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2020 (8) TMI 591 - AT - Income TaxDisallowance of Administrative expenses - non-furnishing of details - denial of principle of natural justice - HELD THAT:- Assessee should be given proper opportunity by the assessing officer to explain its case before the AO takes any action adverse to the assessee. Assessee should be given proper opportunity by AO to explain its case before the AO takes any action adverse to the assessee. In the instant case, we notice that the assessing officer neither called for explanations from the assessee nor did he explain as to why he is restricting the claim of administrative expenses to ₹ 4.77 crores as against the claim of ₹ 5.77 crores. Accordingly, we are of the view that the there is no reason to reduce the claim of administrative expenses by ₹ 1.00 crore. Accordingly, we direct the AO to allow the administrative expenses fully as claimed by the assessee at ₹ 5.77 crores. Addition of pantry and stationery purchases - denial of principle of natural justice - HELD THAT:- Reasons discussed in the preceding paragraphs on the principle of natural justice, the action of the assessing officer cannot be upheld. Accordingly, we direct the AO to allow deduction relating to pantry and stationery purchase. Addition of Building maintenance expenses - said expense was grouped under the head “Administrative expenses” - according to AO, the assessee did not produce proper break-up of the asset owned by it and expenses related to building hence the AO disallowed 40% of the above said claim - HELD THAT:- It is not clear whether the AO did call for any detail or not. We have noticed that the assessee is carrying on sub-letting activity on the buildings taken on rent. Hence the expenses incurred on building should be mainly on maintenance activities only. We notice that the AO has disallowed 40% of expenses on adhoc basis, i.e., he did not bring any material on record to support the estimate of 40%. Accordingly, in the absence of any supporting evidences, we are of the view that the disallowance of 40% of expenses on the higher side. Since the assessee has not furnished any break-up details, we are of the view that some disallowance out of the above said expenses is called for. In our view the disallowance may be restricted to 10% of the expense claimed under the head building maintenance services, i.e., 10% of ₹ 45,57,237/- and the same would take care of deficiencies, if any in the claim. We order accordingly. The order passed by Ld CIT(A) on this issue stands modified accordingly. Disallowance of miscellaneous expenses - HELD THAT:- AO has made this disallowance without properly analysing the financial statements furnished by the assessee. We notice from the financial statements furnished by the assessee that the details of administrative expenses are given in Schedule 24. Further the miscellaneous expenses included in the break-up details of administrative expenses was ₹ 4,09,950/- only. Hence we are unable to understand as to how that the AO could disallow a sum of ₹ 7.00 lakhs out of miscellaneous expenses. Accordingly, we are of the view that there is no basis for making disallowance - Decided in favour of assessee.
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