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of <h1>Tax appeal allowed: disallowances on repairs, salaries and car expenses set aside where books and evidence showed business use</h1> ITAT held that no addition was warranted where repair bills wrongly booked under purchases were reconciled before the AO. The tribunal also found the ... Disallowance of expenses - Wrong booking in accounts, treated as bogus purchase -Adhoc disallowance @ 20% of total salary and Adhoc disallowance @25% of Car expense are related expenses - HELD THAT:- It is observed that the assessee has explained that certain repair bills were wrongly shown under purchases and that the same have been duly reconciled before the AO. Therefore, no addition is warranted on this account. With regard to the disallowance of adhoc expenses @ 20% on salary and 25% on car, we find that no adhoc disallowance can be made on salary which has already been paid to the employees. Further, in respect of car expenses, it was submitted that the vehicles have been exclusively used for business purposes, as the Directors have their own personal cars. In the absence of contrary evidence, no disallowance is called for on this account. Appeal of the assessee is allowed. The assessee, a scrap-dealing company, filed return for AY 2018-19 (processed under section 143(1)) and was picked for limited scrutiny through 'CASS' for reason 'Income from Scrap'. AO issued notice under section 143(2) and treated certain purchases as 'unexplained', making additions. Grounds raised challenged: (i) wrong booking treated as bogus purchase Rs. 88,092; (ii) adhoc disallowance @20% of salary Rs. 3,74,980; (iii) adhoc disallowance @25% of car expenses Rs. 98,528. CIT(A) dismissed the appeal as not maintainable. Tribunal found repair bills were wrongly shown under purchases and 'duly reconciled' before AO, holding that 'no addition is warranted' on that account. Tribunal further held that 'no adhoc disallowance can be made on salary' already paid to employees and, absent contrary evidence, 'no disallowance is called for' for car expenses used exclusively for business. Appeal allowed; assessment adjustments reversed.
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