MAYUR JOITKUMAR JAIN ,MUMBAI vs. DCIT, CIRCLE 20(1), MUMBAI

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ITA 8525/MUM/2025Status: DisposedITAT Mumbai13 July 2026AY 2022-235 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that an ad-hoc disallowance without rejecting the books of accounts or pointing out specific defects is not sustainable. The Tribunal found no dispute on the genuineness of the expenses and set aside the disallowance.

What were the facts?

The assessee claimed expenses of Rs. 3,46,46,477/- in its profit and loss account. The Assessing Officer disallowed 5% of these expenses due to lack of proper vouchers. The CIT(A) sustained a partial disallowance of 5% on certain expense heads.

What were the issues?

Whether ad-hoc disallowances of expenses are sustainable without rejection of books of accounts and without pointing out specific defects in documentation.

Which sections of the Income-tax Act were involved?

Section 44AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH; MUMBAI

Before: SHRI VIKRAM SINGH YADAV & SHRI SIDDHARTHA NAUTIYAL

Hearing: 30.06.2026Pronounced: 13.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH; MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No. 8525/Mum/2025 (Assessment Year: 2022-23)

Mayur Joitkumar Jain DCIT, CIRCLE 20(1) B-094, Pratiksha Tower, R.S Piramal Chamber, LalbaugParel, Nimkar Marg, Mumbai, vs. Mumbai, Maharashtra, 400012. Maharashtra, 400008

PAN: AIFPJ1119G (Appellant) (Respondent) For Assessee : Shri Anish Shah C.A For Revenue : Shri Prasma Prakash Tewari, Sr. DR Date of Hearing : 30.06.2026 Date of Pronouncement : 13.07.2026 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld.CIT(A)’], dated 28.10.2025, pertaining to Assessment Year (AY) 2022-23, wherein the Assessee has challenged the sustenance of ad-hoc disallowance of Rs. 10,04,092/-.

2.

Briefly, the facts of the case are that the assessee filed its return of income declaring total income of Rs. 1,30,60,570/-, which was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer issued show cause in terms of admissibility of expenses claimed in the profit &loss account amounting to

ITA No. 8525/Mum/2025; A.Y. 2022-23 Mayur Joitkumar Jain Rs. 3,46,46,477/-. In response, the assessee filed its submissions which were considered but not found acceptable. As per the Assessing Officer, in absence of proper bills/vouchers and foolproof vouchers for the entire expenses claimed, 5% of the expenses claimed of Rs. 3,46,46,477/-, which works out to Rs. 17,32,320/- needs to be disallowed and which were brought to tax in the hands of the assessee and the assessed income was determined at Rs. 1,47,92,890/-.

3.

The assessee, thereafter carried the matter in appeal before the ld. CIT(A). The ld. CIT(A) allowed partial relief to the assessee, wherein, he has deleted the disallowance of expenses in respect of 5 heads of the expenses. However, in respect of remaining 12 head of expenses, he has sustained the ad-hoc disallowance stating that the assessee has not substantiated the claim with adequate supporting bills/vouchers and given the size of the claim and partial compliance with verification requirements, the AO’s limited disallowance on a reasonable estimate basis is justified and it would be fair and proper to restrict the disallowance to 5% of the unverified portion and delete the balance.

4.

Against the said findings and the directions of the ld. CIT(A), wherein he has sustained the ad-hoc disallowance of 5% in respect of 12 head of the expenses, the assessee is in appeal before us.

5.

During the course of hearing, the ld. AR submitted that the assessee’s books of accounts are duly audited u/s. 44AB of the Act and the assessee has reported a turnover of Rs, 33,42,46,196/- and has reported gross profit at 22.18% and net profit at 3.94%. It was submitted that the gross profit is comparable to what has been disclosed in the earlier financial year at 22.63% and as against the slight fall in the net profit rate, the same is primarily on account of the foreign exchange fluctuation loss which has been claimed by the assessee during the year under consideration. It was submitted that no

ITA No. 8525/Mum/2025; A.Y. 2022-23 Mayur Joitkumar Jain defect has been pointed out in the books of accounts or for that matter, books of accounts have not been held to be non-reliable. It was further submitted that the 12 head of expenses, wherein, the addition has been sustained consisted primarily of loss on foreign exchange transaction, clearing and forwarding expenses, travelling expenses, labour charges, repair and maintenance of machinery. It was submitted that as far as the foreign exchange loss is concerned, the same is clearly a non-cash notional loss arising from restatement of foreign currency liabilities as per Accounting Standard (AS-11) and therefore, there cannot be any dispute in terms of allowability of the said expenditure and inspite of that the AO has summarily made a disallowance of 5% of the foreign exchange loss and which has been summarily upheld by the ld. CIT(A). Regarding clearing and forwarding expenses, it was submitted that these expenses represent a significant portion of the operational cost relating to movements of goods and import-export logistics and the assessee produced a representative sample of invoices and travel documents covering over 70% of the expenses so claimed during the course of assessment proceedings. However, no specific defect has been pointed out by the Assessing Officer and ad-hoc disallowance has been made which has been sustained by the ld. CIT(A). Similarly, it was submitted that the assessee has incurred travel expenses as part of routine business operations which include airfare, hotel stays and local conveyance and no specific defect has been pointed out in terms of the documentation so submitted. Similarly, in respect of other expenses, it was submitted that the assessee has submitted necessary sample documentation, copy of the ledger as well as the bank statements and given the nature of the faceless proceedings, it was difficult to submit the whole set of the documentary evidence. However, where required the assessee can produce the said documentation and seek to file the same as additional evidence. It was submitted that it is a clear case of ad-hoc disallowances without rejection of books of accounts and without

ITA No. 8525/Mum/2025; A.Y. 2022-23 Mayur Joitkumar Jain pointing out any specific defect in the books of accounts and it is a settled position that the ad-hoc disallowances cannot be sustained and reliance was placed on various Coordinate Benches of the Tribunal and it was submitted that the disallowance so sustained be directed to be deleted.

6.

The ld. DR has been heard, who has relied on the findings of the Assessing Officer. It was submitted that the ld. CIT(A) has already allowed partial relief to the assessee and the order of the ld. CIT(A) be confirmed.

7.

We have heard the rival contentions and perused the material available on record. Where the Assessing officer has accepted 95% of expenses, it in effect means that there is no dispute on the genuineness of the expenses so incurred and claimed by the assessee. There is no finding that the expenses are bogus in nature or not incurred for the purposes of the assessee’s business. No defect has been pointed out in the documentation so submitted by the assessee or any specific expenses head or major expenditure transaction being highlighted which require further verification. How then the Assessing officer can take a view that he is satisfied with 95% of expenses and not satisfied with 5% of the expenses. Further, where the Assessing officer seeks to verify 100% of documentation and that too, in the faceless scheme of assessment, nothing prevents the Assessing officer in carrying out such an exercise, however the question is whether the assessee has been put to notice and sufficient time provided to the assessee to submit, however, there is nothing on record to this effect. Further, looking at the nature of expenses as well such as foreign exchange loss, how 5% of foreign exchange loss arising out of restatement of liabilities at the year end call for disallowance in absence of any finding that the determination of loss is not in consonance with the Accounting

ITA No. 8525/Mum/2025; A.Y. 2022-23 Mayur Joitkumar Jain standards or are in the nature of capital loss. Similar, in respect of other expenses, the assessee has put forward reasonable explanation and documentation which supports the claim of the expenses. In light of the aforesaid, we are of the considered view that the disallowance so made and sustained by the ld CIT(A) deserve to be set-aside and is hereby set-aside.

8.

In the result, the appeal filed by the assessee is allowed.

Order pronounced on 13.07.2026

Sd/- Sd/- SIDDHARTHA NAUTIYAL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 13.07.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai

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