The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) canceled the 30% ad-hoc disallowance of expenses amounting to Rs.78,030, made by the Assessing Officer ( AO ), due to lack of justification.
Bhagabhai Tribhovandas Patel,appellant-assessee,challenged the order dated 10.04.2024 passed by the Commissioner of Income Tax (Appeals) [CIT(A)], under Section 250 of the Act,in quantum proceedings under Section 143(3) read with Section 263 of the Act.
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In this case, the AO issued an order under Section 143(3) read with Section 263 of the Act on 12.12.2018 for the Assessment Year (AY) 2011-12. The order involved the disallowance of Rs.2,44,553/- as the cost of improvement and the rejection of other expenses at 30%, totaling Rs.78,030/-.
The assessee’s counsel argued that all relevant details, including the ledger accounts for conveyance, electricity, municipal tax, accounts fee, repairs, maintenance, stationery, tea expenses, and other miscellaneous expenses, had been submitted to the Revenue Authorities. Therefore, the disallowance of 30% of the expenses was against the settled principles of law.
In response, the revenue counsel contended that due to the lack of complete vouchers and details, the Assessing Officer had appropriately disallowed 30% of the expenses instead of rejecting the entire amount.
The two-member bench, comprising Dr. B R R Kumar ( Vice President ) and Suchitra Kamble ( Judicial Member ) noted that in relation to the disallowance of 30% of expenses on Rs. 2.6 lakhs, the assessee had provided all necessary details, such as municipal tax, accounts fee, repairs, maintenance, and miscellaneous expenses.
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The AO did not present any evidence to suggest that any of the expenses should be disallowed. The only issue raised was the absence of a bifurcation of these expenses.
However, the tribunal found that all the expense categories had been duly submitted and concluded that there was no justification for the 30% disallowance on an ad-hoc basis.
In short, the appeal filed by the assessee was allowed.
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