2018 (1) TMI 1538 - AT - Income Tax

Disallowance of expenses relating to staff welfare, pooja expenses, postage, telegram telephone expenses etc .- AO made disallowance by holding that the expenses of vouchers were not properly vouched and he also held that major expenses were supported by self-made vouchers - HELD THAT - AO did not point out any specific voucher on which we was not satisfied and had made the addition on ad hoc basis. Before learned CIT(A), the assessee submitted that no defect was pointed out by the Assessing Officer in any of the vouchers and had relied on a number of case laws. CIT(A), on the basis of submissions, restricted the disallowance of 10% to 5% and also upheld a part of certain disallowances. CIT(A) had also not cited any reason for partly confirming the additions and partly allowing the additions. In view of the above, the disallowances sustained by learned CIT(A) are not in order and therefore, we allow the appeal of the assessee.

Summary

Issues: Appeal against disallowance of expenses related to staff welfare, pooja expenses, postage, telegram & telephone expenses.

Analysis:
1. The appeal was filed against the order of CIT(A) dated 29/06/2016 regarding the disallowance of various expenses by the Assessing Officer. The appellant contended that the disallowances were ad hoc without specific defects in the books of account or vouchers. It was argued that since the books of account were not rejected, such disallowances were unwarranted, citing relevant case laws in support.

2. The Assessing Officer had disallowed expenses claiming that vouchers were not properly vouched and major expenses were supported by self-made vouchers. However, no specific defects in vouchers were pointed out by the Assessing Officer. The appellant, before the CIT(A), reiterated that no defects were identified in the vouchers and relied on case laws. The CIT(A) reduced the disallowance from 10% to 5% based on submissions but did not provide reasons for partially confirming and partially allowing the additions.

3. The Tribunal noted that the disallowances sustained by the CIT(A) were not justified as no specific defects in vouchers were highlighted by the Assessing Officer. The Tribunal found the disallowances to be arbitrary and allowed the appeal of the assessee, concluding that the disallowances upheld by the CIT(A) were not in order.

4. Ultimately, the appeal of the assessee was allowed by the Tribunal, setting aside the disallowances imposed by the Assessing Officer and partially upheld by the CIT(A). The decision was pronounced in the open court on 11/01/2018.