2015 (10) TMI 310 - AT - Income Tax

Disallowance of denting & painting and job charges expenditure - Held that - In the present case, it is noticed that the assessee explained the reason for increasing the expenses which was mainly due to warranty scheme and no recovery was made in those case where warranty period was inexistence. The Assessing Officer did not point out any item of expenses which was not incurred for the business purposes. Therefore, the disallowance made by the Assessing Officer and sustained by the Ld. CIT(A) was not justified. Accordingly, the same is deleted. - Decided in favour of assessee. Addition @ 15% out of claim of rebate & discount expenses and various expenses debited in the P & L account - AO was of the view that the discount and rebate allowed to the customers was through self made vouchers instead of sales bills issued to the customers - Held that - In the instant case, it is noticed that the Assessing Officer did not point out any defect in the books of accounts which were duly audited. He also did not point out any specific items of expenses which was not incurred for the business purposes. In our opinion, the Assessing Officer failed to appreciate the facts in right perspective even he did not consider this explanation of the assessee that sales bills for vehicles and spare parts were issued online through accounting software, the bills were issued on Maximum Retail Price (MRP) and the discount was given through self made vouchers because there was no such software in the accounting system for giving discount. The Assessing Officer made the adhoc disallowance without any basis and the Ld. CIT(A) also restricted the same in slip shod manner without giving any cogent reason and the basis. We therefore, considering the totality of the facts of the present case, are of the view that the disallowance sustained by the Ld. CIT(A) was not justified. Accordingly, same is deleted.- Decided in favour of assessee.

Summary

Issues: Appeal against order of Ld. CIT(A), Bikaner regarding disallowance of expenditure and confirmation of additions under various heads.

Analysis:

1. Ground No. 1 - Disallowance of Expenditure:
- The assessee filed the return declaring income of Rs. 27,45,020, which was later scrutinized. The Assessing Officer disallowed Rs. 75,000 each for denting & painting expenses and job charges due to claimed excess expenses compared to service charges receipts. The CIT(A) sustained the disallowance, stating expenses were accounted for on internal vouchers. Assessee argued citing case laws.
- The Tribunal found the disallowance unjustified as expenses were related to warranty schemes, and no non-business expenses were identified. The disallowance was deleted.

2. Ground No. 2 - Confirmation of Additions:
- The Assessing Officer disallowed Rs. 87,312 from rebate & discount expenses and Rs. 1,10,000 from various expenses due to self-made vouchers. The CIT(A) reduced the disallowance to 15% and 10% respectively. Assessee contended that no non-business expenses were identified.
- The Tribunal observed no defects in audited accounts and no specific non-business expenses. The disallowance was considered arbitrary, lacking basis, and not justified. Therefore, the disallowance was deleted, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the assessee, deleting the disallowances made by the Assessing Officer and sustained by the CIT(A) due to lack of justification and basis for the disallowances.