2019 (11) TMI 350

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....ufacturing expenses @ 5% out of this the ld. CIT(A) allowed Rs. 32,06,63.00/- and grossly erred in sustaining disallowance to the extent of Rs. 100,000/- on lum sum basis. 2. That the Ld. AO grossly erred on Law and facts in making disallowance out of various expenses particularly Miscellaneous expenses further the ld. CIT (A) also erred in sustaining the disallowance out of that Rs. 43,325.00/-." 2. Briefly stated, the facts of the case are that the assessee is engaged in the manufacturing and trading of flour & rice mill products. During the course of assessment proceedings, the Assessing Officer, on perusal of manufacturing and trading account observed that most of the expenses are not properly vouched and were met by cash pa....

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....yment. Also, use of car and telephone for purposes other than business cannot be denied. Therefore, to plug any leakage of Revenue 10% of the total expenses were disallowed amounting to Rs. 15,66,88/-. On appeal, ld. CIT(A) held that he is not convinced with the disallowance made in respect of vehicles and telephone @ 10%. The same were deleted. However, in respect of miscellaneous expenses, he restricted the disallowance to 5% which comes to Rs. 43,325/-. Against the said sustenance of expenses of Rs. 43,325, the assessee is in appeal before us. 5. During the course of hearing, the ld. AR submitted that the assessee has filed its return of income disclosing total income of Rs. 70,30,540/- and has disclosed gross profit rate of 7% which ....

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....epreciations claim as well as telephone and miscellaneous expenses have also been disallowed. There is no specific finding recorded by the Assessing Officer in terms of any of these expenses having not been incurred for the purpose of business or bogus in nature. The disallowance of expenses have thus been made in the routine manner without pointing out any specific defects in the vouchers or the fact that where the payments have been made in cash, such expenses are not incurred for the purposes of business. Mere incurrence of expenditure in cash by itself cannot be a ground for denial of genuine claim of the assessee. There are business necessities which warrant the assessee to incur the expenditure in cash, a fact which has been recognize....