Disallowance of Transport Expenses Due to Lack of Evidence: ITAT Directs AO to Estimate Income at 8% u/s 44AD [Read Order]

The Chandigarh Bench of Income Tax AppellateTribunal ( ITAT ) directed the Assessing Officer (AO) to estimate income at 8% of total transport receipts under Section 44AD of Income Tax Act,1961, after noting that the assessee failed to substantiate the expenses claimed.

Friends Transport Carrier,appellant-assessee, had filed an appeal for AY 2020-21 against the order dated 08-08-2024 passed by the Commissioner of Income Tax (Appeals)[CIT(A)],arising from the best judgment assessment made by the AO under Section 144 of the Act on 20-09-2022. During the hearing, no one appeared on behalf of the assessee.

The tribunal, after hearing the Senior Departmental Representative and examining the records, proceeded to dispose of the appeal.

The assessee had shown transport receipts of Rs. 81.89 lakhs and claimed expenses of Rs. 80.31 lakhs as a deduction under Section 57. Since no supporting evidence was furnished, the AO disallowed 75% of the expenses and added Rs. 60.11 lakhs to the income. The CIT(A) later confirmed the disallowance, leading the assessee to file a further appeal before the tribunal.

It was observed that the assessee had earned transport receipts but failed to substantiate the related expenses. Considering this, and guided by the presumptive provisions of Section 44AD, the tribunal estimated the income at 8% of the total receipts of Rs. 81,89,283, amounting to Rs. 6,55,143. The AO was accordingly directed to recompute the income on this basis.

The two member bench comprising Laliet Kumar (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) partly allowed the appeal.

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