2012 (11) TMI 1278 - HC - Income Tax

High Court upholds repair expenses, dismisses disallowance under Section 40A(3) for lack of evidence.

The High Court upheld the Tribunal's decision to allow the repair and maintenance expenses claimed by the assessee, finding the reasons for increased ... - Issues involved: Appeal challenging ITAT order on disallowance of repair and maintenance expenses and disallowance under Section 40A(3).Issue A - Disallowance of repair and maintenance expenses:The assessee appealed the ITAT order deleting the disallowance of Rs. 10,87,465 being 50% of repairs and maintenance. The Assessing Officer had disallowed the claim as no major repair work was substantiated, which was confirmed by CIT (A). However, the Tribunal noted the increase in repair expenses and reasons provided by the assessee, including damage to the hotel building, pest control, and waterproofing. The Tribunal held that the disallowance was unjustified, as the reasons for the increased expenses were valid and no law question arose. Thus, the Tribunal upheld the claim of the assessee.Issue B - Disallowance under Section 40A(3):The disallowance of Rs. 21,40,512 under Section 40A(3) was made by the Assessing Officer and confirmed by CIT (A). The Tribunal found that cash payments were recorded on the same day each month, indicating legitimate cash expenditures. It concluded that without evidence of cash payments exceeding Rs. 20,000 to a single person in a day, no disallowance under Section 40A(3) could be justified. Despite the destruction of petty cash records in a flood, substantial evidence in the form of books of account and tax audit reports supported the expenses. The Tribunal's decision was based on factual evidence, and no legal question arose, leading to the dismissal of the appeal.In conclusion, the High Court dismissed the Tax Appeal based on the Tribunal's sound reasoning and factual findings for both issues.