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2018 (11) TMI 780 - AT - Income TaxDisallowance of ad-hoc basis for the expenses relating to freight, Trip Bhatta and Diesel expenses - disallowance was made by the AO of the expenses as discussed above @3.33% on the ground that similar disallowance was made in the earlier years which was subsequently confirmed by the Hon’ble ITAT - Held that:- From the details filed by the Assessee we note that there is decline in the expenses incurred on freight/ trip bhatta expenses in relation to the transport income as evident from the chart discussed above. It is beyond doubt that the direct expenses in relation to transport income in terms of the ratio are decreasing on year to year basis resulting the better GP ratio to the assessee. There is no statutory provision under the statute to make the disallowance of the expenses if these were disallowed in the earlier years. It is undisputed fact that the GP ration of the assessee has increased/ improved in comparison to the earlier years which implies that the direct expenses of the assessee have come down. Therefore if further disallowance is made for the aforesaid expenses will certainly result loss to the assessee. There is no statutory provision prescribed under the Act to make the disallowance of the expenses at the same rate at which these were disallowed in the preceding assessment years on year to year basis. As in the case before us the situation has changed i.e. the gross profit of ratio of the assessee has increased on account of declined in the cost of the direct expenses. Therefore we are reluctant to apply the same rate of disallowance made in the earlier years which was subsequently confirmed by the ld CIT(A). Considering all we are also of the view that the possibility of leakage from the expenses in the absence of documentary evidence cannot be ruled out. Thus in the interest of the justice we are of the view that the disallowances @1.11% of the aforesaid expenditure will be just and reasonable in the given facts and circumstances. Accordingly we direct the authorities below to make the disallowance @1.11% of the expense as discussed above. - Decided partly in favour of assessee
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