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2015 (6) TMI 320 - ITAT DELHI

2015 (6) TMI 320 - ITAT DELHI - TMI - Disallowance under the head “Purchase and Vendor Purchases” - CIT(A) deleted the addition - Held that:- AO has made the disallowance purely looking into the past history of the case and that too, twice the amount surrendered in the last year. Neither the AO has adduced any material, rational basis nor any justification for the doubling the addition made during the year. We further find that the business results of the assessee are certified by the audited ac .....

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, it can be safely assumed that the Auditor had prepared the Report based on the vouchers/ bills with the assessee and so it is authentic, 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 .....

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- 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 of the ld CIT(A), Faridabad relevant to assessment years 2006-07 and 2007-2008. 2. The revenue has raised the following grounds in appeal for the AY 2006-07 are as under:- 1. On the facts and in th .....

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& Workers welfare, traveling expenses, Diwali expenses, telephone expenses and Repair & maintenance even when the assessee had no evidence to support his claim that all these expenses were incurred wholly & exclusively for the purpose of business." 3. The brief facts of the case are that the assessee is the Proprietor of M/s. Raj Furniture, a Contractor who is engaged in interior furnishing on contract basis and sale of furniture. For the year in question, he filed his return of .....

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. Apropos ground No.1 which is against deletion of disallowance of ₹ 10,00,000/- under the head Purchase and Vendor Purchases made by the AO. 5. Ld. DR submitted that as per the P&L a/c of the assessee, amounts of ₹ 29,14,80,232/- and ₹ 7,75,91,523/- have been debited under the head Purchases & Vendor purchases respectively. The assessee was asked by the AO to furnish the evidences of the above purchases and to show its genuineness. In response thereto, assessee has pro .....

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unt. 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 r .....

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n the premises of the assessee on 23.09.2007. To prove the genuineness of the fire incident in the assessee's premises, the copies of FIR, documents from Fire Station Officer, documents of insurance claim from National Insurance Company Ltd., paper cuttings from leading newspapers where news of fire incident on 23.09.2007 was reported on 24.09.2007, were furnished before the AO for her examination. Also,it was pointed out that the AO herself made "proper enquiries and investigation" .....

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previous assessment year i.e. A.Y 2005-06, an addition of ₹ 5,00,000/-was made by the AO under this head because of the fact that the assessee could not produce supporting evidences and had surrendered the above amount. Therefore, the AO on the basis of the previous conduct of the surrender made as aforestated, she concluded that the assessee was in the habit of not keeping the complete records of expenses / purchases. As a result, she made a disallowance of ₹ 10,00,000/- under this .....

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. AR, the books of accounts were duly audited u/s 44AB of the Act by the Chartered Accountant. The Section 131(d) had been invoked by the ADI, FBD by letter no.1838 dt 04.12.2008 to find out the genuineness of the creditors and purchase from them which has been completed and there was no discrepancy found. According 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 .....

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er 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 decide .....

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tors. Moreover, the incident of fire at the assessee s business premise has also been accepted by the AO, because the documents submitted in support of such accident has not been disputed or found fault with by the AO. Yet we find that the AO has made the disallowance of ₹ 10,00,000/- purely looking into the past history of the case and that too, twice the amount surrendered in the last year. Neither the AO has adduced any material, rational basis nor any justification for the doubling the .....

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the return of income was filed on 31.10.2006. But since an accidental fire happened on 23.9.2007 i.e. after the audit was conducted on 28.10.2006, it can be safely assumed that the Auditor had prepared the Report based on the vouchers/ bills with the assessee and so it is authentic, 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 arbitrar .....

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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 agai .....

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ach 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. We find that the AO has resorted to adhoc disallowance without bringing out any specific instances of expenditure. It was noticed by the Ld. CIT(A) that in the immediate preceding assessment year, the disallowances were effected by the AO out of (i) travelling expenses, (ii) sale promotion and staff welfare expenses and (iii) repair & maintenance ex .....

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owable under section 37(1) of the Act, in view of the decisions in ACIT vs. Anil Alums (P) Ltd. (2005) 98 TTJ (Asr) 56 and Mr. Maya J. Daryani vs. IAC (1994) 50 TTJ (Del) 510. Travelling expenses are deductible under section 37(1) as per ratio in 5unita Mine chem. Ind. vs ITO (2008) 14 TTJ (Jd.) 98 and Ganesh Foundry vs ACIT (2003) 78 TTJ (Jd.) 736. Ld. CIT(A) observes that all the disallowances out of expenses listed have been made without any reason, and hence the disallowance was not warrante .....

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08) 12 DTR-1 (Del Tribunal). 11. 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 also and dismiss the ground no. 2 raised by the Revenue. 12. In the result, the Appeal No. 4165/Del/2009 for (AY 2006-07) stands dismissed. In ITA No.2785/Delhi/2010 (AY 2007-08) 13. The following grounds have been raised .....

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ances 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 re .....

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Appeals) on this issue and decide the issue in favour of the assessee. 15. Apropos ground no. 2 regarding deletion of addition of ₹ 8,26,378/- made by the AO under the various heads of expenditure even though the assessee had failed to discharge the onus that the expenditure was incurred wholly and exclusively for the purposes of business. 15.1 A perusal of the assessment order reveals that the AO has disallowed the expense under following different heads to the tune of ₹ 9,07,350/- .....

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tioned at serial No. 1 to 3 & 5 to 6 and affirmed the action of the AO disallowing expenditure on account of charity and donation of ₹ 1,28,225/- mentioned at serial no. 4 i.e. ₹ 9,07,350 - ₹ 1,28,225 = ₹ 7,79,125/- was deleted by the Ld. CIT(A). 15.3 Against the above order of the Ld. CIT(A), Revenue has raised the ground no. 2 before us, but wrongly mentioned the amount of deletion of addition of ₹ 8,26,378/- i.e. (Rs. 9,07,350 - ₹ 80,972 on account of E .....

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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 find that Ld. CIT(A) has rightly obs .....

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