2013 (5) TMI 384 - AT - Income Tax

Tribunal directs AO to re-examine assessee's expenditure claim, stresses verification importance.

The Tribunal allowed the assessee's appeal, directing the AO to re-examine the miscellaneous expenditure claim after verifying the necessary details ... Disallowance of Miscellaneous expenditure – As per revenue the details in respect of miscellaneous expenditure remained to be filed therefore the allowability of such expenditure is not possible and accordingly addition made was made to total income. CIT (A) restricted the disallowance to 10% of the claim on adhoc basis. Held that:- Assessee did not furnish the details as required by AO and so AO had no option than to disallow the amount at 90% of the total claim. The learned CIT (A) without referring the matter to AO, restricted the disallowance to 10% of the claim on adhoc basis. He also did not allow AO to examine the vouchers but gives a finding that the bills and vouchers have not been produced before AO, that is the reason why he is restricting the disallowance to 10%. Considering assessee's submissions that it is a public limited company and all expenses are properly vouched, we in the interest of justice, restore the issue to the file of AO to examine the nature of the miscellaneous expenditure and allow the same after due verification. Issues:Assessee's appeal against disallowance of miscellaneous expenditure on an adhoc basis without furnishing details to AO.Analysis:The appeal was made against the CIT (A)'s confirmation of the addition of Rs.1,90,846 being 10% of the Miscellaneous Expenditure on an adhoc basis. The AO disallowed 90% of the expenditure claimed since no details were furnished regarding the miscellaneous expenditure. The CIT (A) restricted the disallowance to 10% of the total claim, considering that the appellant is a public limited company with audited accounts, but bills/vouchers were not produced. The disallowance of Rs.1,90,846 was contested, and the Counsel referred to details filed, balance sheet, Profit & Loss A/c, and case law to support the appeal.The AO had asked for details of the miscellaneous expenditure claim, which were not provided by the assessee. The AO disallowed Rs.17,17,617 out of the claimed amount of Rs.19,08,463 due to lack of proper verification. The CIT (A) restricted the disallowance to 10% without referring the matter back to the AO for examination. The Tribunal set aside the orders of the AO and CIT (A), directing the examination of the miscellaneous expenditure by the AO after the necessary details are furnished by the assessee. The Tribunal emphasized the need for proper verification and examination of the nature of the expenses before allowing the claim.In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes, directing the AO to re-examine the miscellaneous expenditure claim after verifying the necessary details provided by the assessee. The case law cited by the assessee was not discussed further as the matter required factual examination. The Tribunal stressed the importance of proper verification and examination by the AO before allowing the expenditure claim.