M/s. Goodwill Impex Limited Vs DCIT (ITAT Jaipur)
Assessee has challenged the sustenance of 10% of telephone, conveyance & car maintenance expenses amounting to Rs. 65,448/. As per Assessing Officer, the expenses in the profit & loss account are related to such facilities which are certainly proved to be used for other than business purposes. The ld. CIT(A) confirmed the addition so made (except the addition on account of depreciation) holding that the assessee has failed to file any evidence which established that the observation made by the Assessing Officer are not correct. In our view, these are purely adhoc addition made by the Assessing Officer which cannot be sustained in eyes of law. It is not the case of the Revenue that these are bogus expenditure or the expenditure has not been incurred for the purposes of business. A mere suspicion that given the nature of expenses, it is likely that incurrence of such expenditure is for non-business purposes, in our view, cannot be a basis for making the addition in the hands of the assessee. Accordingly, the adhoc addition so made is hereby directed to be deleted.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the assessee against the order of ld. CIT(A)-3, Jaipur dated 09.02.2018 wherein the assessee has taken the following grounds of appeal:-
“1. That the learned Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming rejection of books of account o f appellant and making trading addition of Rs. 2,00,000/-.
2. That the learned Commissioner of Income Tax (Appeals) has erred in law and in facts confirming disallowance to the extent of 10% o f telephone expenses, Conveyance expenses, Car maintenance expenses totaling Rs. 65,448/-.
3. That the learned Commissioner of Income Tax (Appeals) has erred in law and in facts confirming disallowance to the extent of Rs 99608, being 10% of total expenses on labour, staff welfare and office expenses. ”
2. Regarding Ground No. 1, briefly stated, the facts of the case are that the assessee is engaged in the business of manufacture and export of garments. During the course of assessment proceedings, the Assessing Officer noted that the assessee has reported a gross profit rate of 16.38% on turnover of Rs. 22,87,79,964/- and examined its books of accounts. In view of non-maintenance of stock register and quantity wise details of opening and closing stock and work in progress, the fact that design charges and wages were claimed on self-made vouchers and some of payments to transporters having been made in cash, the books of accounts were rejected by invoking of provisions of section 145(3) of the Act. Regarding the estimation of gross profit rate, the Assessing Officer stated that even though the assessee has declared better GP rate in comparison to the previous years but looking at the discrepancies in the books of accounts, it will be fair and reasonable to make a lump sum addition of Rs. 2,00,000/- on this account to prevent any possible leakage of revenue. On appeal, the ld. CIT(A) confirmed the rejection of books of accounts as well as the trading addition of Rs. 2,00,000/-. Now the assessee is in appeal before us against the said findings of the ld CIT(A).
3. During the course of hearing, the ld AR submitted that there is an overall increase in turnover and gross profit rate declared by the assessee as compared to earlier years as detailed below:
