ITAT allows petty expenses paid through cheques even where Taxpayer could not produce necessary bills

Thermon Heat Tracers Pvt. Ltd. V/s. Jt. Commissioner of Income Tax

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

The assessee had claimed expenditure against four parties for an amount of Rs. 9,19,142 and submitted vouchers to an extent of Rs. 6,12,563. The assessee did not produce the bills and vouchers regarding the difference between the claim and evidence 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. The assessee debited expenditure to an extent of Rs. 5,37,727 against each party but no details were furnished during the course of assessment proceedings. He added 50% i.e. Rs. 2,68,863 (Rs. 5,37,727 at 50%). He added 20% i.e. Rs. 7,32,385 (Rs. 36,61,927 at 20%) by holding the assessee has failed to furnish bills and vouchers in respect of expenditure of Rs. 36,61,927.

Appeal before CIT(A) : 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 filed appeal before the tribunal.

Appeal before the Tribunal:

The ld. AR, submitted 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 were 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, etc. All these expenses are small in nature but no cash payments were made. Regarding the expenditure of Rs. 89,566 the details of which also submitted in the assessment proceedings.

The ld. DR, 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 AR.

The tribunal heard both the parties and perused the materials on record and held that all these expenses were incurred for staff during the course of business and all were paid through cheques. It was noted 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, as confirmed by the CIT(A) the expenses were incurred for the purpose of business and therefore, the assessee is entitled to claim these as deduction. Thus, the order of CIT(A) is not justified and the grounds raised by the assessee are allowed.