2017 (7) TMI 1163 - AT - Income Tax

Tribunal affirms 2% disallowance on consumable expenses.

ITO, WARD-48 (4) KOLKATA Versus M/s. HAZI HERITAGE

ITO, WARD-48 (4) KOLKATA Versus M/s. HAZI HERITAGE - TMI Issues:- Disallowance of expenses on consumable stores by the Assessing Officer.- Appeal by the revenue against the order of Learned CIT (Appeals) concerning the deletion of disallowance made by the AO.Analysis:1. The assessee, a partnership firm engaged in galvanizing iron goods on a labor job basis, filed a return declaring income of Rs. 9,62,727 with consumable stores expenses of Rs. 3,15,44,707. The AO disallowed Rs. 85,77,008 (19% of job charges) due to high consumable expenses compared to comparable cases.2. The AO's disallowance was challenged before the Ld. CIT (A), who reduced it to Rs. 9,02,843. Ld. CIT (A) emphasized the lack of fault in the books, absence of bogus claims, and high disallowance without proper enquiry. He sustained a 2% disallowance based on net profit percentage, deleting the balance.3. The revenue appealed to the Tribunal, arguing the disallowance was excessive. The assessee maintained that accounts were not rejected, expenses were consistent, and comparisons with other cases were unfair. The Tribunal noted discrepancies in comparable cases and upheld Ld. CIT (A)'s decision to restrict the disallowance to 2% of job charges.4. The Tribunal found the Ld. CIT (A) correctly considered all aspects, including past expenses, justifying the slight increase in expenses for the year under review. Consequently, the appeal of the revenue was dismissed, affirming the 2% disallowance.In conclusion, the Tribunal upheld the Ld. CIT (A)'s decision to restrict the disallowance of consumable expenses to 2% of job charges, considering the justifications provided by the assessee and the lack of substantial discrepancies. The appeal by the revenue was dismissed, affirming the reduced disallowance amount.