| The Tax Publishers2022 TaxPub(DT) 7070 (Mum-Trib) INCOME TAX ACT, 1961
Section 37(1)
Where similar expenses were allowed in earlier years and most of expenses incurred through banking channels and they were normal expenses incurred in course of business, disallowance of expenses for non-production of vouchers rightly restricted to 10% of expenses claimed by assessee.
|
Business expenditure - Allowability - Non-operation of business -
AO noticed that, during year under consideration, assessee did not carry on any business. Further, he noticed that assessee had claimed expenses aggregating to Rs. 23.68 lakhs in Profit and Loss account. He also noticed that assessee had declared business loss of Rs. 21,33,618 and set off same against income declared under other heads. He asked assessee to prove expenses, but assessee did not furnish details on reasoning that its factory was closed due to labour strike. Hence he disallowed business loss of Rs. 21,33,618 declared by the assessee. In appeal CIT(A) directed AO to allow 50% of expenses claimed by assessee and accordingly granted partial relief to assessee. Still aggrieved, assessee filed this appeal. Held: In facts and circumstances of case, stoppage of production should be taken as 'temporary lull' in business and hence there was no necessity in disallowing entire expenses claimed by assessee. CIT(A) considered expenses incurred by assessee to be genuine and sustained disallowance of part of expenses only for reason that assessee did not furnish evidences for incurring those expenses before AO. Accordingly, in facts and circumstances of case, dispute may be put to rest by making disallowance of part of expenses claimed by assessee. This was due to the fact that considerable time, i.e., more than nine years have elapsed from date of closure of financial year. Hence, considering fact that similar expenses had been allowed in earlier years and since it was submitted that most of expenses had been incurred through banking channels and nature of expenses would show that they were normal expenses incurred in course of business, disallowance of expenses for non-production of vouchers might be restricted to 10% of expenses claimed by assessee.
Cited in support:Micro Turners (P) Ltd. v. JCIT, ITA No. 321/Del/201, dt. 4-5-2016
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2014-15
IN THE ITAT, MUMBAI BENCH
 SUBSCRIBE FOR FULL CONTENT
|