The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax (Appeals)[CIT(A)]’s disallowance of Rs. 3,00,000 out of Rs. 16,32,609 claimed for gift, boni, and chandla expenses in 2007-08 due to insufficient documentation, despite similar claims being allowed in previous years.
JMC Projects,appellant-assessee, claimed a total of Rs.16,32,609/- for expenses under the heads gift, boni, and chandla for the financial year 2007-08. The Assessing Officer ( AO ) requested vouchers, receipts, and additional documents to verify the claims and identify the recipients of the payments. While the assessee provided some details, the AO found the documentation insufficient and unclear regarding the business connection of the expenses.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
As a result, 50% of the claimed amount was disallowed. The assessee argued that similar expenses were allowed in earlier years, particularly for Assessment Year( AY ) 2005-06, and maintained that the expenses, although not fully documented, were legitimate business costs.
The CIT(A) considered the case carefully. In A.Y. 2005-06, the expenses for gift, boni, and chandla were fully allowed, as they were deemed essential for business. However, in A.Y. 2006-07, the CIT(A) took a more cautious approach. While referring to the earlier decision, the CIT(A) acknowledged the AO’s concerns about missing documentation and disallowed Rs.1,50,000 from the total expenses of Rs.7,05,818.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The two member bench comprising Suchitra Kamble ( Judicial Member ) and Makarand V.Mahadeokar ( Accountant Member ) considered the submissions from both sides and the facts of the case. It observed that the CIT(A) had applied a consistent approach, taking into account previous years and the increase in expenses for the current year.
The CIT(A) disallowed Rs.3,00,000 from the total of Rs.16,32,609 for A.Y. 2007-08, which appeared to be a fair decision, balancing partial relief with the AO’s concerns about inadequate documentation. Considering the significant rise in the claimed expenses and the assessee’s failure to provide complete evidence, the tribunal saw no reason to alter the CIT(A)’s decision.
In short, the tribunal agreed with the CIT(A)’s decision, upheld the disallowance of Rs.3,00,000/-, and rejected the ground raised by the assessee.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
