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2023 (1) TMI 769 - AT - Income TaxAddition of local conveyance and conveyance transport - non-business use of the above expenses - HELD THAT - It is observed that the AO had made the disallowance out of Travelling Expenses on ad-hoc basis stating that pre-ponderance of probability indicates that non-business use cannot be ruled out. However, the AO has not specifically mentioned which vouchers were defective and what kind of nonbusiness use company indulged into. The assessee is a private limited company and the expenditure had been incurred for its business purposes. In the absence of any specific defect, the disallowance made by AO is merely on surmises. There is no basis for the disallowance. Therefore, the AO is directed to delete the addition, accordingly grounds of appeal of the assessee are allowed. Addition of Travelling and conveyance Expenses - lack of the supporting and probability of non business purpose involved in it, the disallowance of 5% of travelling expenses is made - HELD THAT - As it is an admitted fact by the Ld.CIT(A) that no specific defect was pointed out by the AO. Thus, the disallowance is based on surmises. The AO has failed to prove that the expenditure was not incurred wholly and exclusively for business purpose. Hence, the AO is directed to delete the disallowance - Accordingly, grounds of appeal of the assessee are allowed.
Issues Involved:
1. Ad-hoc addition of expenses for alleged non-business use in assessment orders for A.Y. 2013-14 and 2014-15. 2. Upholding of additions by the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) (CIT(A)). 3. Arguments presented by the Assessee and the Revenue. 4. Analysis of the disallowances based on surmises and lack of specific defects in vouchers. 5. Legal basis for the disallowances and the direction to delete the additions. Analysis: 1. Ad-hoc Addition of Expenses for Alleged Non-Business Use: The Assessee filed two appeals against the orders of the CIT(A) for A.Y. 2013-14 and 2014-15, challenging the ad-hoc additions made by the AO. The grounds of appeal primarily focused on the disallowance of expenses related to local conveyance, conveyance transport, travelling expenses, and sales promotion expenses, alleging non-business use of these expenditures. 2. Upholding of Additions by the AO and CIT(A): The CIT(A) upheld the additions made by the AO, emphasizing the possibility of non-business use in the expenses claimed by the Assessee. The AO had disallowed a percentage of the expenses based on the preponderance of probability indicating potential non-business elements in the claimed expenditures. 3. Arguments Presented by the Assessee and the Revenue: The Assessee, through the Authorized Representative, contended that the disallowances were unfounded as they were based on surmises and conjectures. It was argued that being a company, personal elements could not exist in the claimed expenses. The Departmental Representative for the Revenue supported the decisions of the Lower Authorities. 4. Analysis of Disallowances Based on Surmises: Upon hearing both parties and examining the records, the ITAT Pune found that the disallowances made by the AO lacked specific defects in the vouchers or concrete evidence of non-business use. The tribunal noted that the Assessee, being a private limited company, had incurred the expenses for business purposes. The disallowances were deemed to be merely speculative and without a valid basis, leading to the direction to delete the additions. 5. Legal Basis for Disallowances and Direction to Delete Additions: In both appeals, the ITAT Pune concluded that the disallowances were not substantiated with concrete evidence or specific defects in vouchers. The tribunal directed the AO to delete the additions made, emphasizing that the expenses were incurred wholly and exclusively for business purposes. Consequently, the grounds of appeal raised by the Assessee were allowed, resulting in the overall allowance of both appeals. This detailed analysis highlights the key issues, arguments, and the tribunal's decision regarding the ad-hoc additions of expenses for alleged non-business use, providing a comprehensive overview of the legal judgment delivered by the ITAT Pune.
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