Disallowance of expenses - need for tax authorities to have a practical understanding of the nature of business operations

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..... ted Expenditures : The primary issue was the disallowance of certain expenditures claimed by the assessee for the assessment year 2017-18, where the Income Tax Authority (ITA) questioned the genuineness of these expenses, citing non-maintenance of proper bills and vouchers. Nature of Expenditures : The expenditures under scrutiny included business establishment expenses, conveyance, gues .....

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..... acknowledged that certain day-to-day expenses might not have proper vouchers or signatures but stated that this alone cannot justify a blanket disallowance. Appeal Allowed : The court allowed the appeal by the assessee, stating that the tax authorities' decision to disallow expenses on an estimate basis was not sustainable under the law. Therefore, the disallowance made by the AO was .....

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..... practical understanding of the nature of business operations when assessing expenses. Conclusion The decision in this case is significant for businesses in India. It serves as a reminder for companies to rigorously maintain financial documentation. Simultaneously, it guides tax authorities to exercise caution and due diligence, ensuring a fair assessment that acknowledges the operationa .....

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