Disallowance out of loading unloading freight shop expenses by the AO

Last updated: 17 August 2021

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The Income Tax Appellate Tribunal heard an appeal concerning the disallowance of loading, unloading, and freight expenses. The Assessing Officer had disallowed 5% of freight and 10% of other shop expenses, citing the assessee's inability to provide complete vouchers. The tribunal partly allowed the assessee's appeal, acknowledging the issue of insufficient documentation.

Court :
ITAT Lucknow

Brief :
This is an appeal filed by the assessee against the order of ld. CIT(A), Bareilly dated 12.12.2017.

Citation :
ITA No.171/Lkw/2018

IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH ‘SMC’ LUCKNOW
[Through Virtual Hearing]
BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
ITA No.171/Lkw/2018
A.Y. 2014-15

Behari Associates,
Shyamganj,
Bareilly
PAN: AAFFB 3611H
(Appellant)

Vs.

Income Tax Officer,
Ward 1(1),
Bareilly

(Respondent)

Appellant by Shri Abhinav Mehrotra, Advocate
Respondent by Shri Ajay Kumar, DR
Date of hearing 08/07/2021
Date of pronouncement 30/07/2021
O R D E R

This is an appeal filed by the assessee against the order of ld. CIT(A), Bareilly dated 12.12.2017.

2.Vide grounds of appeal, the assessee has challenged the order of ld. CIT(A) by which he has confirmed the disallowances made by the Assessing Officer out of loading unloading freight shop expenses by disallowing 5% out of freight and 10% out of other expenses by holding that the assessee was not able to produce voucher for claim of such
expenses. Such disallowances were made to cover possible leakages on account of excess claim of expenditure.

3.The ld. DR, on the other hand, relied on the orders of the authorities below and submitted that the Assessing Officer had made the disallowances after consultation with the counsel of the assessee as the assessee was not able to produce complete vouchers. As regards the personal use of telephone and car the ld. DR submitted that it is not possible that assessee utilized these service only for business purposes, therefore, disallowances sustained by ld. CIT(A) are justified.

4.In the result, the appeal of the assessee is partly allowed.
(Order pronounced in the open court on 28/07/2021)

Please find attached the enclosed file for the full judgement

FAQ :

The Assessing Officer disallowed a portion of loading, unloading, and freight expenses, specifically 5% of freight charges and 10% of other shop expenses.

The disallowances were made because the assessee was unable to produce complete vouchers to substantiate the claims for these expenses.

The assessee challenged the disallowances made by the Assessing Officer and confirmed by the CIT(A), likely arguing for the validity of their expense claims.

The appeal filed by the assessee was partly allowed by the Income Tax Appellate Tribunal.

Yes, the Revenue Department argued that disallowances for personal use of telephone and car were justified as it's unlikely these services were used solely for business purposes.