Disallowance of ₹58.83 Lakh u/s 57 Deduction for Lack of Evidence: ITAT Remands Matter to AO [Read Order]

Waseem Alam,petitioner-assessee,filed the return of income for AY 2018-19 declaring ₹9,68,550. The return was processed under Section 143(1), and the case was later picked for limited scrutiny to verify a large deduction claimed under Section 57. Notices were issued, and some documents were uploaded, but they were incomplete.

The AO noted income of ₹2.64 crore from contract work, dairy income, transport income, and hostel rent. Against this, a deduction of ₹58.83 lakh was claimed under Section 57, which was not routed through the profit and loss account. The assessee also failed to provide proper breakup or proof that the expenses were incurred solely for earning the income.

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Due to lack of evidence, the AO disallowed the entire deduction and completed the assessment. The appeal before the Commissioner of Income Tax(Appeals)[CIT(A)] was dismissed, and the assessee then approached the tribunal.

The assessee counsel stated that the Section 57 expenses were genuine and recorded in the books but could not be fully supported earlier due to missing documents. The assessee requested another chance to provide the evidence.

The Departmental Representative backed the lower authorities’ orders but agreed that the matter could be sent back to the AO for fresh review.

The two member bench comprising Sonjoy Sarma (Judicial Member) and Rakesh Mishraj (Accountant Member) reviewed the case and found that the ₹58.83 lakh deduction under Section 57 was disallowed because the assessee had not given enough proof that the expenses were made solely to earn the income.

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It also noted that the assessee had partly complied with notices and now asked for another chance to submit documents.

The appellate tribunal set aside the lower authorities’ orders and sent the case back to the AO to review it again, giving the assessee an opportunity to present all required evidence and directing full cooperation in the process.

Accordingly,the appeal was allowed for statistical purposes.

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