Personal Expenses of Directors of Company can’t be disallowed without Sufficient Proof: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT), while deleting an addition against the assessee-Company, held that the personal expenses of the Directors/ Office bearers cannot be disallowed without having sufficient proof.

In the instant case, the assessment was carried out against the assessee inconsequent to search operations. While completing the assessment, the Assessing Officer disallowed 10 per cent of the total expenses on account of personal use amounting to Rs. 97,351/-out of telephone expenses, car running and maintenance expenses and depreciation on car.

Before the Tribunal, the assessee contended that the assessee filed all requisite details, vouchers regarding expenses claimed and Ld.AO has not pointed out any instances/fault in the same.

While allowing the assessee’s claim, the Tribunal noted that the assessee is a company and is an entity recognised by law, as a legal person, that exist in eyes of law independently with rights and liabilities.

“Thus no element of personal expenses by the Directors/Office bearers can be attributed, without, there is sufficient evidence in support. Admittedly, Ld.AO neither pointed out any instance of inflation in expenditure claimed by the assessee nor has given any finding regarding expenditure claimed by assessee being capital in nature, for purposes of disallowance. It is further observed that Ld.CIT(A) made the general observation for sustaining addition made by Ld.AO. It is observed from assessment order that assessee filed books of accounts, vouchers and bank statements before Ld.AO. If Ld.AO was not satisfied with details filed by the assessee, he could have pointed out at the assessment stage itself. Under such circumstances we are not inclined to sustain the addition made by Ld.AO,” the Tribunal said.