Criteria for expense disallowance and depreciation disallowance under the Income Tax Act

This Income Tax Appellate Tribunal ruling addresses expense and depreciation disallowances for an exporter. The Assessing Officer disallowed 15% of expenses like postage and travel due to insufficient evidence, and also disallowed depreciation on a car purchased in an employee's name. The CIT(A) reduced the expense disallowance to 10% but upheld the depreciation disallowance, stating the assessee failed to prove business use with evidence like a logbook, despite showing the purchase was made from their account.

IN THE INCOME TAX APPELLATE TRIBUNAL
“D” BENCH, MUMBAI

BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND
HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(Hearing Through Video Conferencing Mode)

I.T.A. No.614/Mum/2019
Assessment Year: 2013-14)
&
I.T.A. No.615/Mum/2019
Assessment Year: 2014-15)

Shri Madhav Prasad Aggarwal
Matulya Center, A-2, GF
Senapati Bapat Marg
Mumbai- 400 013
PAN/GIR No. AABPA-6137-H
Appellant)

Vs.

ACIT – 21(2)
Piramal Chambers
4th floor, Lower Parel
Mumbai-400 013
Respondent)

Assessee by : Shri S. L. Jain, Ld. AR
Revenue by : Shri Bharat Andhale, Ld. Sr. DR

Date of Hearing : 03/06/2021
Date of Pronouncement : 03/06/2021

O R D E R

Manoj Kumar Aggarwal (Accountant Member)

1. Aforesaid appeals by assessee for Assessment Years (AY) 2013-14 & 2014-15 contest ommon order of Learned Commissioner of Income-Tax (Appeals)-33, Mumbai [CIT(A)], dated 06/12/2018 qua confirmation of certain expense disallowance as well as depreciation disallowance. Both the appeals are recalled matter since the same were disposed-off by the Tribunal ex-parte qua the assessee vide order dated 13/03/2020. However, the assessee moved miscellaneous application and the order was recalled. Accordingly, the appeals have come up for fresh hearing before this bench.

2. Having heard rival submissions and after going through material on record, our adjudication to the appeals would be as under.

3. The assessee being resident individual stated to be engaged in export of chemicals was assessed for AY 2013-14 u/s 143(3) on 23/03/2016. It transpired that the assessee debited expenses of Rs.31.50 Lacs under postage/telephone, travelling, sales promotion etc. In the absence of satisfactory documentary evidences forthcoming from assessee, Ld. AO estimated disallowance of 15% against the same. The second disallowance was with respect to depreciation on Motor Car. It transpired that the assessee had purchased the Motor Car in AY 2012-13 in the name of one of its employee and it was held in that year that depreciation would not be allowable since the Motor Car was not owned by the assessee. Taking the same view, depreciation of Rs.1.85 Lacs was disallowed in this year.

4. Upon further appeal, Ld. CIT(A) restricted the expense disallowance to 10%. Regarding depreciation disallowance, the assessee filed copy of bank statement of its proprietorship concern to demonstrate that the payment for purchase of car was made by the assessee. However, Ld. CIT(A) chose to confirm the disallowance in view of the fact that the assessee could not produce any corroborative evidences like log book to prove that the car was used for business purposes.

To know more in details find the attachment file