INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Disallowance of transportation expenses @ 10% - Justifiability -

Assessee was in business of Kacha Aadhat and trading of food grains and debited amount a sum under the head transportation expenses. On examination of the details of expenditure, AO observed that some of the expenses below Rs. 20,000 were paid in cash and no supporting evidence was available with assessee except of self-prepared vouchers. Thus, AO held that in absence of complete particulars of the recipient, self-prepared vouchers are only a device to suit assessee and AO made disallowance in respect of transportation expenses @ 10%, however CIT(A) restricted the disallowance Held: Disallowance was made without considering the relevant facts. Further, when transportation and freight expenses was inevitable in assessee's line of business then without conducting any enquiry or giving a finding, payment made by assessee was either bogus or excessive/inflated then an ad hoc disallowance made by AO of the entire claim of transport expenses where the majority of the payment was made through cheques was not justified. Accordingly, disallowance sustained by CIT(A) was deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

INCOME TAX ACT, 1961

Section 37(1)

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