TMI Blog2022 (4) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... ere has been no clear findings as to number of vouchers requiring denial of allowances with the amount of expenditure and nature of defects therein or therewith, moreover department could not bring out any deprecative material on record to substantiate its conclusion as logical Allowability or disallowance of any individual head of expenditure debited to P L account and claimed in the return of income filed by the assessee, unless put to aforesaid litmus test as envisaged in section 37(1) should not be arrived at. Where any expenditure is debited to P L account and claimed in the return of income as deductible, then the primary onus is undoubtedly casted upon the claimant assessee to vindicate that, each transaction falling within a particular head of expenditure foretaste litmus test, duly supported by genuine and satisfactory proof [for short GSP ], accompanied by reasonable explanation. Consequently, during course of assessment or reassessment proceedings, the burden of proof of deductibility of expense in relation to queried transaction stands discharged upon the submission of GSP accompanied by relevant voucher and reasonable explanation when called for. Once the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - made by Ld. Assessing Officer 2. Because, the Ld. CIT(Appeals) has erred in overlooking and summarily rejecting the detailed statements of facts submitted along with written submission of appeal and accepted the incorrect version of the learned assessing officer. 3. The appellant reserves the right to add, amend or alter any ground or ground/s of appeal (Emphasis supplied) 4. The facts scooped out of the case are tersely; 4.1 The appellant assessee is a resident individual and proprietor of Shree Sadguru Steel Agency, for the AY 2012-2013 filed his return of income [for short ITR/ROI ] on 28/09/2012 with a retuned income of ₹29,37,760/-, which was first summarily processed u/s 143(1) of the Act and then selected for scrutiny through CASS. The scrutiny assessment u/s 143(3) of the Act was culminated with a total income of ₹31,07,760/- on account of a solitary addition ₹1,70,000/- made on ad-hoc basis for disproportionate increase in freight charges incurred. 4.2 Aggrieved assessee carried the matter in an appeal before the first appellate forum, wherein Ld CIT(A) echoing the views of Ld AO, perfunctorily upheld the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,60,49,458 12 months 10,24,587 1.0667 7.15 19.37 2 2011-2012 1,34,39,578 3 Months 52,900 0.3936 Base Base 6.3. On a test verification, the Ld AO observing the multi-fold and disproportionate increase in freight charges incurred over increase in turnover, dissatisfied with the records of expenses on account of incomplete information contained therein, as to Distance covered for transportation in number of Kilo-Meter, Charges per km/per ton (per ton per km), Capacity of the vehicle utilized for transportation and some of the vouchers which were either self-signed or remained unsinged. The aforestated observations instigated the Ld AO in disallowing ₹1,70,000/- out of the total freight expenditure debited for the year under consideration. 6.4. Aggrieved by such impugned addition, the assessee filed an appeal before the CIT(A), wherein the Ld CIT(A) categorically notified the disproportion increase in the turnover over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowances with the amount of expenditure and nature of defects therein or therewith, moreover department could not bring out any deprecative material on record to substantiate its conclusion as logical. We couldn t also see remotely there is any mention of rationale in arriving at and applying the percentile of disallowance in the present case, consequently we find substantial force in the claim of the assessee that devoid of any specific infirmity qua the assessee s claim for deduction of the aforementioned expenditure by the lower tax authorities, and for the reason, the ad-hoc disallowance carried out in a most arbitrary manner could by no means be held to be justified. 9. We hold a view that, the section 37(1) of the Act, subject to certain explicit conditions, panoramically provides for allowability of expenditure by way of deduction while computing the income under the head Profits Gains of business or profession. Precisely the statute provided that, any expenditure of revenue nature(1), in relation to business or profession(2) of the assessee incurred during the previous year(3), and incurred wholly and exclusively(4) in relation to such business or profession in qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any deprecative material qua rationale negativizing litmus test, hence is precluded from making any disallowance on surmise or conjecture and this aforesaid view is fortified by the judgment of the Hon'ble High Court of Madras in V.C. Arunai Vadivelan Vs ACIT (TCA No 612 of 2019 dt 05/02/2021), wherein the lordships have held para 7 as; Given the nature of the industry in which the assessee operates, we can take judicial notice of the fact that, computer generated vouchers may not always be issued by the transporters unless they are an organization owning a large fleet and 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. (Emphasis supplied) 14. Considering the entire conspectus of case, we, do not find favour with the views lower tax authorities, consequently we set aside the order of Ld CIT(A) and direct Ld AO to delete the ad-hoc disallowance in its entirety an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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