TaxTMI 
TaxTMI 
2012 (7) TMI 249
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....ion made by the AO in the facts and circumstances of the case. 2. That the ld. CIT(A) erred in law and on facts in making an ad hoc disallowance of Rs.7000/- out of expenses under the head "salaries to staff" to avoid any leakage of revenue and the ld. CIT(A) erred in sustaining the disallowance at Rs.35000/- without assigning any reason whatsoever." 3. Briefly stated, the facts of the case are that the AO finalized the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") and noted that the assessee was engaged in the business of manufacturing of ready mix concrete and showed net loss of Rs.2,17,766/- for the year under consideration. He also noted that the assessee debited Salaries to Staff of Rs.3,90,....
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.... as under:- "Grounds no. 1 to 4 wherein the appellant has challenged disallowance of Rs.70000/- out of salaries paid to staff. I have gone through the assessment order and written submission of the appellant. The AO has contended that during the financial year 2007-08 relevant to AY 2008-09, the assessee has shown net loss (-) 217766/-. On examination of details filed by the assessee it was noticed that assessee has debited Salaries to Staff of Rs.390105/- in his Profit & Loss Account. During the course of assessment proceedings the assessee was asked to file bills and vouchers. It was found during the course of examination of books of accounts that these expenses are not properly vouched. Therefore, an amount of Rs.70,000/- was disallowe....
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....nd to be genuine or not relating to the business." A similar view has been taken by the Punjab & Haryana High Court in CIT vs M/s S.S.P. Ltd. (ITA Bi, 535 of 2010) wherein it was held that: "The CIT(A) had concluded that the audited books of account along with vouchers were produced by the assessee and thereafter the AO had failed to show that the said expenditure was not for business purposes. Further, the disallowance was made on ad hoc basis without there being any material which would justify that the amount had been spent for personal use of the directors. The aforesaid findings were confirmed by the Tribunal. The findings of the CIT(A) and the Tribunal have not been shown to be perverse or illegal in any manner, by the learned coun....
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....alled for by him, which the assessee failed to furnish. There is also nothing brought on by the AO to show that the commission and brokerage expenses claimed by the assessee were excessive and unreasonable. The disallowance of 10% made by the AO out of commission and brokerage expenses thus was not sustainable and the ld. CIT(A), in our opinion, was fully justified in deleting the said disallowance. In the case of Pearl Farben Chem (P) Ltd. (ITA No. 1122/Mum/2010) also the Hon'ble Mumbai Bench of ITAT has held that: "We have perused the records and considered the rival contentions carefully. The dispute is regarding the estimated disallowance out of expenses under the heads 'repairs and maintenance', 'business promotion expenses' and 'tra....