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2014 (2) TMI 1163 - ITAT MUMBAIDisallowance of expenses - Proof of expenses not submitted - Held that:- As the assessee could not furnish bills and vouchers of expenses, the AO disallowed the same by observing that provisions were made for unascertained liabilities - As per the details of provisions so made in respect to of various expenditure, it appears that these expenditures were related to the business carried on by the assessee. However, since the assessee failed to submit bills/voucher of these expenditures as well as TDS, if any, deducted at source, the AO has disallowed the same by observing that these were unascertained liabilities. There is no dispute to the fact that expenditure can be allowed as deduction under Income Tax Act as provided under Sections 32 & 37 of the IT Act. Such expenditures are required to be proved as having been incurred wholly and exclusively for the purpose of business dully supported by bills and vouchers. Mere provision of expenses cannot be allowed unless same is ascertained and quantified with reference to the bills of expenses. Since assessee is required to follow mercantile system of accounting, only the expenditure accrued and pertaining to the year under consideration can be allowed. The AO has also disallowed 50% of expenditure on ad-hoc basis. These expenditures were in the nature of staff welfare, conveyance and travelling. The ad-hoc disallowance was made on the plea that there was substantial increase in the expenditure in the month of March, 2006 and assessee could not satisfactorily explain the reasons for increase. We found that before making ad-hoc disallowance of 50%, the AO has not pinpointed any of the expenditure which was not properly vouched or not supported by bills etc. It is also not in dispute that expenditures were incurred for the purpose of business. Genuineness of expenses were also not doubted. Keeping in view the totality of the facts and circumstances of the case, we direct the AO to restrict the disallowance of these expenditures to the extent of 20% in place of 50% disallowed by the AO. - Decided partly in favour of assessee.
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