M/S. KOMAL AGENCY,,NASHIK vs. INCOME-TAX OFFICER, WARD - 1 (3),, NASHIK

The only issue raised in this appeal is against the confirmation of disallowance of expenses amounting to Rs.5,33,184/-.

3. Briefly stated, the facts of the case are that the assessee is a partnership firm engaged in the business of whosesale recharge vouchers. A return of income was filed declaring Nil income. The assessee recorded turnover of Rs.2.34 crores. In the Profit and Loss account, certain expenses totaling to Rs.5,33,184/- were debited. During the course of assessment proceedings, the assessee failed to furnish details of such expenses, which led to the disallowance of entire expenses. The ld. CIT(A) echoed the assessment order on this point. The assessee is aggrieved by the sustenance of disallowance of full expenses.

We have heard both the sides through Virtual Court and gone through the relevant material on record. Out of the total expenses disallowed by the Assessing Officer, Interest on partners’ capital stands at Rs.17,128/- and remuneration to partners figures at Rs.1,46,348/-. Salary and interest to the partners have to be allowed in terms of section 40(b) of the Act. We, therefore, direct to allow these expenses. It is further observed that the assessee paid certain expenses through banking channels, such as, Bank commission amounting to Rs.52,259/-, Salary (staff) at Rs.2,37,486/- and Telephone expenses at Rs.11,763/-. Since these payments were made through banking channel, as has been specifically stated before the ld. CIT(A) as well, there cannot be any question of disallowance of such expenses by their very nature. As regards the other remaining expenses, we order to make disallowance at 20%. In other words, full amount of Salary and interest to partners along with Bank commission, Telephone bills and Salary to staff together with 80% of other expenses are allowed.

In the result, the appeal is partly allowed. Order pronounced in the Open Court on 31st July, 2020.

The CIT(A)-1, Nashik 4. The Pr. CIT-1, Nashik िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे / DR ‘SMC’, ITAT, Pune गाड� फाईल / Guard file 5. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune