2022 (4) TMI 455 - AT - Income Tax

Disallowance of expenditure on account of Final Settlement Expenses - AO ad hoc basis disallowed 20% of deduction of expense - Onus proving the allowability of its claim for deduction of the expenditure - HELD THAT - We find no infirmity in the view taken by the lower authorities. In our considered view, as the assessee had failed to substantiate the nature of the aforesaid expenditure which was claimed by him as a deduction therefore, the lower authorities had in all fairness disallowed 20% of the said amount. We, thus, concur with the view taken by lower authorities as regards the aforesaid issue - Decided against assessee. Disallowing on an ad-hoc basis 20% of its claim for deduction of Telephone expenses and Car expenses - HELD THAT - As the lower authorities have rightly observed that the personal element qua incurring of the aforesaid expenses could not be ruled out, therefore, a part of the same was liable to be disallowed on the said count. Considering the reasonableness of the disallowance i.e. 20% of the respective expenses, we find no reason to interfere with the view taken by the lower authorities. - Decided against assessee.

Summary

Issues:
1. Disallowance of Final Settlement Expenses
2. Disallowance of Car and Telephone Expenses

Analysis:
1. The appeal was against the order by the CIT(A) which upheld the AO's disallowance of Final Settlement Expenses of ?6,36,959. The assessee failed to substantiate the nature of the expenditure, resulting in a 20% disallowance of ?1,27,391. The CIT(A) upheld this decision. The tribunal concurred with the lower authorities, stating that as the assessee couldn't prove the allowability of the claim with supporting evidence, the disallowance was justified. Thus, Ground of appeal No.1 was dismissed.

2. The AO disallowed 20% of Telephone expenses (?67,444) and Car expenses (?1,07,941) due to lack of a log book and possible personal field expenditures by partners. The CIT(A) upheld this disallowance. The tribunal agreed with the lower authorities, noting that the personal element in the expenses couldn't be ruled out. Therefore, a 20% disallowance was reasonable. The tribunal upheld the decision, dismissing Ground of appeal No.2.

In conclusion, the tribunal dismissed the appeal of the assessee, upholding the disallowances of Final Settlement Expenses and Car and Telephone Expenses based on the failure to substantiate claims and the potential personal nature of the expenditures.