2017 (12) TMI 1674 - AT - Income Tax

Disallowance of vehicle expenses and miscellaneous expenses - adhoc addition @5% - search and seizure action u/s 132 as carried out by the Investigation wing - HELD THAT - Vehicle expenses, tea and sundry expenses were supported by bills and vouchers. Admittedly, the burden is upon the assessee to furnish necessary evidence to substantiate the claim. To put an end to the litigation, we deem it appropriate to reduce the addition to ₹ 1 lakh out of ₹ 1,82,609/- sustained by the Ld. Commissioner of Income Tax (Appeal) as the personal use of these expenses cannot be ruled out. Thus, the appeal of the assessee is partly allowed.

Summary

Issues: Disallowance of expenses on ad-hoc basis by the Assessing Officer, appeal before the Commissioner of Income Tax (Appeal) regarding the disallowance, further appeal before the Appellate Tribunal ITAT Mumbai, consideration of evidence and bills to substantiate expenses, reduction of disallowance amount by the Tribunal.

Analysis:
The judgment by the Appellate Tribunal ITAT Mumbai involved the appeal of an assessee against the order of the Ld. First Appellate Authority confirming the disallowance of expenses amounting to ?1,82,609 on an ad-hoc basis. The assessee, engaged in the business of manufacturing and exporting diamonds, had faced a search and seizure action under the Income Tax Act. The Assessing Officer disallowed a portion of vehicle expenses and sundry expenses, which was further contested by the assessee before the Commissioner of Income Tax (Appeal). The Commissioner partially allowed the appeal, reducing the disallowance to 5% of the expenses. However, the assessee remained dissatisfied and appealed to the Appellate Tribunal.

Upon reviewing the submissions and available material, the Tribunal noted that the expenses in question were supported by bills and vouchers. Acknowledging the burden on the assessee to provide evidence for claims, the Tribunal decided to reduce the disallowance amount to ?1 lakh out of the initial ?1,82,609 sustained by the Commissioner of Income Tax (Appeal). This reduction was deemed appropriate to address the potential personal use of the expenses, as complete elimination of the disallowance was considered unwarranted. Consequently, the appeal of the assessee was partly allowed by the Tribunal.

In conclusion, the Appellate Tribunal ITAT Mumbai partially allowed the appeal of the assessee, reducing the disallowance of expenses on an ad-hoc basis after considering the evidence presented and the nature of the expenses incurred by the assessee. The decision aimed to strike a balance between substantiated claims and the potential personal element in the expenses, ultimately providing relief to the assessee while upholding the need for proper documentation and justification of expenditures in tax assessments.