Case Law Details
Chetas Gulabbhai Desai Vs DCIT (ITAT Mumbai)
The assessee during the period relevant to the assessment year under appeal had incurred expenditure of Rs.35.00 lakhs towards club membership, entrance fee and subscription fee. The aforesaid expenditure was claimed as business expenditure on the ground of commercial expediency. The said expenditure was also reflected in the Tax Audit Report under clause 21 of Form 3CD. The return of income was processed u/s. 143(1) of the Act and the aforesaid expenditure was disallowed.
The assessee filed rectification petition u/s. 154 of the Act, the same was also rejected by the CPC. It is a well settled law that before disallowing any expenditure/making any addition, an opportunity of hearing has to be given to the assessee.
In the instant case since return of the assessee was processed u/s. 143(1) of the Act, no opportunity was granted to the assessee to put forth his stand before disallowing the expenditure. In the First Appellate proceedings, the CIT(A) dismissed the appeal of assessee against the order passed u/s. 154 of the Act on the ground that the issue raised is debatable.
If that be so, the CPC has erred in disallowing the assessee’s claim of expenditure while processing the return of income u/s. 143(1) of the Act. The Revenue cannot in unilateral proceedings disallow expenditure without affording an opportunity to the assessee.
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