TMI Blog2018 (11) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee have come down. Therefore if further disallowance is made for the aforesaid expenses will certainly result loss to the assessee. There is no statutory provision prescribed under the Act to make the disallowance of the expenses at the same rate at which these were disallowed in the preceding assessment years on year to year basis. As in the case before us the situation has changed i.e. the gross profit of ratio of the assessee has increased on account of declined in the cost of the direct expenses. Therefore we are reluctant to apply the same rate of disallowance made in the earlier years which was subsequently confirmed by the ld CIT(A). Considering all we are also of the view that the possibility of leakage from the expenses in the absence of documentary evidence cannot be ruled out. Thus in the interest of the justice we are of the view that the disallowances @1.11% of the aforesaid expenditure will be just and reasonable in the given facts and circumstances. Accordingly we direct the authorities below to make the disallowance @1.11% of the expense as discussed above. - Decided partly in favour of assessee - I.T.A. No. 293/AHD/2014, I.T.A. No. 999/AHD/2015 - - - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses as discussed above. 4.2 The assessee in compliance to it submitted that its books of accounts were duly audited by the Branch auditor/statutory auditor and tax auditors. There was no disallowance made on account of such expenses. 4.3 The assessee also claimed to have filed that the copy of account of diesel expenses and trip bhatta expenses for the verification along with sample copies of the supporting vouchers. 4.4 The assessee also submitted that the expense incurred on diesel has been increased mainly on account of hike in the rates by the Government. Therefore the diesel expenses were increased due to hike in the Government rate. 4.5 The expenses incurred on trips bhatta and freights were increased on account of two reasons, firstly hike in diesel price and secondly , there was no escalation clause in the agreement made with the parties. 4.6 The assessee further submitted that there is a decline in freight and trip bhatta expenses in terms of the ratio to the total transport operation income. The assessee in support of his claim produced a chart depicting the freight/ trip expenses in relation to transport operation income which is reproduced as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable finding or cogent material. ii. There was not provided reasonable opportunity of being heard to the assessee before making the disallowance of the expenses as discussed above. Therefore, these expenses have been disallowed without any base, cogent material and finding. As such, all these expenses were incurred exclusively for the purpose of the business. iii. It is a fact on record that similar expenses were disallowed in the earlier years but that cannot be a basis to make the disallowance in each and every year. The situations of the business changes every year. Therefore, the same amount of percentage cannot be applied on blanket basis every year. The assessee in this regard further submitted that the expenses on freight/ bhatta and diesel has comedown drastically and these factors have not been considered by the AO during the assessment proceedings. iv. It is settled law that once, the direct expenses reduce then the gross profit ratio increases in comparison to the gross receipts. As the GP ration has improved in the year under consideration on account of the decline in the expenses, then there is reason to make the further disallowance of the similar exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 091/And/2005 and ITA No.4258/Ahd/2007:- In AY.2001-02 There was disallowance of ₹ 2,00,000/- out of Diesel Expenses out of ₹ 9,44,717/- out of Trip and Bhatta upheld by the CIT(A) restricted disallowance to ₹ 2,00,000/- out of total of 4,00,044/-and disallowance of ₹ 9,44,717/- @10% of total expenditure was upheld by the CIT(A) which was upheld by the ITAT. (relevant paper book page no.15to 17) For AY.2004-05 the CIT(A) restricted the disallowance to 1/3 (3.33%) of the total disallowance towards Diesel, Trip and Bhatta expenses as against 10% disallowed by the AO. The finding of the CIT(A) upheld and appeals of assessee and revenue dismissed by the ITAT. refer to page no. 17,18 and finding on page 20 (para 22 of order of ITAT). The AY.2003-04 : There was disallowance of ₹ 29,68,000/- out of Diesel Expenses and Trip, Bhatta Expenses which was restricted to ₹ 10,00,0007- by the CIT(A) (2.70%). Both the assessee and department filed appeal. The disallowance by the AO was 8% of the total expenses and the order of CIT(A) upholding disallowance to the extent of 2.70% was confirmed by the ITAT and both the appeals dismissed, (r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. In the given facts and circumstances we are of the view that on many occasion the corroborative expenses in support of the expenditure claimed by the assessee are not available, specially in the case of freight/ trip bhatta expenses. It is because these expenses include the payment made to the drivers for their foods and lodging expenses which are supposed to be incurred during the journey. In such kind of cases, the external supporting expenses might not be available. Therefore, there cannot be a permanent parameter for making the disallowance of such expenses. 8.2 It is undisputed fact that the GP ration of the assessee has increased/ improved in comparison to the earlier years which implies that the direct expenses of the assessee have come down. Therefore if further disallowance is made for the aforesaid expenses will certainly result loss to the assessee. 8.3 Moreover, there is no statutory provision prescribed under the Act to make the disallowance of the expenses at the same rate at which these were disallowed in the preceding assessment years on year to year basis. As in the case before us the situation has changed i.e. the gross profit of ratio of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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