Ishvatham Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, in the case of Ishvatham Vs ITO, has partially allowed the assessee’s appeal, setting aside the order of the Commissioner of Income Tax (Appeals) [CIT(A)] that had confirmed the total disallowance of business expenses. The Tribunal found that while the Assessing Officer (AO) was correct in noting the lack of supporting documentation for the claimed expenses, the complete disallowance was unjustified given the existence of an ongoing business.
Background of the Case
The appeal concerned the Assessment Year (AY) 2013-14. The assessee, a firm engaged in the business of purchase and sale of paintings, challenged the confirmation of the AO’s decision to disallow the entirety of expenses claimed under various heads. These heads included business expenses (Rs.2,60,003/−), foreign travel expenses (Rs.7,79,968/−), club facility and subscription charges (Rs.72,864/−), general travel expenses (Rs.1,63,594/−), and motor car expenses (Rs.14,88,543/−), totaling Rs.27,64,972/−.
The assessee reported earning a commission on the sale of paintings amounting to Rs.1,23,125/− during the year. The AO and the CIT(A) disallowed the expenses entirely, primarily on two grounds: the assessee had not effected any sale of paintings (disputed by the Tribunal) and had failed to furnish sufficient bills and vouchers to prove the expenses were incurred wholly and exclusively for business purposes.
