Rajnandgaon Petrol Service Vs ACIT (ITAT Raipur)
Conclusion: Disallowance of tanker transport expenses was not justified as AO had failed to place on record any material which would prove to the hilt that assessee had either raised a bogus claim of expenditure; or that the said expenditure was not incurred wholly and exclusively for the purpose of business; or that the expenditure so claimed as a deduction did not fall within the four parameters of Section 37.
Held: AO observed that assessee-firm which was running a petrol pump under the name and style of Rajnandgaon Petrol Service had, inter alia, claimed deduction of merchant share and tanker transport expenses aggregating to Rs.44,64,558/- (i) tanker expenses : Rs.43,99,618/-; and (ii) merchant share : Rs.64,940/-. As assessee had failed to substantiate its claim for deduction of expenses based on supporting bills and vouchers to the satisfaction of AO, therefore, the latter had on an ad-hoc basis disallowed 15% of the total expenses i.e. Rs.6,69,683/- (15% of Rs.44,64,558/-). Accordingly, AO after making the aforesaid addition determined income of assessee firm at Rs. 23,95,353/-. On appeal. It was held that disallowance of an expenditure claimed by assessee as a deduction as per the mandate of section 37 could only be disallowed in case of satisfaction of either of the conditions set out in the said section, which were required to be spelt out by AO in the body of the assessment order, viz. (i) the claim of expenditure raised by the assessee was found to be bogus; (ii) the expenditure was in the nature of a capital expenditure or personal expenditure of the assessee; or (iii) that the expenditure had been incurred for any purpose which was an offence or which was prohibited by law. As AO had failed to place on record any material which would prove to the hilt that assessee had either raised a bogus claim of expenditure; or that the said expenditure was not incurred wholly and exclusively for the purpose of business; or that the expenditure so claimed as a deduction did not fall within the four parameters of Section 37. A similar claim for deduction as was raised by assessee-firm in the preceding year had been allowed by the department, but also the fact that the GP/NP rates of assessee firm were progressive as in comparison to the preceding year. The disallowance of Rs.2,19,981/- sustained by the CIT(Appeals) was vacated.
