The Jaipur bench of the Income Tax Appellate Tribunal ( ITAT ) has held that addition cannot made merely on the ground that the expenditure is for non-business purposes.
During the assessment proceedings, the Assessing Officer has held that the expenses in the profit & loss account are related to such facilities which are certainly proved to be used for other than business purposes.
The assessee has challenged the sustenance of 10% of telephone, conveyance and car maintenance expenses amounting to Rs. 65,448/.
On first appeal, the CIT(A ) confirmed the addition so made (except the addition on account of depreciation) holding that the assessee has failed to file any evidence which established that the observation made by the Assessing Officer are not correct.
Granting relief to the assessee, the Tribunal held that “In our view, these are purely adhoc addition made by the Assessing Officer which cannot be sustained in eyes of law. It is not the case of the Revenue that these are bogus expenditure or the expenditure has not been incurred for the purposes of business. A mere suspicion that given the nature of expenses, it is likely that incurrence of such expenditure is for non-business purposes, in our view, cannot be a basis for making the addition in the hands of the assessee. Accordingly, the adhoc addition so made is hereby directed to be deleted.”
Subscribe Taxscan Premium to view the Judgment