What did the Tribunal hold?

The Tribunal found that the additions were made on an ad-hoc basis and the CIT(A) had granted partial relief. To meet the ends of justice, the Tribunal decided to limit the disallowance to 50% of the amount sustained by the CIT(A).

The assessee appealed against the CIT(A)'s order which upheld certain additions. The Assessing Officer had made ad-hoc disallowances on various expenses like motor car rent, hamali & sand, wages, and discount & maintenance.

What were the issues?

Whether ad-hoc disallowances made by the Assessing Officer on various business expenses were justified, and to what extent relief should be granted.

Jai Nagoba Food Industries vs ITO | ITAT Mumbai 2018

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA, AM

For Appellant: Shri Saurabh Deshpande

For Respondent: Shri Saurabh Deshpande

O R D E R Per Shamim Yahya, A. M.: This appeal by the assessee is directed against the order by the Commissioner of Income Tax (Appeals) dated 05.09.2017 and pertains to the assessment year 2011- 12.

The grounds of appeal read as under: On the facts and in law, The Hon. CIT (A) erred in upholding the addition to the extent of Rs.40,000/- on account of disallowance of "motor car rent & motor car expenses", not Jai Nagoba Food Industries appreciating the appellant's explanation that the entire expenditure was incurred by the appellant firm for its business purposes. The Hon. CIT (A) erred in upholding the addition to the extent of Rs. 30,000/- on account of disallowance of "hamali & sand expenses", not appreciating the fact that the entire expenditure was incurred by the appellant firm for its business of manufacture and sale of Poha (flattened Rice). The Hon. CIT (A) erred in confirming the addition of Rs. 3,00,000/- on account of disallowance of "wages", inspite of the fact that the entire expenditure was" incurred by the appellant firm for its business and was verifiable from wages register and an incorrect assumption with regards to the net profit margin of the appellants business. The Hon. CIT (A) erred in upholding the addition to the extent of Rs. 50,000/- on account of disallowance of "discount & maintenance expenses", inspite of the fact that the entire expenditure was incurred by the appellant firm for its business purposes only.

3. In this case, the Assessing Officer made the following adhoc disallowances:

a) Car rent & expenses Rs.50,000/- b) Hamali & Sand expenses Rs.50,000/- c) Wages Rs.3,00,000/- d) Discount and maintenance Rs.1,00,000/- 4. These additions were made on the ground that the expenditure could not be fully vouched.

Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) upheld the following additions:

a) On Motor Car, rent & expenses Rs.40,000/- b) Hamali & Sand expenses Rs.30,000/- c) Disallowance of Wages Rs.3,00,000/- d) Discount and maintenance Rs.50,000/- 6. Against the above order, the assessee is in appeal before the ITAT.

I have heard the ld. Departmental Representative. None appeared on behalf of the assessee. I find that the addition has been made by the Assessing Officer on adhoc

Jai Nagoba Food Industries basis. The ld. Commissioner of Income Tax (Appeals) has granted part relief. On the facts and circumstances, in my considered opinion, the addition to the extent of 50% as sustained by the ld. Commissioner of Income Tax (Appeals) could meet the ends of justice. Accordingly, I modify the order of the ld. Commissioner of Income Tax (Appeals) and hold that the disallowance should be limited to 50% of the disallowance sustained by the ld. Commissioner of Income Tax (Appeals).

In this result, this appeal by the assessee stands partly allowed. Order pronounced in the open court on 16.05.2018 Sd/- (Shamim Yahya) लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 16.05.2018 व.�न.स./Roshani, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,

JAI NAGOBA FOOD INDUSTRIES,MUMBAI vs. INCOME TAX OFFICER, WARD-1, PANVEL

What did the Tribunal hold?

What were the facts?

What were the issues?

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