TaxTMI 
TaxTMI 
2026 (7) TMI 341
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....er the facts and circumstances of the case and in law, the orders of the authorities below (the assessment order as upheld in the impugned CIT(A) order) have been passed without due consideration of relevant facts and applicable law, rendering the assessment improper. The resultant disallowances/additions are arbitrary, perverse and contrary to settled principles, and therefore the entire disallowance of Rs.33,39,148/- deserves to be deleted and the impugned order quashed. 2. That the learned CIT(A) erred in upholding the disallowance of Rs.33,39,148, being bona fide business expenditures (such salaries. as administrative expenses) rent, and incurred wholly and exclusively for the purposes of the business, which are fully allowable under Section 37(1) of the Income Tax Act, 1961. The disallowance is unjustified on facts and in law. 2.1 Under the facts and circumstances of the case and in law, the ld. CIT(A) has grossly erred in confirming the disallowance of Rs.23,90,181 / in respect of Salary expenses. 2.2 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding the disallowance of Rs.84,000/- being Office Rent. ....
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....7(1) of the Income Tax Act, 1961. The disallowance is unjustified on facts and in law." 3. "That the learned CIT(A) further erred in confirming the levy of interest under Sections 234B and 234C, which is not chargeable on the facts of the case. The interest is purely consequential to the above disallowance and ought to be deleted if and to the extent the underlying addition is deleted. (The appellant denies its liability to such interest.)" 4. "The appellant craves leave to add, amend, alter, delete or modify any of the above grounds of appeal, either before or during the hearing of this appeal." ITA No. 779/Jodh/2025 (Assessment Year: 2023-24) 1. "Under the facts and circumstances of the case and in law, the orders of the authorities below (the assessment order as upheld in the impugned CIT(A) order) have been passed without due consideration of relevant facts and applicable law, rendering the assessment improper. The resultant disallowances/additions are arbitrary, perverse and contrary to settled principles, and therefore the entire disallowance of Rs. 28,84,255/- deserves to be deleted and the impugned order quashed." 2. "That the learned ....
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.... the extent the underlying addition is deleted. (The appellant denies its liability to such interest.)" 4. "The appellant craves leave to add, amend, alter, delete or modify any of the above grounds of appeal, either before or during the hearing of this appeal." ITA No. 871/Jodh/2025 (Assessment Year: 2021-22) 1. "Under the facts and circumstances of the case and in law, the orders of the authorities below (the assessment order as upheld in the impugned CIT(A) order) have been passed without due consideration of relevant facts and applicable law, rendering are arbitrary, perverse and contrary to settled principles, and the assessment improper. The resultant disallowances/additions therefore the entire disallowance of Rs. 6,64,563/- deserves to be deleted and the impugned order quashed." 2. "That the learned CIT(A) erred in upholding the disallowance of Rs. 6,64,563, being bona fide business expenditures (such as salaries, rent and administrative expenses) incurred wholly and exclusively for the purposes of the business, which are fully allowable under Section 37(1) of the Income Tax Act, 1961. The disallowance is unjustified on facts and in law." ....
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....e arbitrary, perverse and contrary to settled principles, and therefore the entire disallowance of Rs.8,31,611/- deserves to be deleted and the impugned order quashed. 2. That the learned CIT(A) erred in upholding the disallowance of Rs.8,31,611, being bona fide business expenditures (such as salaries, rent, administrative expenses) incurred and wholly and exclusively for the purposes of the business, which are fully allowable under Section 37(1) of the Income Tax Act, 1961. The disallowance is unjustified on facts and in law. 2.1 Under the facts and circumstances of the case and in law, the ld. CIT(A) has grossly erred in confirming the disallowance of Rs.4,56,500 /- in respect of Salary expenses. 2.2 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding the disallowance of Rs.1,57,216/- being Office Expenses. 2.3 Under the facts and circumstances of the case and in law, the Id. CIT(A) has erred in confirming the disallowance of Rs.23,531/ incurred on Printing & Stationery Expenses. 2.4 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in sustaining the disallowa....
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....4. "The appellant craves leave to add, amend, alter, delete or modify any of the above grounds of appeal, either before or during the hearing of this appeal." ITA No. 748/Jodh/2025 (Assessment Year: 2023-24) 1. Under the facts and circumstances of the case and in law, the orders of the authorities below (the assessment order as upheld in the impugned CIT(A) order) have been passed without due consideration of relevant facts and applicable law, rendering the assessment improper. The resultant disallowances/additions are arbitrary, perverse and contrary to settled principles, and therefore the entire disallowance of Rs.4,25,058/- deserves to be deleted and the impugned order quashed. 2. That the learned CIT(A) erred in upholding the disallowance of Rs.4,06,719, being bona fide business expenditures (such as salaries, rent, and administrative and expenses) incurred wholly exclusively for the purposes of the business, which are fully allowable under Section 37(1) of the Income Tax Act, 1961. The disallowance is unjustified on facts and in law. 2.1 Under the facts and circumstances of the case and in law, the ld. CIT(A) has grossly erred in confirming the d....
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.... impugned order passed by CIT(A) without due consideration of relevant facts and applicable law, rendering the assessment improper. The resultant disallowances/additions are arbitrary, perverse and contrary to settled principles, and therefore the entire disallowance of Rs.3,93,893/- deserves to be deleted and the impugned order quashed. 2. That the learned CIT(A) erred in upholding the disallowance of Rs.1,46,213/-, being bona fide business and administrative expenditures (such as rent, and administrative expenses) incurred wholly and exclusively for the purposes of the business, which are fully allowable under Section 37(1) of the Income Tax Act, 1961. The disallowance is unjustified on facts and in law. 2.1 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding the disallowance of Rs.47,200/- being Office Rent. 2.2 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the disallowance of Rs.13,650/- incurred on Travelling. 2.3 Under the facts and circumstances of the case and in law, the Id. CIT(A) has erred in sustaining the disallowance of Rs.13,240/- towards....
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.... the learned CIT(A) erred in upholding the disallowance of Rs.4,30,035, being bona fide business expenditures (such as salaries, rent, and administrative expenses) incurred wholly and exclusively for the purposes of the business, which are fully allowable under Section 37(1) of the Income Tax Act, 1961. The disallowance is unjustified on facts and in law. 2.1 Under the facts and circumstances of the case and in law, the ld. CIT(A) has grossly erred in confirming the disallowance of Rs.1,80,000 /- in respect of Salary expenses. 2.2 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding the disallowance of Rs.96,000/- being Office Rent. 2.3 Under the facts and circumstances of the case and in law, the Id. CIT(A) has erred in confirming the disallowance of Rs.10,293/- incurred on Travelling. 2.4 Under the facts and circumstances of the case and in law, the Id. CITIA) has erred in sustaining the disallowance of Rs.30,762/- towards Conveyance charges. 2.5 Under the facts and circumstances of the case and in law, the Id. CIT(A) has erred in confirming the disallowance of Rs.10,258/- relating to Telephon....
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....IT(A) has erred in sustaining the disallowance of Rs.2,240/- towards Conveyance charges. 2.5 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the disallowance of Rs.2,950/- relating to Telephone expenses. 2.6 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding the disallowance of Rs.3,977/- under the head "Office Expense". 2.7 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding the disallowance of Rs.69,350/- under the head "Preliminary Expenses". 2.8 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding the disallowance of Rs.3/- under the head "Other Expenses " 3. That the learned CIT(A) further erred in confirming the levy of interest under Sections 234B and 234C, which is not chargeable on the facts of the case. The interest is purely consequential to the above disallowance and ought to be deleted if and to the extent the underlying addition is deleted. (The appellant denies its liability to such interest.) 4. The appellant craves leave to add, amend....
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.... 2.9 Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in upholding the disallowance of Rs.490/- under the head "Staff & Labour Expenses". 3. That the learned CIT(A) further erred in confirming the levy of interest under Sections 234B and 234C, which is not chargeable on the facts of the case. The interest is purely consequential to the above disallowance and ought to be deleted if and to the extent the underlying addition is deleted. (The appellant denies its liability to such interest.) 4. The appellant craves leave to add, amend, alter, delete or modify any of the above grounds of appeal, either before or during the hearing of this appeal. ITA No. 793/Jodh/2025 (Assessment Year: 2022-23) 1. Under the facts and circumstances of the case and in law, the orders of the authorities below (the assessment order) upheld and amount of disallowance enhanced in the impugned order passed by CIT(A) without due consideration of relevant facts and applicable law, rendering the assessment improper. The resultant disallowances/additions are arbitrary, perverse and contrary to settled principles, and therefore the entire disallowan....
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....denies its liability to such interest.) 5. The appellant craves leave to add, amend, alter, delete or modify any of the above grounds of appeal, either before or during the hearing of this appeal. 3. The appellant assessee's have raised sole issues in these appeals pertaining to disallowance of business expenditure u/s 37(1) of the Income Tax Act, 1961 on identical facts and, therefore, all these appeals were although heard on consecutive dates as covered matter by the judgment delivered by coordinate Jodhpur Bench in the case of KBK Mercantile LLP, MPK Equity Research LLP and Crystal Infrabuild Pvt. Ltd. order dated 21.05.2026 and adjudicated together by this consolidated order for sake of brevity. 4. ITA No. 778/Jodh/2025 with respect to assessment year 2021-22 in case of Svaraj Trading and Agencies Ltd., Mumbai is taken as a lead case for discussion of facts. 5. Briefly the facts as per record are that the appellant company is engaged in the business of wholesale trade on a fee or contract basis, including activities of commission agents. The appellant assessee has filed return of income for the year under consideration i.e. 2021-22 declaring total income of Rs....
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....urred out of commercial considerations and in the normal course of business. The Court held that the reasonableness of expenditure must be judged from the point of view of a businessman and not from the standpoint of the Assessing Officer. The Supreme Court emphasized that the tax department cannot dictate how much an assessee should spend to run its business. In the present case, the CIT Appeal disallowed salary, rent, travelling, conveyance, telephone and other administrative expenses solely because he believed the appellant's business activity was "minimal." This is identical to the error addressed by the Supreme Court. The appellant incurred expenditure for day- to-day administration, statutory compliance, banking work and accounting. These are matters of commercial expediency. The Assessing Officer cannot substitute his view for that of a prudent businessman. The disallowance therefore directly contradicts the principle laid down in Walchand and must be deleted. ii. S. A. Builders Ltd. v. CIT (2007) 288 ITR 1 (SC): In S. A. Builders, the Assessing Officer disallowed certain advances made to a subsidiary on the reasoning that the expenditure did not serve ....
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.... assumptions without supporting documents. In the present case, the Assessing Officer and CIT Appeal relied entirely on uncorroborated search statements of third parties (a peon, an accountant and a group employee) none of whom were linked to the appellant's management. The CIT Appeal himself records that the Assessing Officer brought no seized profit and loss account, balance sheet, bank statement or other Incriminating material specific to the appellant. Disallowance based on assumption that the appellant was "at a dummy address" without evidence violates the principle laid down in Dhakeshwari Cotton Mills. The disallowance has no evidentiary backing and must be deleted. v. Umacharan Shaw and Bros. v. CIT (1959) 37 ITR 271 (SC): In this case, the department made additions based on presumption without any direct evidence. The Supreme Court held that suspicion, however strong, cannot take the place of proof and additions must be supported by credible material. The disallowance in the appellant's case rests solely on suspicion derived from third-party statements and an alleged common address issue. No document, voucher or bank entry has been shown ....
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....g charges, bank charges, and secretarial audit fee in physical and operational vaccum is a disallowance sustained by the Ld. CIT(A) as those expenses are the necessary pre-condition for the allowed expenses to exist. 23. It is well settled principle of law through judicial pronouncement that routine administrative and operational expenses which are necessary for maintaining corporate existence and ensuring statutory compliance, cannot be disallowed unless they are specifically shown to be non-genuine, excessive, or unrelated to the business. In the present case, neither the Assessing Officer nor the Ld. CIT(A) has brought any material on record to establish that the impugned expenses are bogus, inflated, unverifiable or not incurred for business purposes. We find that all the disallowed expenditures are duly supported by documentary evidence and are intrinsically linked to the normal functioning and compliance requirements of the appellant LLP. The acceptance of statutory expenses, while simultaneously disallowing the genuine administrative and other expenses results in an internally inconsistent and legally unsustainable conclusion. 24. In the above view, we hold....