2019 (2) TMI 782 - AT - Income Tax

Disallowance u/s 37(1) - expenses incurred on motor car, depreciation on motor car and business promotion - allowable busniss expenses - Held that - Considering the personal element involved in motor car expenses, depreciation on motor car, business promotion expenses, the assessee itself has disallowed 10% out of the total expenditure claimed. AO without pointing out any shortcoming in the disallowance made by the assessee has made further disallowance of 10% by merely stating that the disallowance made by the assessee is on the lower side. The assessing officer has not provided any reason why he considers the disallowance made by the assessee to be on the lower side. In view of the aforesaid, we hold that the disallowance made by the assessing officer in addition to disallowance already made by the assessee is unsustainable. - Decided in favour of assessee.

Summary

Issues: Disallowance of expenses under section 37(1) of the Income Tax Act, 1961 for assessment year 2012-13.

Analysis:
1. The dispute revolves around the disallowance of ?9,54,286 under section 37(1) of the Income Tax Act, 1961, concerning expenses incurred on a motor car, depreciation on a motor car, and business promotion.

2. The assessing officer observed a 10% disallowance by the assessee on these expenses due to a personal element involved. However, without providing any specific reasons, the officer further disallowed another 10% on the grounds that the initial disallowance was on the lower side.

3. The Tribunal noted that the assessing officer failed to justify why the initial 10% disallowance by the assessee was considered inadequate. Consequently, the Tribunal held the additional disallowance made by the assessing officer as unsustainable and deleted the disallowance of ?9,54,286.

4. The Tribunal's decision was based on the lack of reasoning provided by the assessing officer for the additional disallowance, ultimately leading to the allowance of the assessee's appeal and the deletion of the disputed disallowance amount.

5. Therefore, the Tribunal allowed the assessee's appeal, ruling in favor of the assessee and deleting the disallowance of ?9,54,286. The order was pronounced in open court on 26.12.2018.