INDUTCH COMPOSITES TECHNOLOGY PRIVATE LIMITED,VADODARA vs. DEPUTY COMMISSIONER CIRCLE 1(1)(1) VADODARA, VADODARA
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Annapurna Gupta
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order of Office of the Commissioner of Income Tax, Appeal, ADDL/JCIT (A)-1, Nashik, National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 04/08/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2015-16. Indutch Composites Technology Pvt.Ltd. vs. DCIT Asst.Year : 2015-16
The assessee, in this appeal, is aggrieved by the action of the lower authorities on account in making disallowance of 5% of the expenditure claimed by the assessee under the head “Other Expenses” on adhoc basis. The assessee claimed total expenditure of Rs.5,34,58,482/- out of which the Assessing Officer (AO) allowed expenditure relating to fuel, rent, rates and taxes and payment to auditors. However, he disallowed 5% of the expenses claimed under the head “Miscellaneous Expenditure” details of which are as under: “Miscellaneous Expenditure
Annual Maintenance Charges 12,079.00 0.00 Custom Clearing Charges 128,766.00 128,106.00 Fabrication Expenses 1,536,404.00 690,845.00 Factory Expenses, 1,001,725.00 563,683.00 Freight & Forwarding Charges 2,050,708.00 1,053,981.00 Labour Hiring Charges 10,190,755.00 2,967,827.00 Testing Charges – Material 19,956.00 40,816.00 Calibration Expenses 59,619.00 5,450.00 Consultancy Charges 1,140,250.00 622,617.00 Electricity Expenses-Office 31,896.00 4,270.00 Foreign Exchange Loss 22,974.00 0.00 Hiring Charges 225,000.00 370,098.00 Incentive Expenses 399,839.00 433,619.00 ISO Expenses 82,389.00 0.00 Conveyance Expenses 1,489,894.00 673,737.00 Courier Charges 75,631.00 24,776.00 Job Work Charges 13,467,472.00 7,607,367.00 Legal Expenses 112.510.00 71.400.00 Membership Fees 3,933.00 7,118.00 Miscellaneous Expenditure 71,613.00 60,241.00 Office Expense 194,186.00 231,883.00 Packing Expenses 73,109.00 17,145.00 Service Tax/TDS Interest & Charges 108,450.00 0.00 Printing & Stationery 204,407.00 79,175.00 Repairing & Maintenance Expenses 93,913.00 174,776.00 Asst.Year : 2015-16
3 Software Maintenance Expenses 0.00 12,500.00 Sales Promotion Expenses 302,700.00 47,391.00 Telephone Expenses 238,041.00 130,051.00 Travelling Expenses 1,636,612.00 1,530,038.00 Vehicle Hire Charges 184.300.00 860.914.00 Preliminary and pre-operative expenses w/off 354,907.00 354,907.00”
The AO made the disallowance @ 5% out of the above expenditure on adhoc basis, observing that the assessee had incurred this expenditure in cash and, therefore, the same is not verifiable.
In appeal, the Ld. CIT(A) confirmed the addition, so made by the Assessing Officer (AO).
Before us, the Ld. Counsel for the assessee has submitted that the observation of the AO that the expenditure under the head “Miscellaneous Expenditure” were made in cash, was factually incorrect, rather almost 99% of the above stated expenditure under the head “Miscellaneous Expenditure” were incurred through banking channel and the TDS was duly deducted thereupon, wherever applicable. He has submitted that the AO, without verification of the details and evidences submitted by the assessee in the shape of bills and vouchers, ledger and audited financial report, simply disallowed the 5% of these expenditure on adhoc basis without assigning any justifiable reason. He has further submitted that even the net profit rate of the assessee for the year under consideration has increased considerably and there was no reason for the lower authorities to make/confirm the aforesaid disallowance.
The Ld. DR, on the other hand, has relied upon the findings of the lower authorities. Asst.Year : 2015-16
Considering the rival submissions and also the details and nature of the expenses and also the fact that the assessee had incurred the said expenditure through banking channel and further considering that the AO had made the disallowance on adhoc basis without making any effort to verify the aforesaid expenditure, the said disallowance, in our view, is not justified. Therefore, the impugned disallowance and corresponding addition made by the AO is not sustainable and the same is, accordingly, ordered to be deleted.
In the result, the appeal of the assessee stands allowed.
Order pronounced in the Open Court on 29 /01/2026. (Annapurna Gupta ) Judicial Member अहमदाबाद/Ahmedabad, िदनांक/Dated 29/01/2026 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की "ितिलिप अ#ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant
"%थ$ / The Respondent. संबंिधत आयकर आयु& / Concerned CIT 3. आयकर आयु& अपील
( ) / The CIT(A)/ADDL/JCI (A)-1 Nashik 5. िवभागीय "ितिनिध आयकर अपीलीय अिधकरण अहमदाबाद/DR,ITAT, Ahmedabad. , , गाड" फाईल /
Guard file.
आदेशानुसार/ BY ORDER, स%ािपत "ित //// सहायक पंजीकार (Asstt.
