Case Number: ITA 649/DEL/2019
Appellant: Raj Kumar Jain, New Delhi
Respondent: ITO, Ward-38(2), New Delhi
Assessment Year: 2015-16
Result: Partly Allowed
Case Filed On: 2019-01-30
Order Type: Final Tribunal Order
Date of Order: 2019-07-09
Pronounced On: 2019-07-09
This case involves Raj Kumar Jain, the appellant, contesting the disallowance of certain expenses by the Income Tax Officer (ITO), Ward-38(2), New Delhi, for the assessment year 2015-16. The case highlights the issues surrounding the disallowance of expenses incurred by the appellant and the subsequent reduction of the disallowance by the Commissioner of Income Tax (Appeals) [CIT(A)].
Raj Kumar Jain, an individual engaged in the wholesale trading of wheat and cattle feed under the name M/s Shree Mahavira Enterprises, filed his return of income on 28.09.2015, declaring a total income of Rs. 4,87,000. During the assessment proceedings, the Assessing Officer (AO) noted that several expenses claimed by the appellant were paid in cash and thus disallowed 30% of the total expenses on an ad hoc basis.
The appellant filed an appeal against the AO’s order, and the CIT(A) subsequently reduced the disallowance from 30% to 20% of the total expenses. The appellant, not satisfied with this reduction, appealed to the Income Tax Appellate Tribunal (ITAT).
The appellant, represented by Shri Gautam Jain, Advocate, and Shri Lalit Mohan, CA, argued that the disallowance was uncalled for and made on an ad hoc basis without finding any defects in the books of accounts. The appellant contended that the AO’s and CIT(A)’s disallowances were excessive, especially since the AO had only made a disallowance of Rs. 50,000 on a similar basis in the previous assessment year 2014-15.
The respondent, represented by Shri S.L. Anuragi, Sr. DR, relied on the orders of the lower authorities and argued in favor of the disallowance.
The ITAT, after considering the arguments and the facts of the case, noted that the AO had made an ad hoc disallowance of Rs. 3,55,139 (30% of the total expenses of Rs. 11,83,798) solely on the ground that the payments were made in cash. The CIT(A) had restricted this disallowance to 20%, resulting in a sustained disallowance of Rs. 2,26,160.
The Tribunal found that no defects were pointed out in the books of accounts or the bills and vouchers, and there was no violation of the provisions of Section 40A(3) of the Income Tax Act. The Tribunal also noted that a similar disallowance in the previous assessment year 2014-15 was limited to Rs. 50,000 on an ad hoc basis. Therefore, the ITAT concluded that the disallowance sustained by the CIT(A) was excessive and reduced it to Rs. 50,000.
In conclusion, the ITAT’s decision in the case of Raj Kumar Jain vs ITO for the assessment year 2015-16 highlights the importance of a consistent and fair approach in disallowing expenses. The reduction of the disallowance to Rs. 50,000 underscores the necessity for the tax authorities to substantiate their disallowances with specific defects in the books of accounts or violations of statutory provisions, rather than making arbitrary ad hoc disallowances.
Order pronounced in the open Court on 09.07.2019 by Shri R.K. Panda, Accountant Member.
Source: Income Tax Appellate Tribunal, Delhi Bench ‘SMC’, New Delhi
Disclaimer: This article provides a general overview of the case and is not a substitute for professional legal advice. For detailed information, readers are encouraged to refer to the official case documents and consult with a qualified legal professional.
Raj Kumar Jain vs ITO: Expense Disallowance Dispute for AY 2015-16
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform