2019 (3) TMI 1966 - AT - Income Tax

Disallowance of expenditure under various heads - Addition on the ground that the assessee has claimed huge and exorbitant expenses and the genuineness of the same were not established - as per CIT-A expenditure claimed by the assessee are incurred as well as directly relatable for the purpose of earning profit on the activities carried out by the assessee and therefore the disallowance made by the AO is unjustified - HELD THAT - DR has not been able to controvert the findings of First Appellate Authority. In the absence of any contrary material, we find no reason to interfere with the reasoned findings of Commissioner of Income Tax (Appeals). The same are upheld, accordingly and the appeal of Revenue is dismissed being devoid of any merit. - Decided against revenue.

Summary

Issues: Disallowance of expenditure under various heads

Analysis:
1. Background: The appeal by the Revenue challenged the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of expenditure amounting to ?1,63,64,142 for the assessment year 2010-11.

2. Disallowed Expenditure: The Assessing Officer disallowed various expenses claimed by the assessee, including manufacturing expenses, consultancy charges, travelling expenses, professional fees, selling expenses, interest paid to banks and others, interest on vehicle loan, and bank commission and charges. The disallowance was based on the grounds of the claimed expenses being huge and not adequately substantiated.

3. Appellate Proceedings: The Commissioner of Income Tax (Appeals) deleted the entire addition of disallowed expenditure after considering the facts, documents, and evidence on record. The Commissioner held that the Assessing Officer failed to conclusively prove that the expenditures were bogus and that the expenses were directly related to the business activities of the assessee.

4. Arguments: The assessee's representative argued that the disallowance was based on surmises and conjectures, and the Assessing Officer did not consider the documentary evidence provided. It was highlighted that the books of account were audited, and the disallowance on interest charges in a related case was also overturned by the Tribunal.

5. Department's Defense: The Department's representative defended the assessment order and sought to reverse the Commissioner's findings on the disallowed expenditures.

6. Tribunal's Decision: After hearing both sides and reviewing the orders of the authorities, the Tribunal upheld the Commissioner's decision to delete the disallowed expenditures. The Tribunal concurred with the Commissioner's reasoning that the expenses were genuine, directly related to business activities, and adequately supported by payments to banks and other parties.

7. Final Verdict: The Tribunal dismissed the Revenue's appeal, stating that there was no reason to interfere with the Commissioner's findings. Consequently, the cross objections filed by the assessee were also dismissed as the appeal was rejected.

In conclusion, the Tribunal upheld the Commissioner's decision to delete the disallowed expenditures, emphasizing the genuineness and business relevance of the expenses incurred by the assessee.