Ad hoc disallowance of expenses for personal use of telephone, car deleted in the absence of any finding of fact

Ad hoc disallowance of expenses for personal use of vehicle telephone deleted as AO did not bring any finding of fact against the assessee on record-ITAT

ABCAUS Case Law Citation:
ABCAUS 2413 (2018) 07 ITAT

The instant appeal was filed by the assessee against the order passed by the CIT(A) in confirming the ad hoc disallowance made by the Assessing Officer assuming personal use of telephone, car etc.

The AO observed that the assessee had debited a huge amount towards expenses on account of telephone, travelling and conveyance, vehicle expenses and repair and maintenance. The AO noted that in the computation of income no amount on account of personal use of the assets/facilities by the assessee and their family members had been added back by the assessee.

The AO was of the opinion that the issue of non-business use of these expenses could not be ruled-out completely. Therefore he disallowed 1/10th of the expenditure and made the addition.

The assessee challeneged the addition before the CIT(A) as highly unreasonable. However the addition was confirmed.  

The Tribunal opined that the addition was wholly unjustified as the AO had not pointed out as to which was personal expenditure incurred by the assessee and merely because no amount had been added back by the assessee for personal use was no ground to make adhoc addition.

The ITAT opined that if the AO wanted to disbelieve the explanation of assessee, he should have brought some finding of fact against the assessee on record. Otherwise, on mere presumption adhoc addition was not justified.

Accordingly, the addition was set aside.

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