The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has instructed the Assessing Officer (AO) to restrict the disallowance percentages for aggregate expenditure, conveyance charges, office maintenance, Sunday, and business promotion expenses due to the non-production of complete bills and vouchers.
The assessee had appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], presenting their grounds, submissions, and countering the Assessing Officer’s (AO) findings. However, the CIT(A), after reviewing the arguments and the AO’s actions, had upheld the AO’s decision and dismissed the taxpayer’s appeal. Frustrated with the CIT(A)’s ruling, the assessee had further escalated the matter by filing an appeal before the Tribunal.
The counsel for the assessee Piyush Chhajed argued that the Commissioner of Income Tax (Appeals) [CIT (A)] had erred in upholding the disallowance imposed by the Assessing Officer (AO). The counsel for the assessee asserted that the CIT (A) overlooked the facts and submissions presented during the assessment proceedings.
Moreover, the counsel for the assessee Piyush Chhajed emphasized that similar claims had been accepted by the revenue in previous years, and for the current year, the AO estimated the disallowance without specifying the particular item under the expenses claim, making ad hoc additions. The counsel for the assessee further contended that the disallowance of routine day-to-day expenses was on the higher side.
Supporting these arguments, the counsel for the assessee presented factual evidence, judicial decisions, and prayed for the allowance of the assessee’s appeal.
Per Contra, the counsel for the revenue S.G. Menon relied on the order of the CIT (A).
The Single member bench of the tribunal comprising Pavan Kumar Gadale( Judicial member) observed that CIT (A) overlooked crucial evidence, per the arguments presented by the counsel for the assessee, who contended that the Assessing Officer (AO) failed to specify a particular expenditure item for disallowance. The AO’s presumptive estimations of disallowances on legitimate business expenditures incurred, based on incomplete bills and vouchers, were contested. Ledger account copies supporting the claims were provided.
The bench concluded that the counsel for the assessee emphasized past and subsequent years’ expenditure percentages relative to business turnover. Recommending a reversal of the CIT(A)’s decision, directing the AO to restrict disallowances to 3% (from 10%) for aggregate expenditures and 2% (from 5%) for office maintenance in the current assessment year. Partially favoring the assessee’s appeal.
In result, the appeal filed by the assessee was partly allowed.
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