2018 (9) TMI 1634 - HC - Income Tax

Disallowance of a part of repair and maintenance expenditure u/s 37 - fact recorded by the AO that neither vendor nor confirmation were produced during the course of assessment proceedings - ITAT deleted the addition for the reasons that the assessee had furnished PAN of venders - Held that - The finding of the Tribunal deleting disallowance of 50% by the Assessing Officer is primarily factual. We have quoted the reply filed by the respondent/assessee before the first appellate authority. These documents and papers were relied upon by the Tribunal and the Commissioner of Income Tax (Appeals). However, copies of the said documents/papers have not been filed. There is nothing to show and establish that the findings of the Commissioner of Income Tax (Appeals) and the Tribunal are perverse and factually incorrect. No substantial question of law

Summary

Issues:
1. Disallowance of repair and maintenance expenditure.
2. Justification for deleting disallowances by the ITAT.

Issue 1: Disallowance of repair and maintenance expenditure:
The Assessing Officer disallowed a portion of the repair and maintenance expenditure, citing absence of supporting documents and a complaint made by a third party. The AO disallowed 50% of the expenditure amounting to a significant sum as ingenuine. The Commissioner of Income Tax (Appeals) reduced this disallowance to 5% based on past orders and submissions by the assessee. The respondent- assessee had produced various vendors and documents to establish the genuineness of the expenditure. However, a certain payment to a contractor was disallowed due to lack of confirmation, leading to a partial disallowance.

Issue 2: Justification for deleting disallowances by the ITAT:
The Tribunal, in its decision, noted that the assessee had provided detailed information about vendors, including PAN numbers and invoices. It referenced previous Tribunal decisions where similar disallowances were deleted. The Tribunal criticized the Commissioner of Income Tax (Appeals) for making a 5% disallowance based on mere suspicion. The Revenue's appeal against similar deletions in earlier years was dismissed. The High Court found the Tribunal's deletion of the disallowance to be primarily factual, supported by the documents and papers submitted by the respondent/assessee. As no substantial question of law was found, the appeal was dismissed.

In conclusion, the High Court upheld the Tribunal's decision to delete the disallowance of repair and maintenance expenditure, emphasizing the factual basis of the decision and the lack of any substantial legal question. The case highlights the importance of providing necessary documentation and justifications to support business expenditures to avoid disallowances by tax authorities.