Expenditure can’t be disallowed only because not debited in Profit & Loss Account

Expenditure can’t be disallowed because it is not debited in Profit and Loss Account – ITAT 

In a recent judgment, ITAT Guwahati has held that only because of expenditure not debited in Profit and Loss it does not disentitle assessee to claim deduction of the said expenditure if assessee otherwise is eligible for the same. 

ABCAUS Case Law Citation:
ABCAUS 4031 (2024) (05) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the disallowance of deduction towards expenditure on donation.

The assessee was an individual. He had made donation of Rs.2,00,000/- to a charitable

organization which was approved u/s 80G of the Act, therefore, in his income tax return the assessee had claimed the deduction of the said amount.

However, in the tax audit report of the assessee, the chartered accountant inadvertently noted the said amount of Rs. 2,00,000/- as personal expenses on account of donation.

Based on the audit report, in summary assessment u/s 143(1) of the Act, the deduction claimed by the assessee was disallowed by the Assessing Officer (AO).

Before the Tribunal, the assessee contended that there was a bona fide mistake on the part of the auditor to report the said donation as personal expenses. The assessee further submitted that this fact was brought to the notice of the CIT(A), however, the CIT(A) disallowed the said expenditure observing that the said expenditure was not debited to the Profit & Loss Account.

It was submitted that the assessee was an individual and only because of the said expenditure was not debited in the business account of its proprietorship business, that does not disentitle the assessee to claim the deduction of the said expenditure if the assessee otherwise is eligible for the same.

In view of the submissions of the assessee, the Tribunal opined that the lower authorities were not justified in making the impugned addition and the same was ordered to be deleted.

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• No disallowance u/s 43B if expenditure not claimed in Profit and Loss Account
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• Jurisdictional PCIT/CIT to condone delay in filing Form No. 10A for Registration u/s 12A
• AO not justified in making addition by adopting extrapolation without any material evidence
• Court can not sit over comparative financial attractiveness of rival offers decided by CoC