Disallowance of Business Expenses Made Without Proper Justification: ITAT Restricts It to 10% of Expenses Claimed [Read Order]
The tribunal observed that no clear basis was provided for the disallowance and that the tax liability remained Nil due to the declared and carried-forward losses.
![Disallowance of Business Expenses Made Without Proper Justification: ITAT Restricts It to 10% of Expenses Claimed [Read Order]](https://images.taxscan.in/h-upload/2025/07/18/2065012-disallowance-of-business-expenses-disallowance-itat-taxscan.webp "Disallowance of Business Expenses Made Without Proper Justification: ITAT Restricts It to 10% of Expenses Claimed [Read Order]")
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) restricted disallowance of business expenses to 10% of the total claimed, noting the absence of proper justification from the Assessing Officer (AO). Raj Quarry,appellant-assessee,had filed its return of income declaring a loss of Rs.1,35,40,922. It had claimed expenses of Rs.79,28,708 towards mining operations at the...
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) restricted disallowance of business expenses to 10% of the total claimed, noting the absence of proper justification from the Assessing Officer (AO).
Raj Quarry,appellant-assessee,had filed its return of income declaring a loss of Rs.1,35,40,922. It had claimed expenses of Rs.79,28,708 towards mining operations at the lease site, site carting, labour and providing charges, and machinery hire. Upon verification of the vouchers, the AO disallowed one-third of the total expenses due to insufficient substantiation.
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Additionally, the AO disallowed Rs.11,44,400, being one-fourth of the diesel and petrol expenses claimed at Rs.45,77,900.
Challenging these disallowances, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)], who confirmed the AO’s decision.
The two member bench comprising Dr.B.R.R. Kumar ( Vice President) and SuchitraKamble (Judicial Member) noted that the AO had not provided any clear basis or justification for making the disallowance. It found that the assessee had reported a loss of Rs.1.35 crores along with brought forward losses of Rs.27.29 lakhs. As a result, even if the disallowance was restricted to 10% on an ad-hoc basis, the tax liability would remain Nil.
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Given the lack of specific details from either party to support or contest the extent of disallowance, the tribunal deemed it reasonable to limit the disallowance to 10% of the claimed expenses.
Accordingly, the appeal was partly allowed.
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