The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that no disallowance of expenses on basis of lack of business activity or non-reporting income under Profit and gains of business or profession (PGBP).
The assessee, NCR Business Park Pvt. Ltd, engaged in the business of providing infrastructure services. During the assessment proceedings, the AO observed that the assessee had not carried out any business activities during the year and had earned income from other sources only.
The expenditure claimed by the assessee, except bank charges and audit fee, amounting to Rs.41,61/481/-, were held to be inadmissible and were disallowed by AO alleging that there was no activity on which income had been earned from income under the head “Profit and gains of business or profession”. On appeal the CIT (A) sustained the disallowance of business expenses, hence assessee filed an appeal before ITAT.
The Tribunal observed that when expenditure means a cost relating to the operations of an accounting period then it encompasses not only active operations but even dormant operations which may not be generating any revenue or income. The disallowance on basis of lack of business activity or non-reporting income under PGBP cannot be the sole ground for disallowing expenditure.
The Coram of Mr. G.S. Pannu, President, and Mr. Anubhav Sharma, Judicial Member has held that “there is no matter on record to suggest that the expenses were examined based on actual expenditure corroborated by evidence. Therefore, the issue regarding the disallowance of expenses is restored to the files of the AO with a direction to evaluate the genuineness of the expenses on an actual expenditure basis and then pass fresh assessment order”.
Adv Mr. Kapil Goel and Ms. Garima Sharma appeared for the assessee and the respondent respectively.
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