Partial Acceptance of Expenses claimed Implies Expenses are Related to Business Activities of Assessee : ITAT Deletes Disallowance on Vehicle, Telephone and Salary expenses [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) held that 1/3rd disallowance of the said expenses and accepted the remaining expenses implies partially admission that the assessee has incurred expenses for its own business, thus the Assessing Officer (AO) as well as the Commissioner of Income Tax (Appeals) [CIT(A)] was not justified in making the disallowance for the expenses which were claimed by the assessee.

The assessee Ramku Raningbhai Patgir filed its e-return of income declaring total income at Rs.23,21,380/-. The case was selected for scrutiny for the reason the sale consideration of the property in Income Tax Return is less than the sale consideration of property reported in All India Report (AIR). Statutory notice under Section 143(2) of the Income Tax Act, 1961 was issued and duly served upon the assessee.

The AO observed that the assessee derives income from business, house property and other sources. During the year under consideration, the assessee sold a non-agricultural land for a consideration of Rs.90,00,000/-.

The AO further observed that the assessee has shown the profit arising out of the sale of the said land under the head “Business Income”. The assessee claimed that the assessee is negated in land trading and investment in Real Estate and thus this profit is nothing but his business income.

The AO made disallowance on account of petrol expenses amounting to Rs.3,79,500/-, Telephone expenses amounting to Rs.42,360/- and Salary & Bonus expenses amounting to Rs.4,80,000/-

Aggrieved by the order the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which dismissed the appeal of the assessee.Further aggrieved the assessee filed an appeal before the Tribunal with a delay of 148 days.

The assessee filed a delay condonation application and affidavit in response to the 148-day delay in filing the appeal, claiming that the delay was caused because assessee had not received the order of the CIT(A) on his mail.

 The Authorised Representative of the assessee (AR) Ms. Urvashi Shodhan, submitted that the assessee has filed all the details during the assessment proceedings and since the assessee is engaged into land trading and investment the consideration sale of Rs.90,00,000/- was considered as his business income. Since the assessee is having business income the expenses claimed by the assessee are genuine expenses and the same should have been allowed by the Assessing Officer.

He further submitted that the CIT(A) has not given opportunity to the assessee and passed ex-parte order without taking cognisance of the details filed before the AO.

The AR stated that the evidences submitted by the assessee before the AO was in respect of sale consideration of the property as the case was selected for scrutiny , he further contended that the AO himself has disallowed 1/3^rd expenses which was actually stating that the expenses are related to the business activities of the assessee.

The Departmental Representative (DR) Mr. N.J. Vyas, relied upon the Assessment Order and the order of the CIT(A).

The Single Member Bench comprising of Ms. Suchitra Kamble, Judicial Member observed that the disallowance made by AO due to no documentary proof in support of expenses relating to salary and bonus paid to the employees, petrol expenses and usage of vehicles for personal and business purpose as well as expenses relating to telephone appears to be incorrect as the assessee has given the details of expenses made by the assessee during the course of conducting the business.

Further the Tribunal noted that the AO has disallowed 1/3rd of the said expenses and accepted the remaining expenses and, therefore partially admitted that the assessee has incurred expenses for its own business.

The Bench held that the AO as well as the CIT(A) was not justified in making the disallowance for the expenses which were claimed by the assessee.

Hence, appeal filed by assessee was allowed.

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