2012 (9) TMI 1012 - AT - Income Tax

Addition on account of travelling expenses - Held that - We find that the addition on account of travelling expenses was totally based on surmises and conjectures. Assessing Officer has not brought on record any cogent basis as to why this expenditure was to be disallowed. It is not the case that expenditure was considered to be bogus or any shortcoming in the vouchers in this regard was observed by the Revenue. Under the circumstances, we hold that estimated addition without any basis cannot be sustained. In this regard, the case law relied upon by the assessee in the case of the ITO vs. Lake Palace Hotels and Motels (P) Ltd 1981 (11) TMI 77 - ITAT CALCUTTA-A is germane. In this case, it was held that the travelling expenses and salary expenses, addition made on estimate basis cannot be justified. Moreover, disallowance is also not justified merely on the ground that similar disallowance was made in the previous year. Accordingly, in the background of the aforesaid discussions and precedent, we hold that the addition on account of travelling expenses is liable to be deleted and hence, we set aside the orders of the authorities below and decided the issue in favour of the assessee.

Summary

Issues:
Assessment of adhoc disallowance of travelling expenses.

Analysis:
The appellant challenged the order of the Ld. Commissioner of Income Tax (Appeals) regarding the adhoc disallowance of an amount on account of travelling expenses for the assessment year 2008-09. The Assessing Officer had disallowed a portion of the expenses, including travelling expenses, Diwali expenses, and telephone expenses, citing a personal element in some of the expenses. The Ld. Commissioner of Income Tax (A) confirmed the disallowance of travelling expenses but deleted the addition on account of telephone and Diwali expenses. The Appellate Tribunal noted that the addition on account of travelling expenses was based on surmises and conjectures without any concrete basis provided by the Assessing Officer. The Tribunal emphasized that the expenditure was not considered bogus, and no shortcomings in the vouchers were observed. Relying on a relevant case law, the Tribunal held that estimated additions without any basis cannot be sustained. The Tribunal also highlighted that disallowance solely based on previous year's disallowance was not justified. Consequently, the Tribunal set aside the orders of the lower authorities and decided the issue in favor of the assessee, allowing the appeal.

This case underscores the importance of providing a concrete basis for disallowing expenses and highlights that estimated additions without proper justification cannot be upheld. The Tribunal emphasized the need for assessing officers to substantiate their decisions with valid reasons and not solely rely on past practices. The decision serves as a reminder that each case should be evaluated on its own merits, and arbitrary disallowances should be avoided.