In ITA No.28/Lkw/2021 -ITAT- AO, CIT(A) did not provide specific grounds for disallowance; ITAT (Lucknow) reduces disallowance of expenses for Metal Cans and Closures Pvt. Ltd.
Members Sudhanshu Srivastava (Judicial) & Anadee Nath Misshra (Accountant) [19-07-2023]

Read Order: Metal Cans and Closures Pvt Ltd v. A.C.I.T., Circle-2(3)(1), Kanpur

Chahat Varma

New Delhi, August 22, 2023: The Lucknow bench of the Income Tax Appellate Tribunal has ruled in favour of Metal Cans and Closures Pvt Ltd (assessee), stating that the Assessing Officer (AO) and the CIT(A) did not provide specific grounds for disallowing certain expenses. The disallowance was based on a general assumption that there might be leakage in the form of personal expenses.

The case revolved around the assessment order passed under Section 143(3) of the Income Tax Act, wherein the assessee's total income was assessed at Rs. 6,28,91,316, compared to the returned income of Rs. 6,25,16,280. An addition of Rs. 3,75,036 was made due to the disallowance of various expenses like conveyance, loading & unloading expenses, misc. expenses, repair & maintenance, telephone expenses, travelling expenses, and vehicle running & maintenance expenses. The assessee appealed to the CIT(A) against this addition, but the appeal was dismissed, upholding the disallowance.

The coram of Sudhanshu Srivastava (Judicial) and Anadee Nath Misshra (Accountant) noted that while a disallowance was justified, the AO and the CIT(A) did not specify the particular expenses to be disallowed, nor did they question any specific item. The disallowance was based on a general assumption of possible leakage in personal expenses. Considering this, the bench deemed the total disallowance of Rs. 3,75,036 as excessive and unreasonable.

The bench deemed a disallowance of Rs. 10,000 to be more just and. Consequently, the bench upheld a disallowance of Rs. 10,000 and directed the AO to delete the remaining disallowance of Rs. 3,65,036.