The Two member bench of Income Tax Appellate Tribunal (ITAT) of Bangalore directed readjudication with respect to disallowance made on expenses incurred under Section 37(1) of the Income Tax Act, 1961.
The Assessee Ambika Ghorpade filed this appeal .During the assessment proceedings Ao disallowed certain expenses incurred by the assessee u/s 37(1) of the Act.
The AO contented that these expenses were disallowed by AO on the reason that the assessee is engaged in Mining activities, which is not categorized as “C” Category and in the assessment year under consideration assessee was not permitted to carry on Mining operation . AO, assessee has not incurred expenditure wholly and exclusively for the purpose of business.
During the adjudication the counsel for assessee submitted that due to non-permission by the Government, assessee has not carried on mining business in the assessment year under consideration. However, the assessee has continued to be in business and required to incur this expenditure.
Department representatives argued that assessee has failed to substantiate the expenditure as incurred wholly and exclusively for the purpose of business.
It is observed that “In this case, NFAC has no dispute regarding incurring of expenditure. However, it has been disallowed by NFAC on the reason that the assessee has not substantiated the expenses.”
Therefore the bench determined that it is appropriate to remit the issue to the file of AO with a direction to the assessee to substantiate the incurring of this expenditure by producing relevant bills, vouchers & receipts.
After reviewing the facts the ITAT bench of George George K., Vice President and Chandra Poojari,(Accountant Member) partly allowed for statistical purposes.
K.R. Pradeep & Ms. Girija GA counsel appeared for the assessee and Subramanian S.counsel appeared for revenue.
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