Tribunal remands disallowed expenses issue for verification, upholds adhoc disallowances.

The Tribunal remanded the issue of disallowance of expenses related to exempt income under section 14A back to the Assessing Officer for verification, holding that no disallowance could be made for investments held as stock-in-trade. Adhoc disallowances on specific expenses like computer software and conveyance were upheld as the assessee failed to substantiate the expenses. The appeals were partly allowed for statistical purposes, maintaining the adhoc disallowances made by the AO.

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Issues:
1. Disallowance of expenses relatable to exempt income under section 14A of the Income Tax Act, 1961.
2. Restriction of adhoc disallowances on specific expenses.

Issue 1: Disallowance of expenses relatable to exempt income under section 14A:
The appeals arose from the CIT(A)'s order confirming the disallowance of expenses related to exempt income under section 14A of the Act read with rule 8D of the Rules for the assessment years 2010-11 and 2011-12. The assessee argued that investments were held as stock-in-trade and the disallowance should not apply to dividend income earned on such investments. The Tribunal noted that the issue was identical for both years and remanded the matter back to the AO for verification. The Tribunal held that no disallowance under section 14A could be made for investments held as stock-in-trade, directing the AO to verify the nature of investments before deciding the claim.

Issue 2: Restriction of adhoc disallowances on specific expenses:
The second issue concerned the adhoc disallowances on computer software, conveyance, and Diwali expenses. The AO had disallowed a portion of these expenses due to lack of proper vouchers. The CIT(A) upheld the disallowance, and the Tribunal confirmed it as the assessee failed to substantiate the expenses. The Tribunal allowed the appeals partly for statistical purposes, maintaining the adhoc disallowances made by the AO.

In conclusion, the Tribunal remanded the first issue back to the AO for verification regarding the nature of investments held as stock-in-trade. The Tribunal upheld the adhoc disallowances on specific expenses as the assessee could not provide sufficient evidence to support the expenses. The appeals were partly allowed for statistical purposes.

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