Siddhartha Nautiyal ORDER
1. This assessee's appeal for A.Y. 2014-15, arises from order of the Commissioner of Income Tax (Appeals)-2, Rajkot dated 21-08-2017, in proceedings under section 250 of the Income Tax Act, 1961; in short "the Act".
2. The assessee has raised the following grounds of appeal:-
"1. The learned Commissioner of Income Tax (Appeals) officer erred in upholding the disallowance at Rs. 2,00,000/-.
2. The learned CIT (Appeals) has decided identical matter in favour of the assessee on identical facts in their case in earlier years (A.Y. 2011-12, 2012-13) and therefore should not have upheld the disallowance.
3. The appellant craves the leave to add, amend, alter, vary and/or delete, withdraw any or all of the grounds of appeal at or before the time of hearing."
3. The brief facts of the case are that the assessee is a firm engaged in the business of import of plastic scrap from European countries, USA and countries situated in UAE. During the course of assessment, the AO noticed that the assessee had debited following expenses, which have elements of personal and non-business nature:
Conveyance charges 1,05,563/-
Fuel exp. motor car 1,61,038/-
Repairs & maint. (motorcar) 88,926/-
Telephone charges 1,40,292/-
Travelling expense 3,84,615/-
3.1. The AO noticed that the assessee has not maintained log-book or any other document to separate business and non-business expenses. Therefore, it is not established that expenses were wholly and exclusively incurred for the business purposes. Further, the AO noted that many expenses were accounted on the basis of self-made vouchers. In some of the supporting evidences, addresses are of the recipient were missing and vouchers were lacking proper details about the expenditure made. Therefore, the AO disallowed a lump sum amount of ` 2 lakhs out of the above expenditure by treating it to be incurred for non-business use and added the same back to the total income of the assessee. In appeal, Ld. CIT(Appeals) dismissed the assessee's appeal with the following observations:
"6. DECISION
Having considered facts and circumstances of the case and rival contentions I find that the appellant's Ld. Counsel during appellate proceedings has not denied that log book of vehicles and telephones has not been maintained and that few of the vouchers of expenses are self made and not subject to verification. In these facts, the case can be distinguished from that relied upon by assessee for earlier years. The observation of AO at beginning of assessment order that books of A/c and details were furnished is a general finding whereas in the concluding paragraph there is a specific finding that log books were not maintained and that some vouchers were not subject to verification being self made and lacking complete and proper address. In these facts, I do not find any infirmity in ad hoc disallowance made by AO which is neither unjustified nor exorbitant nor unreasonable in quantum."
4. The assessee is in appeal before us against the aforesaid addition of ` 2 lakh made during the assessment proceedings. The counsel for the assessee submitted that the disallowance has been made on a purely ad-hoc basis, without finding any fault in the audited books submitted before the AO during the course of assessment proceedings. Accordingly, the AO has erred in law and on facts in making disallowance of ` 2 lakhs on a purely ad-hoc basis, which is impermissible law. In response, the Ld. DR relied on the observations made by the Ld. CIT(Appeals) in the appeal order.
5. We have heard the rival contentions and perused the material on record. We observe that the AO has not disputed that the accounts and records the assessee are audited under the provisions of section 44AB of the A........