Prime Cleaning Services Vs DCIT (ITAT Lucknow)
ITAT Lucknow: Ad Hoc Disallowance Without Pinpointing Defects Unsustainable; GST/TDS Late Fee Held Compensatory and Remanded for Fresh Examination
The Lucknow Bench of the ITAT held that an ad hoc disallowance of business expenditure cannot be sustained merely because the Assessing Officer considers certain expenses to be insufficiently substantiated, without identifying any specific bogus or inadmissible expenditure. Where the assessee expresses willingness to produce supporting evidence, the matter deserves fresh examination in the interest of justice.
The assessee, engaged in the business of professional cleaning, housekeeping and hospitality services, was subjected to scrutiny. The Assessing Officer, finding that documentary evidence was not produced for certain expenses aggregating ₹2.19 crore, disallowed 10% thereof (₹21.90 lakh) on an ad hoc basis. The CIT(A)/NFAC upheld the disallowance, holding that the assessee had failed to discharge the burden of substantiating the expenditure.
Before the Tribunal, the assessee contended that it had furnished sample details of the expenses and had specifically requested the Assessing Officer to seek any further documents required. However, instead of making a specific requisition or identifying any inadmissible claim, the Assessing Officer proceeded to make an estimated disallowance. The Tribunal found merit in this contention and observed that, since the assessee claimed to possess all supporting evidence, one more opportunity ought to be granted to substantiate the expenditure before the Assessing Officer. Accordingly, the issue relating to the ad hoc disallowance was restored to the Assessing Officer for fresh adjudication.
On the separate issue of late payment fee relating to GST and TDS, the Tribunal observed that such payments are compensatory in nature and cannot be disallowed merely on the ground that they arise from an infringement of law. With these observations, the Tribunal restored the matter to the Assessing Officer for passing a fresh order in accordance with law. The appeal was allowed for statistical purposes.
Cases Discussed:
- PCIT-II, Lucknow vs. Metal Seam Company (P.) Ltd., 2017-LL-0905-2, dated 5.09.2017
- PCIT-II, Lucknow vs. Motor Sales Limited, ITA No. 142 of 2015, dated 2.03.2017
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
