RAMESH B. BUSWAL,MUMBAI vs. ITO 19(3)(2), MUMBAI

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ITA 2623/MUM/2015Status: DisposedITAT Mumbai29 February 2016AY 2011-123 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 the ad-hoc disallowance was not sustainable as the Assessing Officer did not provide any specific instances of unvouched or non-business expenses, despite the availability of audited financial statements.

What were the facts?

The assessee, an individual engaged in contracting and interior decoration, faced an ad-hoc disallowance of 10% on various business expenses, including casual labour, telephone, and business promotion. The assessee argued that their accounts were audited and no specific unvouched or non-business expenses were identified.

What were the issues?

Whether an ad-hoc disallowance of business expenses is justified without specific evidence of unvouched or non-business expenditure.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

For Appellant: Shri Vimal Punmiya
For Respondent: Shri Vishwas Jadhav
Hearing: 10/12/2015Pronounced: 29/02/2016

The captioned appeal is preferred by the assessee and is directed against the impugned order dated 27/02/2015 of CIT(A)-32, Mumbai, pertaining to the assessment year 2011-12, which in turn has arisen from an order passed by the Assessing Officer dated 09/01/2014 under section 143(3) of the Income Tax Act, 1961( in short “the Act”).

2.

In this appeal, the only grievance of the assessee is that the lower authorities have erred in sustaining adhoc disallowance of 10% of total

(Assessment Year : 2011-12) expenditure incurred towards casual labour and other expenses being telephone charges, business promotion expenses, labour welfare expenses, miscellaneous expenses and travelling expenses.

3.

At the time of hearing, the Ld. Representative for the assessee explained that the assessee is an individual, who is carrying on the business of work contractor and interior decorator. The lower authorities disallowed Rs.1,13,585/-, out of total casual labour expenditure of Rs.11,35,850/- in an adhoc manner. Similarly, adhoc disallowance @10% of total expenditure on various expenses was made for Rs.18,922/-. The only plea raised by the assessee is that the accounts were audited and no specific instance has been brought by the lower authorities to say that any particular expenditure was unvouched or was incurred for non business purposes. In this context, it was also pointed out that the profit rate shown by the assessee is 11.32%, which is otherwise also reasonable considering even the presumptive taxation profit rate of 8%, is considered adequate.

4.

On the other hand, Ld. Departmental Representative for the Revenue submitted that payments were made to casual labours and, therefore, in the absence of proper records, 10% of expenses were rightfully disallowed.

5.

I have considered the rival submissions. Ostensibly, the entire addition is based on the perception of the Assessing Officer that certain

(Assessment Year : 2011-12) expenses must have been incurred by the assessee for personal and/or for non business purposes. However, the relevant discussion in the assessment order does not show any specific instance of such nature being brought out by the Assessing Officer in spite of the fact that assessee had filed his return of income based on audited financial statements, which were very much available with the Assessing Officer. Therefore, such adhoc disallowance in my view does not merit any sustenance. Accordingly, I set aside the order of the CIT(Appeals) and direct the Assessing Officer to delete the addition of Rs.1,13,585/- out of casual labour expenses and Rs.18,922/- out of other expenses.

6.

In the result, the appeal of the assessee is allowed as above. Order pronounced in the open court on 29/02/2016.

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