2022 (9) TMI 652 - AT - Income Tax

Disallowance of Material Expenses - second round of litigation - allowability of business expenses - HELD THAT - It is observed that the assessee produced books of accounts before the authorities below and claim is made that complete details of bills/vouchers were furnished . The ledger account of Material Expenses is also furnished before us. Thus, in the facts and circumstances of the case, where the assessee is satisfactorily able to provide details and establish genuineness of Material Expenses claimed to be incurred for business of the assessee - Disallowance by authorities below of which even specific details/breakup of the expenses which are disallowed is not furnished by the authorities below with no specific defects being pointed out, we hold that disallowance as were made by authorities below is not sustainable and we allow these Material expenses which stood disallowance by authorities below, and we order deletion of these additions. As assessee produced books of accounts as well vouchers/bills before the authorities below and primary onus which lay on the assessee stood discharged, and it is now for the authorities below to bring out specific defects in the books of accounts as well bills and vouchers furnished by the assessee after making necessary enquiries and investigation and the authorities are to point out which expenses are not allowable and reasons thereof, which has not been done by authorities below in this case. Same is the fate of other expenses on account of staff welfare, repairs and maintenance, telephone and mobile expenses and travelling and conveyance, which disallowance also stood deleted. - Decided in favour of assessee.

Issues Involved:
1. Disallowance of Material Expenses of Rs. 2,15,000/-.
2. Disallowance of Staff Welfare Expenses of Rs. 6,930/-.
3. Disallowance of Repair and Maintenance Expenses of Rs. 28,000/-.
4. Disallowance of Telephone and Mobile Expenses of Rs. 18,500/-.
5. Disallowance of Travelling and Conveyance Expenses of Rs. 22,010/-.

Detailed Analysis:

Disallowance of Material Expenses of Rs. 2,15,000/-
The assessee contested the disallowance of Rs. 2,15,000/- out of the total Material Expenses of Rs. 7,26,25,516/- claimed. The AO verified Rs. 7,24,10,516/- but could not verify Rs. 2,15,000/-. The CIT(A) upheld the disallowance, noting that the addition was specific and not adhoc. The tribunal observed that neither the AO nor the CIT(A) provided specific details or defects regarding the disallowed amount. The assessee had produced books of accounts and bills/vouchers, satisfactorily explaining the majority of the expenses. The tribunal held that the disallowance was not sustainable due to the lack of specific details and ordered the deletion of the Rs. 2,15,000/- disallowance.

Disallowance of Staff Welfare Expenses of Rs. 6,930/-
The AO disallowed Rs. 6,930/- out of the claimed Rs. 69,343/- for Staff Welfare Expenses, citing un-vouched bills. The CIT(A) upheld this disallowance, agreeing with the AO's observation. The tribunal noted that the disallowance was made without pointing out specific defects and that the assessee had produced the necessary documentation. The tribunal ordered the deletion of the Rs. 6,930/- disallowance.

Disallowance of Repair and Maintenance Expenses of Rs. 28,000/-
The AO disallowed Rs. 28,000/- out of the claimed Rs. 4,83,216/- for Repair and Maintenance Expenses due to un-vouched bills. The CIT(A) upheld this disallowance. The tribunal found that the disallowance was made without specific details or defects being pointed out. Given that the assessee had produced relevant documentation, the tribunal ordered the deletion of the Rs. 28,000/- disallowance.

Disallowance of Telephone and Mobile Expenses of Rs. 18,500/-
The AO disallowed Rs. 18,500/- out of the claimed Rs. 2,69,783/- for Telephone and Mobile Expenses, citing un-vouched bills. The CIT(A) upheld this disallowance. The tribunal observed that the disallowance was made without specific details or defects being provided. The assessee had produced the necessary documentation, and the tribunal ordered the deletion of the Rs. 18,500/- disallowance.

Disallowance of Travelling and Conveyance Expenses of Rs. 22,010/-
The AO disallowed Rs. 22,010/- out of the claimed Rs. 1,92,174/- for Travelling and Conveyance Expenses due to un-vouched bills. The CIT(A) upheld this disallowance. The tribunal noted that the disallowance was made without specific details or defects being pointed out. The assessee had produced the necessary documentation, and the tribunal ordered the deletion of the Rs. 22,010/- disallowance.

Conclusion:
The tribunal allowed the appeal of the assessee, ordering the deletion of all the disallowed expenses, totaling Rs. 2,90,440/-. The tribunal emphasized the need for specific details and defects to justify disallowances, which were not provided by the authorities in this case.

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