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Facts
The revenue appealed against the CIT(A)'s order deleting ad-hoc disallowances made by the AO for Assessment Year 2023-24. The AO had disallowed 30% of various business expenses (aggregating Rs.11.52 Crores) and travelling & conveyance expenses (Rs.40.02 Lacs) for export activities, alleging lack of complete documentation, minor discrepancies, and non-ascertainable genuineness. The assessee, a corporate entity with substantial turnover, contended the expenses were for business purposes, provided sample documentation, and argued that full documentation was bulky and transportation details were not always relevant for all expense types.
Held
The Tribunal upheld the CIT(A)'s decision, finding that the AO's ad-hoc disallowances were not justified. It concurred that merely asserting a lack of certain details like truck numbers or e-way bills was insufficient to conclude incorrect claims, especially when the AO failed to conduct proper verification or distinguish invoices. The Tribunal affirmed that the expenses were incurred for business purposes and that the AO made bald allegations without detailed examination or pointing out specific violations, thus validating the CIT(A)'s deletion of the disallowances.
Key Issues
Whether the ad-hoc disallowance of business expenses and travelling & conveyance expenses by the Assessing Officer, subsequently deleted by the CIT(A), was justified.
Sections Cited
143(3), 133(6)
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Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2023-24 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 03-07-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) of the Act on 21-03-2025. The sole grievance of the revenue is deletion of adhoc disallowances of expenses as made by Ld. AO in the Assessment Year: 2023-24 assessment order. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. Assessment Proceedings 2.1 The assesee declared income of Rs.14.60 Crores which was subject to scrutiny. In the course of assessment proceedings, Ld. AO questioned various expenditure as claimed by the assessee. The assessee furnished complete audited financial statements. The major expenditure as claimed by the assessee was on account of Sales Commission, Marketing &Distribution expenditure, clearing & forwarding expenses, carriage & freight inward and Sales discount which has been tabulated in the assessment order. The asssesee duly furnished party-wise details, amount, addresses etc. The PAN details, wherever available, was also furnished. However, Ld. AO alleged that the assessee did not submit all invoices, bills, ledger, purpose of expenses, mode of payment along with bank statement highlighting the said transactions, copies of agreement / contract etc. The assessee failed to follow the provision of Tax deduction at source. The assessee, in reply, dated 10-03-2025, explained that due to bulky nature of records and limited time availability, the assessee could not provide scanned copies of these documents with respect to each of the parties. However, these documents, on sample basis, were duly furnished by the assessee. It was contended that the stated expenses were incurred for business purposes and duly accounted for in the regular books of accounts. However, finding minor discrepancies in Assessment Year: 2023-24 these documents viz. non-mentioning of vehicle numbers, e-way bills and mode of payment etc., Ld. AO concluded that the genuienness as well as reasonableness of the expenses could not be asertained. Finally, adhoc 30% of these expenditure aggregating to Rs.11.52 Crores was disallowed by Ld. AO as unexplained expenditure which resulted into disallowance of Rs.345.66 Lacs in the hands of the assessee. 2.2 The assessee also claimed Travelling &Conveyance expenditure for export activities for Rs.40.02 Lacs. The same were stated to be incurred on sales operations for export and foreign auditors’ expesnes for quality control purposes. The assessee furnished ledger account of the said expenditure. It was contended that the assessee earned sales turnover of more than Rs.457 Crores out of which approx. 78% was local sales and the remaining was export sales. However, Ld. AO disallowed these expenses and framed the assessment. Aggrieved as aforesaid, the assessee preferred further appeal and made elaborate written submissions assailing the twin disallwoances as made by Ld. AO. Appellate Proceedings 3. The adjudicaiton of Ld. CIT(A) is contained from Page No.25 onwards. The Ld. CIT(A) concured that by simple assertion that the assessee failed to provide truck numbers or e-way bill details for the majority of invoices was not adequate enough to conclude that the assessee had incorrectly claimed expenses. The Ld. AO was required Assessment Year: 2023-24 to distinguish the invoices which did not have these specific details viz. Truck Numbers or e-way bill etc. No efforts were made to segregate such invoices and further, no verification was done by issuing notices u/s 133(6) from the relevant parties. The disallowance was without considering the submissions of the assessee that the transportation details / services would not be required in Marketing & Distribution Expenses, Clearing and Forwarding Expenses, Logistic Expenses, Designing Expenses, Auxiliary Service Expenses, Sales Discount, Sales Commission etc. No detailed examination was carried out by Ld. AO and therefore, adhoc disallowance of 30% had no merits. The assessee submitted ledgers of mode of payments and made due TDS compliance. Therefore, the adhoc disallowance of 30% was deleted.
Similarly, Travelling and conveyance expenses mostly related to export sales of the assessee which necessitated a quality control audit of production facilities before the sales could be exportedto foreign countries. The expenditure was incurredfor business purposes. Therefore, this addition was also deleted against which the revenue is in further appeal before us. Our findings and Adjudication 5. From the facts, it emerges that the assessee is a corporate entity having turnover of more than Rs.457 Crores. The assessee has declared income of more than Rs.14.60 Crores. The books of accounts are duly audited and the tax audit report contain details of Assessment Year: 2023-24 TDS default, if any, as made by the assessee. No such default has been highlighted by Ld. AO in the assessment order. The assessee has claimed expenditure under various heads as enumerated in earlier paragraphs which aggregated to Rs.11.52 Crores. Considering the scale of business, the relevant bills, invoices and related documents would certainly be voluminous one. Nevertheless, the assessee has duly furnished complete details of such expenditure and copies of invoices on sample basis. The majority of the expenditure would not require transportation details considering the nature of expenditure. The allegation of Ld. AO that the reasonableness and genuineness of the expenditure could not be ascertained is mere bald allegation. No specific violations have been pointed out in the assessment order. As rightly pointed out by Ld. CIT(A), no efforts have been made to segregate the discrepant documents / invoices and no verification has been done by issuing notices u/s 133(6) from the relevant parties. The transportation details / services would not be required in Marketing & Distribution Expenses, Clearing and Forwarding Expenses, Logistic Expenses, Designing Expenses, Auxiliary Service Expenses, Sales Discount, Sales Commission etc. No detailed examination has been carried out by Ld. AO to bolster its allegations. Further, Travelling and conveyance expenses mostly related to export sales of the assessee which necessitated a quality control audit of production facilities before the sales could be exported to foreign countries. The expenditure is certainly incurredfor business Assessment Year: 2023-24 purposes since the assessee is engaged in export activities. On these facts. The adjudication of Ld. CIT(A), in our considered opinion, could not be faulted with. We order so. 6. The appeal stands dismissed. Order pronounced on 9th February, 2026.