The ITAT, Lucknow bench in M/s Maheshwari Flour Mills vs. JCIT, has held that expenses related to the fundamentals of the assessee’s business cannot be disallowed merely n ground that they were not vouched.
The return filed at NIL income after set off of earlier year loss by the assessee; who is carrying on the business of flour mill and trading in food grains. They had a repairing expense which has debited under the head “machinery repairing expenses”.
The Assessing Officer, on examination of bills and vouchers relating to expenses, noticed that some of the expenses were not supported with verifiable vouchers and were in cash.
Accordingly AO disallowed Rs.25,000/- on this account and added to the income of the assessee.
CIT (A) accordingly dismissed the appeal of the assessee on the ground of limitation. The tribunal bench comprising T.S. Kapoor, AM and Partha Sarathi Chaudhury, JM observed the fact that such expenses are common in factory set up for which vouching is not always possible.
“The business of the assessee is trading in food grains and producing Maida which is supplied to various biscuit manufacturers. It is common in factory set up that certain repairs and maintenance work are conducted for which vouching is not always possible. These expenses relate to the fundamentals of the assessee’s business and just because they were not vouched, there cannot be any addition. The practical aspects involved in relation to the type of business of the assessee, who is also a tax payer, should be taken into consideration by the Department and taking these facts in totality, we are of the considered view that such ad hoc addition without any basis cannot be sustained and hence liable to be deleted.”
Subscribe Taxscan Premium to view the Judgment
