme Court in the case of DHAKESWARI COTTON MILLS L TD VS CIT (1954) 26 ITR 775 (SC). 6.3 According to him, in order to find out real profit earned by assessee, neither the AO can make crude guess nor proceed arbitrarily but should act judicially in the light of relevant material as has been decided in the case of BAJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra-2 of her order has made the addition, since vouchers were not produced by the assessee on the plea that it was destroyed in the fire accident. The AO while considering the expenses claimed by the assessee for freight and octroi, staff and workers' welfare, traveling expenses, Diwali expenses, telephone expenses and repair and maintenance expenses found it to be unverifiable in the absence of the evidences to substantiate it. Therefore, to protect the interest of the revenue , she worked out the disallowance out of these expenses to the extent mentioned against each head in the impugned assessment order, being fair and reasonable to the assessee. The total disallowance thus amounted to ₹ 6,33,432/- which was added to the total income of the assessee. 9. On the other hand, Ld. AR relied upon the order of the CIT(A). 10. We have heard both the parties and have perused the records of the case and we find that in respect of the addition made by the AO out of vendor purchases and other purchases , identical conclusions/approach have been adopted by her in effecting adhoc disallowances as done in ground no. 1 (Supra) which Ld. CIT(A) deleted and we have confirmed it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A), Faridabad dated 31.3.2010 for the Asstt. Year 2007-08. 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of ₹ 15,00,000/- made by the Assessing Officer on account of purchases and vendor purchases disregarding the fact that the assessee had failed to produce any evidence from which genuineness of purchases could be verified. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of ₹ 8,26,378/- made by the Assessing Officer under the various heads of expenditure even though the assessee had failed to discharged the onus that the expenditure was incurred wholly and exclusively for the purposes of business. 3. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal. 14. Apropos ground No.1, which is regarding deletion of disallowance of ₹ 15,00,000/- under the head Purchase and Vendor Purchases . Since this ground is similar and identical in nature and the facts and circumstances which led to the disallowance are the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is order. This wrong mentioning of the addition amount in the Revenue s appeal raised vide ground no. 2 shows that the Revenue has raised the addition of ₹ 1,28,225/- again, which has already been upheld by the Ld. CIT(A), hence, the issue raised against the head of charity and donation of ₹ 1,28,225/- has become infructuous. From the above, we find that the Revenue has come against the following additions only which comes to ₹ 6,98,153/- in lieu of wrongly mentioned addition of ₹ 8,26,378/-. 1. Staff and workers welfare Rs.13,22,112/- Rs.2,64,422/- (@1/5th) 2. Diwali Expenses Rs.3,29,915/- Rs.1,64,957 (@50%) 3. Telephone expenses Rs.7,46,199/- Rs.1,49,240/- 4. Vehicle maint. Exp. Dep Rs.7,17,206/- Rs.1,19,534/- Total Rs.6,98,153/- 15.4 We have heard both the parties and perused the records. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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