Fuel Expenses Cannot be Assumed or Calculated by Logic: ITAT Upholds Status Quo on Categorization of Income Head, Allows Appeal [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Indore Bench, upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)] regarding categorizing income head of rented JCBs whose fuel expenditures the assessee had assumed.

The assessee, Gopal Muwel, filed an appeal under Section 253 of theIncome Tax Act (IT Act) against the order dated 29.04.2025 which had been passed by CIT(A) under Section 250. The relevant Assessment Year is 2020-21, corresponding previous year period is from 01.04.2019 to 31.03.2020.

The total income of the assessee was computed at INR 63,98,000/- and the total income as per return of income (ROI) was at INR 6,12,710/-, the same is reflected in the Assessment Order noting the addition/variation at INR 57,86,200/-. The case was selected for limited scrutiny to verify deductions from income from other sources. The assessee in ROI had claimed INR 57,86,200/- as deductions from income under Section 57 of the IT Act.

The assessee is also engaged in renting machineries and the income generated from the renting has been shown under income from other sources. However, the Assessment Order had mentioned that no evidence was submitted to support this claim of additional income and expenditure. AO proposed that INR 57,86,200/- be disallowed and added to the total income of the assessee.

Later, the assessee requested an opportunity to rectify ROI but the same cannot be done as per Section 154. The main contention of the assessee was that since they were engaged in the business of construction, they offered tax under presumptive taxation under Section 44AD. This Section also removes a liability to maintain books of accounts.

The counsel for the assessee also contended that since fuel expenses for machineries such as the JCB has been undertaken through cash, Section 44AD must be applied. However, the CIT ruled in favour of the AO’s clumsy arguments rather than assessee’s.

ITAT on 27.01.2026 heard the matter on the issue of the major expense of fuel in cash which have not been recorded or have been made available due to being misplaced. The tribunal observed that even the ROI has not been placed on record. Additionally, it held that the claim under Section 44D is rejected.

The tribunal noted that no explanation for expenditure can be supported by evidence. The counsel for the department left the issue to the bench to take appropriate action as remanding the matter would surely be futile.

The two-member bench held that a deduction under Section 57 of the IT Act needs satisfactory and credible evidence and so the amount INR 57,86,200/- was disallowed. The assessee’s contention of presumptive taxation under Section 44AD was also not maintained.

However, as the Department and the assessee both are ad idem on the fact that some expenses on fuel cost must have been deployed as their renting contract is all inclusive on the JCB’s rented out to Ultratech Ltd.

Thus, the file was sent back to the AO with direction to analyse fuel expense through analysis and the appeal was ultimately allowed for statistical purposes.

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