Miscellaneous expenses Paid by Cheques based on Self-Made Voucher allowable–TAXGURU

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Thermon Heat Tracers Pvt. Ltd. Vs JCIT (ITAT Pune)

ITAT held that miscellaneous expenses Paid Through Cheques Based On Self-Made Voucher Allowable for the purpose of business are allowable.

Admittedly, the majority of details regarding these expenditures were filed by the assessee during the course of First Appellate proceedings as additional evidences. The CIT(A) also basing on the remand report considered the issue and gave part relief to the assessee. In the remand report which is reproduced at Page Nos. 3 and 4 of the impugned order, we note that the AO held bills were not produced for a sum of Rs.89,566/-and self made vouchers furnished regarding the expenditure of Rs.1,15,872/-. Therefore, according to the AO in the remand report and the CIT(A) in his consideration held the amount concerning the above said two amounts were not supported by the necessary bills. Regarding the self made vouchers of Rs.1,15,872/-, we observe that the said payments were made through cheques for car hire charges, small conferences and to the staff for the expenditure incurred thereon for picnic etc. The facts remained admitted no cash payments were made by the assessee regarding these expenses. The only contention raised by the ld. DR that no supporting necessary bills were submitted and the assessee is not entitled to claim deduction in that regard. We note that as submitted by the ld. AR that all these expenses were incurred for staff during the course of business and all were paid through cheques. We note that all these petty expenses were paid through cheque and the AO did not point out any of such expenses were incurred for personal gain, therefore, we find force in the arguments of ld. AR that all these expenses under head miscellaneous expenses as confirmed by the CIT(A) incurred for the purpose of business and therefore, the assessee is entitled to claim as deduction.

FULL TEXT OF THE ORDER OF ITAT PUNE

This appeal by the assessee against the order dated 11-07-2019 passed by the Commissioner of Income Tax (Appeals)-5, Pune [‘CIT(A)’] for assessment year 2009-10.

2. We note that this appeal was filed with a delay of 13 days. After hearing both the parties, we find that the reasons stated by the assessee are bonafide which really prevented the assessee to file the present appeal in time. Therefore, the delay of 13 days are condoned.

3. Ground No. 1 raised by the assessee challenging the action of CIT(A) in confirming the disallowance made on account of miscellaneous expenses.

4. Heard both the parties and perused the material available on record. We note that the AO in his order at Para No. 7 discussed the issue regarding the disallowance made on account of miscellaneous expenses. The AO observed that the assessee claimed expenditure against four parties for an amount of Rs.9,19,142/- and submitted vouchers to an extent of Rs.6,12,563/-. Further, he observed that the assessee has not produced the bills and vouchers regarding the difference between claim and evidences in the form of vouchers to an extent of Rs.3,01,579/-(Rs.9,19,142/- – Rs.6,12,563/-) and held the assessee failed to substantiate the claim of said expenditure. Further, in Para No. 7.2, he found the assessee debited expenditure to an extent of Rs.5,37,727/-against each party but no details has been furnished during the course of assessment proceedings. He added 50% i.e. Rs.2,68,863/- (Rs.5,37,727/-@ 50%). In Para No. 7.3 he added 20% i.e. Rs.7,32,385/- (Rs.36,61,927/-@ 20%) by holding the assessee has failed to furnish bills and vouchers in respect of expenditure of Rs.36,61,927/-. The CIT(A) taking into consideration the remand report gave part relief and restricted the addition to an extent of Rs.89,566/- and Rs.1,15,872/-. Aggrieved by the order of CIT(A), the assessee is before us.

5. The ld. AR, Shri D.Y. Pandit assisted by Smt. Deepa Khare submits that the details relating to addition of Rs.1,15,872/- by way of vouchers submitted in the assessment proceedings and the AO and CIT(A) held the same as self made vouchers. The said vouchers consists of expenditure incurred towards car hire charges, small conferences and other petty expenses when the employees travel to difference places on behalf of the assessee. The said expenditure also includes on account of picnic for the staff. The said expenditure would be incurred by the staff and the assessee used to pay that amount through cheque on furnishing of details. All these expenses are small in nature but no cash payments were made.

6. Regarding the expenditure of Rs.89,566/- the details of which also submitted in the assessment proceedings. The ld. AR drew our attention of Page No. 7 of the impugned order and argued all those payments were made through cross order cheques. He prayed to allow the ground of appeal.

7. The ld. DR, Shri M.G. Jasnani submits that the AO in the assessment proceedings clearly held the details of said expenditure were not filed and not traceable. The CIT(A) also held some of expenditures are in personal in nature and supported the order of CIT(A).

8. Heard both the parties and perused the materials available on record. Admittedly, the majority of details regarding these expenditures were filed by the assessee during the course of First Appellate proceedings as additional evidences. The CIT(A) also basing on the remand report considered the issue and gave part relief to the assessee. In the remand report which is reproduced at Page Nos. 3 and 4 of the impugned order, we note that the AO held bills were not produced for a sum of Rs.89,566/-and self made vouchers furnished regarding the expenditure of Rs.1,15,872/-. Therefore, according to the AO in the remand report and the CIT(A) in his consideration held the amount concerning the above said two amounts were not supported by the necessary bills. Regarding the self made vouchers of Rs.1,15,872/-, we observe that the said payments were made through cheques for car hire charges, small conferences and to the staff for the expenditure incurred thereon for picnic etc. The facts remained admitted no cash payments were made by the assessee regarding these expenses. The only contention raised by the ld. DR that no supporting necessary bills were submitted and the assessee is not entitled to claim deduction in that regard. We note that as submitted by the ld. AR that all these expenses were incurred for staff during the course of business and all were paid through cheques. We note that all these petty expenses were paid through cheque and the AO did not point out any of such expenses were incurred for personal gain, therefore, we find force in the arguments of ld. AR that all these expenses under head miscellaneous expenses as confirmed by the CIT(A) incurred for the purpose of business and therefore, the assessee is entitled to claim as deduction. Thus, the order of CIT(A) is not justified and the grounds raised by the assessee are allowed.

9. In the result, the appeal of assessee is allowed.

Order pronounced in the open court on 06th June, 2022.

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