Prafulla Shantilal Kothari Vs ACIT (ITAT Pune)
Assessee, an HUF, was engaged in the business of online lottery trading under the name “J.K. Lottery.” It filed a return declaring income of ₹51.25 lakhs. AO made ad-hoc disallowances citing insufficient evidence for expenses claimed-30% each of salary expense , vehicle expense & travel expense and 50% of advertisement expense.
CIT(A) acknowledged that the disallowance rates used by the AO were on the higher side & reduced all disallowances to 15% of the respective expenses holding that while documents were lacking, outright rejection of books wasn’t warranted since no defects were pointed out.
Before Tribunal, Assessee submitted that the AO has not rejected the books of accounts but has gone for ad-hoc disallowance which is very high. Although CIT(A) has given partial relief even then also the same is very high. Referring to the copy of financial statements submitted that a comparison of these financial statements with that of current year would show that the expenses claimed during the year are commensurate with the volume of business.
Tribunal observed that it is an admitted fact that due to non-substantiation of various expenses claimed by Assessee in the P & L a/c, AO disallowed 30%/50% of certain expenses. Books of accounts are not rejected, accounts are audited & the auditors have also not pointed out any defect. Expenditure incurred by Assessee during the year on various heads are commensurate with the volume of business if compared with the figures of the preceding assessment years. Even AO has also not rejected the books of accounts but had gone for ad-hoc disallowance of expenses which has partially been reduced by CIT(A). It is the settled proposition of law that for claiming any expenditure as allowable, the onus is always on Assessee to substantiate with evidence to the satisfaction of AO regarding the genuineness & allowability of such expenditure. However, Assessee in the instant case has not fully discharged the onus cast on it. At same time, considering the past history of Assessee, the ad-hoc disallowance of 15% of such expenses as upheld by CIT(A) appears to be on the higher side. Considering the totality of the facts of the case, Tribunal restricted the disallowance to 10% of such expenses to meet the ends of justice.
