Kunal Narendra Gupta Vs ITO (ITAT Mumbai)
ITAT Mumbai: No Ad-hoc Disallowance Without Rejecting Books; Section 40(a)(ia) Relief If TDS Paid Before Return Due Date
The ITAT Mumbai delivered a clear ruling that ad-hoc disallowance of expenses cannot be sustained unless books of accounts are rejected under Section 145(3).
In this case, the Assessing Officer disallowed 10% of various expenses (travelling, telephone, vehicle, etc.) merely on presumption of personal use, without pointing out any defects in books. The Tribunal held such estimate-based disallowance is unsustainable in law when:
- Books are properly maintained and audited, and
- No specific defect or non-genuine expenditure is identified.
On Section 40(a)(ia):
- The Tribunal reiterated that no disallowance is warranted if TDS is deducted and deposited before the due date of filing return.
- Since Revenue failed to dispute timely deposit, the disallowance of brokerage expenses was deleted.
Additionally, the Tribunal:
- Condoned delay of 2747 days, accepting non-receipt of CIT(A) order as sufficient cause.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal is filed by the assessee against the order passed by the learned Commissioner of Income Tax (Appeals)-57, Mumbai [hereinafter referred to as “CIT(A)”]dated 20.03.2018 under section 250 of the Income-tax Act, 1961[hereinafter referred to as “the Act”], arising out of the assessment order passed by the Income Tax Officer, Ward 13(2)(2), Mumbai [hereinafter referred to as “Assessing Officer or AO”]under section 143(3) of the Act dated 20.11.2007 for the Assessment Year 2005-06.
