Jinraj Paper Udyog Pvt. Limited Vs ITO (ITAT Kolkata)
Income Tax Appellate Tribunal (ITAT), Kolkata Bench, in the case of Jinraj Paper Udyog Pvt. Ltd. vs ITO, has ruled in favour of the assessee for Assessment Year 2014–15 by deleting an ad hoc disallowance of indirect expenses. The appeal arose from the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, which had partially upheld a 10% disallowance of indirect expenses originally estimated at 20% by the Assessing Officer (AO). The tribunal’s decision, pronounced on 17 April 2023, underscores the principle that disallowances must be based on factual discrepancies rather than estimation.
The assessee, a private limited company, had declared a net income of Rs. 1,49,930 in its return filed on 30 September 2014. The case was selected for scrutiny under the Computer Aided Scrutiny Selection (CASS) system. The AO, upon review, noted a turnover of Rs. 28.07 crore but a comparatively low net profit of Rs. 1,00,194. Concluding that the expenses claimed appeared excessive, the AO made a 20% ad hoc disallowance of the indirect expenses amounting to Rs. 1.17 crore, resulting in a disallowance of Rs. 23.49 lakh. This was reduced to Rs. 11.74 lakh (10%) by the CIT(A).
