Estimated addition without any basis cannot be sustained

Last updated: 29 September 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The grounds raised read as under:- “1. On the facts and circumstances of the case, the order passed by the Ld. Commissioner of Income Tax (A) is bad both in the eye of law and on facts. 2(i) On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred both on facts and in law in confirming the adhoc disallowance of an amount of ` 1,69,940/- on account of travelling expenses. ii) That the above said disallowance has been confirmed despite the fact that the same has been made on an adhoc rate of 10% without there being any basis for the same. 3 (i) On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred both on facts and in law in confirming the disallowance @10% of the total expenditure without pointing out specific expenditure not eligible for deduction is bad in l aw.

Citation :
Tripat Kaur, A-29, Friends Colony-East,New Delhi – 110 065 (PAN: AAAPK8020A) (Appellant) Vs. ACIT, CIR. 22(1), NEW DELHI (Respondent)

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “H”, NEW DELHI

BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

AND

SHRI C.M. GARG, JUDICIAL MEMBER

I.T.A. No. 3244/Del/2012

A.Y.: 2008-09

Tripat Kaur,

A-29, Friends Colony-East,

New Delhi – 110 065

(PAN: AAAPK8020A)

(Appellant)

Vs.

ACIT, CIR. 22(1),

NEW DELHI

(Respondent)

Assessee by: Sh. Ved Jain, CA

Department by: M rs. Shumana Sen, Sr. D.R.

ORDER

PER SHAMIM YAHYA: AM

This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XXIII, New Delhi dated 05.3.2012 pertaining to assessment year 2008-09.

2. The grounds raised read as under:-

“1. On the facts and circumstances of the case, the order passed by the Ld. Commissioner of Income Tax (A) is bad both in the eye of law and on facts. 2(i) On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred both on facts and in law in confirming the adhoc disallowance of an amount of ` 1,69,940/- on account of travelling expenses.

ii) That the above said disallowance has been confirmed despite the fact that the same has been made on an adhoc rate of 10% without there being any basis for the same.

3 (i) On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred both on facts and in law in confirming the disallowance @10% of the total expenditure without pointing out specific expenditure not eligible for deduction is bad in l aw.

(ii) That the 10% disallowance on mere suspicion ignoring the audited books of accounts as certified by the tax auditor that no expenditure is personal in nature is bad in law.

4. The appellant craves leave to add, amend or alter any of the grounds of appeal.”

3. In this case Assessing Officer observed that personal element in some of the expenses cannot be denied and hence 10% of these expenses are disallowed and added back to in the income of the assessee. Thus Assessing Officer added ` 1,72,941/- being the expenditure incurred on travelling expenses, Diwali expenses and telephone expenses. The Assessing Officer further observed that such disallowance was also in line of the assessment order for the assessment year 2007-08.

4. Upon assessee’s appeal Ld. Commissioner of Income Tax (A) considered the issues and observed that assessee’s counsel was specifically required to submit the note on the purpose of travelling. However, no detail was filed in this regard. As regards addition on account of travelling expenses Ld. Commissioner of Income Tax (A) confirmed the Assessing Officer’s action. Furthermore, Ld. Commissioner of Income Tax (A) deleted the addition on account of telephone expenses and Diwali expenses.

5. Against the above order the Assessee is in appeal before us.

6. We have heard the rival contentions in light of the material produced. We find that the addition on account of travelling expenses was totally based on surmises and conjectures. Assessing Officer has not brought on record any cogent basis as to why this expenditure was to be disallowed. It is not the case that expenditure was considered to be bogus or any shortcoming in the vouchers in this regard was observed by the Revenue. Under the circumstances, we hold that estimated addition without any basis cannot be sustained. In this regard, the case law relied upon by the Ld. Counsel of the assessee in the case of the ITO vs. Lake Palace Hotels and Motels (P) Ltd. 13 TTJ (JP) 216 is germane. In this case, it was held that the travelling expenses and salary expenses, addition made on estimate basis cannot be justified. Moreover, disallowance is also not justified merely on the ground that similar disallowance was made in the

previous year. Accordingly, in the background of the aforesaid discussions and precedent, we hold that the addition on account of travelling expenses is liable to be deleted and hence, we set aside the orders of the authorities below and decided the issue in favour of the assessee.

7. In the result, the appeal filed by the Assessee stands allowed.

Order pronounced in the open court on 07/9/2012.

Sd/- Sd/-

[C.M. GARG] [SHAMIM YAHYA]

JUDICIAL MEMBER ACCOUNTANT MEMBER

Date 07/9/2012

“SRBHATNAGAR”

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT (A)