2019 (8) TMI 148 - AT - Income Tax

Disallowance of travelling expenses - CIT(A) has restricted to 10% of such expenditure on the basis that the assessee could not produce supporting vouchers, however the case of the assessee is that he had produced all the vouchers - HELD THAT - Set of vouchers with supporting bills were submitted before the lower authorities - the entire payment was made through banking channels and the details of Director s travelling expenses and others were separately furnished before the A.O. It is also stated that sample vouchers referred by the A.O. is not verifiable, in fact, it was the travel advance, which was refunded and hence, the entry was reversed. Considering all we direct the A.O. to restrict disallowance to the extent of 5% to plug the leakage of revenue, if any. This ground of the assessee is partly allowed. Disallowance of building repairs and maintenance expenditure - addition made purely on estimation basis - HELD THAT - It is stated that complete set of vouchers with supporting bills were submitted before the lower authorities. TDS was also deducted on the contract payments and duly deposited. In respect of disallowance of repairs and maintenance expenditure also, it is stated that the A.O. made disallowance on adhoc basis. In respect of both the disallowances, the revenue authorities have made purely on estimation basis. It is not a case where the assessee has inflated the expenses. Therefore, considering the totality of the fact, we restrict the disallowance to the extent of 5% of the total disallowance made in this regard. Disallowance of gift and presents - it is stated by the assessee that the addition has been made purely on adhoc basis. It is stated that the A.O s allegation that vouchers were self-made and not reliable is not correct. It is stated that the vouchers specifying the nature and purpose were mentioned in the narration and bills/documentary evidences also. The allegation that expenses incurred for the first time without specifying purpose is not a basis for the purpose of disallowance. After considering rival submissions, looking to the totality of the facts, the disallowance out of the gift and present expenses is restricted to ₹ 50,000/-. Rest of the disallowance is directed to be deleted. Addition in respect of the interest - HELD THAT - It is stated that under the mistaken belief that the balance as on 31.3.2011 was misunderstood as accrual during the year was only ₹ 94,522/-. Therefore, we direct the A.O. to verify this fact and if found correct delete the addition. This ground of the assessee s appeal is allowed for statistical purposes.

Issues:
1. Disallowance of various expenses claimed by the Assessee.
2. Disallowance of traveling expenses.
3. Disallowance of repair and maintenance expenses.
4. Disallowance of building repair expenses.
5. Disallowance of excess depreciation.
6. Disallowance of gift and present expenses.
7. Disallowance of interest claimed.

Analysis:

Issue 1: Disallowance of Various Expenses Claimed by the Assessee
The Assessee appealed against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2012-13. The Assessee challenged the disallowance of several expenses, arguing that the expenses were supported by bills and vouchers and were exclusively for business purposes. The Lower authorities made disallowances on an ad hoc basis without verifying the material on record.

Issue 2: Disallowance of Traveling Expenses
The Assessing Officer (A.O.) disallowed 25% of traveling expenses, which was reduced to 10% by the Commissioner of Income Tax (Appeals). The Assessee contended that all vouchers were produced, and payments were made through banking channels. The Tribunal directed the A.O. to restrict the disallowance to 5% to prevent any revenue leakage.

Issue 3: Disallowance of Repair and Maintenance Expenses
The disallowance of repair and maintenance expenses was made on an estimation basis by the revenue authorities. The Assessee submitted complete vouchers with supporting bills, and TDS was deducted on contract payments. The Tribunal restricted the disallowance to 5% of the total amount disallowed.

Issue 4: Disallowance of Building Repair Expenses
Similar to repair and maintenance expenses, the disallowance of building repair expenses was also based on estimation. The Assessee provided vouchers and TDS details, leading the Tribunal to restrict the disallowance to 5% of the total disallowance.

Issue 5: Disallowance of Excess Depreciation
The A.O. disallowed excess depreciation, which was contested by the Assessee. The Tribunal directed the A.O. to verify the facts and delete the addition if found correct.

Issue 6: Disallowance of Gift and Present Expenses
The A.O. disallowed gift and present expenses on an ad hoc basis. The Assessee argued that vouchers were reliable and specified the nature and purpose of expenses. The Tribunal restricted the disallowance to ?50,000 and directed the deletion of the rest.

Issue 7: Disallowance of Interest Claimed
The Assessee raised an issue regarding the addition of interest. The Tribunal allowed the appeal for statistical purposes, directing the A.O. to verify the correct amount and delete the addition if necessary.

In conclusion, the Tribunal partly allowed the Assessee's appeal, making adjustments to the disallowed expenses and directing the A.O. to verify certain facts before making additions.

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