Case Law Details
Garve Motors Private Limited Vs DCIT (ITAT Pune)
The recent judgement of Garve Motors Private Limited Vs DCIT passed by the Income Tax Appellate Tribunal (ITAT), Pune, brings forth the critical issue of disallowance due to non-submission of business vouchers. This case opens a dialogue around the implications of lack of evidential support for business expenses, with ITAT directing a re-adjudication.
The case revolves around the contention raised by Garve Motors Private Limited, an authorised dealer of Hyundai Cars, against a disallowance made by the Assessing Officer (AO) based on the non-submission of certain business vouchers. AO disallowed 10% of expenses that were backed by handmade vouchers, which the company claimed under “Other Expenses”. Challenging the AO’s decision, the company appealed before the CIT(A) in NFAC, Delhi, who further restricted the disallowance to 8%.
Before the ITAT, Garve Motors argued that the AO made no comment about the genuineness of the expenditure but only doubted the handmade vouchers. The ITAT observed that the AO indeed made no adverse reference to the expenses’ genuineness. Nonetheless, due to the lack of supporting evidence, the tribunal decided to concur with the authorities below. But, considering the absence of doubt about the genuineness of the expenditure, the ITAT restricted the disallowance to 5%.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal by the assessee against the order dated 10-01-2023 passed by the National Faceless Appeal Centre, Delhi (“NFAC”) for assessment year 2-15-16.
2. The sole ground raised by the assessee challenging the action of CIT(A) in restricting the addition to an extent of Rs.9,62,904/- as against Rs.12,03,630/- disallowance made by the AO on account of other expenses in the facts and circumstances of the case.
3. At the outset, we note that the assessee is a private limited company which is authorized dealer of Hyundai Cars. The assessee claimed deduction of expenses under the head “Other Expenses”, the details of which reproduced by the AO in his order at page No. 2. On perusal of same, we note that the AO asked the assessee to furnish evidences in support of claim of the said expenses. The AO held that the explanation and documents filed by the assessee, on verification, that some of the vouchers are not supported by the evidences and are handmade. Accordingly, the AO disallowed 10% of such expenses. Having aggrieved with the order of AO, the assessee questioned the said ad-hoc disallowance before the CIT(A) in NFAC, Delhi. The CIT(A), NFAC, Delhi discussed the issue in para No. 5.1 of the impugned order and restricted the said addition to 8% to meet the ends of justice by holding the view of AO is correct.
4. The ld. AR, Smt. Deepa Khare before us vehemently argued that the AO did not comment about the genuineness of the expenditure but only doubted that some of the vouchers by holding they are handmade. She submits that the assessee cannot submit the supporting evidences for every expenditure incurred during the course of business for which the assessee made such vouchers on its own. She argued without there being any adverse reference by the AO with regard to genuineness of expenses, the addition made on ad-hoc basis is not maintainable and prayed to delete the same.
5. The ld. DR, Shri Ramnath P. Murkunde vehemently supported the order of both the authorities below and submits that the assessee failed to furnish evidences in support of expenditure incurred.
6. We note that, admittedly, the AO made no adverse reference to the expenditure incurred by the assessee and no comment stating that the said expenditure was not incurred for the assessee’s business. The only remark made by the AO is that no evidences were furnished by the assessee in respect of some of the vouchers which are handmade and doubting the same disallowed on ad-hoc basis. Even before us, the assessee could not submit any of the said vouchers which are doubted by the AO and the CIT(A), NFAC, Delhi for our examination. The ld. AR submitted her inability to produce the same as they were running into huge volumes of vouchers. Therefore, in the absence of such vouchers for our examination, we have no alternative except to concur with the finding of authorities below, but however, having not doubted about the genuineness of the expenditure by both the authorities below, in the interest of justice, we restrict the said disallowance to 5% of Rs.1,20,36,301/-. Therefore, the order of CIT(A), NFAC, Delhi is set aside. The AO is directed to restrict the disallowance to 5%. Thus, the sole ground raised by the assessee is partly allowed.
7. In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 30th May, 2023.
