DAULAT AUTOMOBILES,MUMBAI vs. ITO 17 (1)(3), MUMBAI

The issue raised for A.Y.2012-13 is that the CIT(A) erred in upholding the addition of Rs.1,14,572/- made by AO on account of adhoc disallowance @ 15% of Rs.7,63,811/- being expenditure for Labour & Service Charges, Commission, Miscellaneous Expense, Repairs, Printing and Accessories etc. For AY 2013-14 the issue is same only figures are of Rs.1,05,751/- addition upheld in respect of expenditure totally of Rs.7,05,003/-.

In the assessment order, the AO made the disallowance by simply noting that the impugned expenditure incurred in cash and & 7095/M/2018 A.Ys. 2012-13 & 2014-15 non-business element in the same cannot be ruled out. Hence, he made estimated the disallowance of 15%. Upon assessee appeal, the Ld. CIT(A) confirmed the same.

Against the above order, the assessee is an appeal before the Hon’ble ITAT. I have heard the Ld. DR and perused the records. None- appeared on behalf of the assessee.

Up on careful consideration I note that the adhoc disallowance @ 15% is done by AO. This is solely based upon the observation that the expenditure is in cash and element of personal use cannot be ruled out. I also note that before the Ld. CIT(A) assessee has vehemently disputed that all the expenditures are in cash. In my considered opinion, the addition is based upon surmise and conjectures totally unsustainable in law. In my considered opinion, the interest of justice which served if the disallowance is restricted to 5% as against the 15% done by authorities below.

Accordingly, I direct that disallowance be restricted to 5% instead of 15% of impugned expenditure. In the result, these appeals filed by the assesses stand partly allowed. Order pronounced in the open court on 20/04/2020