Case Law Details
Zheng Yuan Mobiles Pvt. Ltd. Vs DCIT (ITAT Delhi)
The case of Zheng Yuan Mobiles Pvt. Ltd. vs DCIT at ITAT Delhi revolves around the disallowance of expenses by the Assessing Officer (AO) based on improper vouchers and bills. The appellant, a private limited company engaged in the distribution of OPPO Mobiles India Pvt. Ltd., contested this disallowance, leading to a series of judicial assessments.
Detailed Analysis: During the assessment proceedings, the AO raised concerns regarding the genuineness of the company’s expenses, citing insufficient documentation, internal vouchers, and cash transactions below the threshold limit. The AO proceeded to disallow 30% of the claimed expenses, considering them excessive, unreasonable, and partly personal in nature.
The Commissioner of Income Tax (Appeals) upheld the AO’s decision, emphasizing the lack of proper documentation and the failure to establish the expenses’ business purpose. Despite the appellant’s submission of ledgers and vouchers, the appellate authority deemed the expenses not wholly and exclusively incurred for business purposes, thereby justifying the disallowance.
Upon further appeal, the Income Tax Appellate Tribunal (ITAT) scrutinized the case. It noted the absence of specific deficiencies in the company’s books of accounts and highlighted the substantial revenue generated by the appellant. The ITAT emphasized the nature of the appellant’s business, operating in a competitive market, and reasoned that minor discrepancies in documentation shouldn’t warrant ad hoc disallowance of expenses.
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