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2025 Supreme(Online)(ITAT) 4174
INCOME TAX APPELLATE TRIBUNAL (JAIPUR BENCH)
NARINDER KUMAR, JM, GAGAN GOYAL, AM
S P C Infrastructures Private Limited – Appellant
Versus
The ACIT, Circle-4, Jaipur – Respondent
ITA No. 411/JPR/2025
For the Appellant: Shri Mukesh Khandelwal, C.A.
For the Respondent: Mrs. Anita R, JCIT, Sr.-DR
Disallowance of business expenses requires clear evidence of deficiencies in expenditure documentation by the assessing authority.
Headnote:(A) Income Tax Act, 1961 - Section 37 - Assessment Year: 2017-18 - The assessee company incurred various expenses related to road construction and toll collection, with the Assessing Officer initially disallowing a portion due to alleged non-verifiability and cash payments. The appellate authority reduced disallowance from 10% to 5%, justifying that specific deficiencies were not brought forward. The Tribunal found lack of precise evidence from the Assessing Officer and held that the matter should be set aside. (Paras 1-8)
(B) The principles of allowable business expenses emphasize that expenditures must be incurred solely for business purposes, with a need for appropriate supporting documentation. (Para 8)
Facts of the case:
The appeal arises from an assessment order resulting in a disallowance of certain expenses, with evidence presented regarding the challenges of obtaining proper documentation.
Findings of Court:
The Tribunal concluded that the conditions were not sufficient for the disallowances made, affecting a proportion of expenses.
Issues: The primary issue was whether the restrictions on disallowed expenses were warranted based on presented evidence.
Ratio Decidendi: The court ruled that disallowances must be clearly substantiated by the assessing authority to be considered valid.
Result: Appeal partly allowed.
| Table of Content |
|---|
| 1. documentation challenges for business expenses. (Para 1 , 7) |
| 2. insufficient evidence grounds for disallowance. (Para 3 , 6) |
| 3. need for substantiation of claims. (Para 8) |
| 4. appeal ruling parameters. (Para 9) |
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cuke The ACIT, S P C Infrastructures Private Limited Circle-4, C-74, Amba Bari, V. Jaipur. Jaipur.
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jktLo dh vksjls@Revenue by: Mrs. Anita R, JCIT, Sr.-DR lquokbZ dh rkjh[k@Date of Hearing : 28/07/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 30/07/2025 vkns'k@ORDER Per: NARINDER KUMAR, JUDICIAL MEMBER .
Appellant-assessee, engaged in the business of road construction and Toll collection, has challenged order dated 07.03.2025, passed by Learned Addl/JCIT(A), u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) whereby appeal filed by the assessee challenging the assessment order dated 31.05.2019, relating to the assessment year
2017-18, has been partly allowed.
Vide assessment order dated 31.05.2019, the Assessing Officer computed the total income of the assessee at Rs. 1,14,75,328/-, by disallowing non verifiable expenses to the tune of Rs. 6,53,456/- and by making another addition of Rs. 16,172/- on the income of interest on IT refund.
2. Arguments heard. File perused.
3. Case of the department is that the assessee company declared its income for the assessment year 2017-18 as Rs. 1,08,05,700/- but, its case was selected for scrutiny, which led to issuance of notices u/s 143(2) and 142(1) of the Act, as it was found that the assessee company, claimed various expenses under different heads in the Profit and Loss Account, but, on verification of the vouchers/bills prepared by the assessee company in response to the said notices, it was found that the same had various defects, and that some of the vouchers/bills were even not available with the assessee company, and also that some payments were made by the assessee company in cash.
It led to issuance of show cause notice dated 21.05.2019, calling upon the assessee to explain as to why disallowance to the extent of 10% of the total expenses of Rs. 6,53,456/- be not made and added to its total income for the year under consideration.
In reply, the assessee submitted as under:_
"1. The assessee has produced s produced complete bills and following expenses as vouchers of per your directions:-
i. Travelling Expenses ii. Vehicle running & Maintenance Expenses iii. Mess Expenses iv. Printing and Stationery Expenses V. Telephone & Mobile Expenses vi. Repairs & Maintenance Expenses vii. Staff Welfare Expenses vili. Vehicle Hire Charges ix. Building Rent-Toll Booths X. Computer Expenses xi. Toll Operating Expeneses
2. In the case of travelling expenses, printing and stationery expenses, repairs and maintenance expenses, site expenses, telephone and mobile expenses the expenses are not fully incurred in cash. In the case of printing & stationery expenses, out of total expenditure of Rs. 1280119/-, Rs. 950000/- are incurred though cheque even tax is deducted (TDS) from the expenses incurred through bank on repairs & maintenance. In case of vehicle running & maintenance expenses, out of total expenditure of Rs. 1203428/-, Rs. 611728/- are incurred through cheque, whereas in case of other heads part expenses have been incurred in cash and part have been incurred through bank.
3. The assessee has to incur these expenses in cash as the toll activities of the assessee are in remote areas wherein proper facilities are not available and the seller/service provider decline to accept pay
