ITAT Jodhpur Deletes Business Expense Disallowance For Lack Of Adverse Findings
Manu Sharma
1 July 2026 5:34 PM IST
The Income Tax Appellate Tribunal (ITAT), Jodhpur, has allowed a batch of appeals filed by four companies, holding that business expenditure cannot be disallowed merely because the tax authorities considered the assessees to have minimal business activity.
The tribunal found no adverse evidence questioning the genuineness of the expenditure and held that the disallowances sustained by the first appellate authority could not be justified on mere suspicion.
A bench of Judicial Member Sudhir Pareek and Accountant Member Dr. Mitha Lal Meena heard the appeals filed by Svaraj Trading and Agencies Ltd., Miraj Creation Pvt. Ltd., Mountain Vintrade Pvt. Ltd. and Aakruti Tradehub Pvt. Ltd. Since the issues were identical, the tribunal followed its earlier decision in KBK Mercantile LLP and connected matters.
The Tribunal noted that, “in absence of any specific adverse finding given by either of the lower authorities on the genuineness of the expenditure claimed by the appellant assessee, the disallowance sustained by the Ld. CIT(A) amounting to Rs. 30,64,577/- is perverse to the facts on record”.
The lead appeal involved Svaraj Trading and Agencies Ltd. for Assessment Year 2021-22. The Assessing Officer had reopened the assessment and disallowed various business expenses after alleging the company was a shell entity with negligible business activity. While the Commissioner (Appeals) accepted statutory expenses such as audit fees and bank charges, it upheld disallowances relating to salaries, office rent, travelling and other operational expenses.
The Tribunal found this approach internally inconsistent, observing that operational expenses required to maintain corporate existence and statutory compliance cannot be rejected without evidence that they are non-genuine.
It was further reiterated that tax authorities cannot substitute their own view of commercial expediency or make additions based on suspicion alone.
Finding no adverse evidence against the expenditure claimed, the Tribunal deleted the disallowances in the lead case and the connected appeals, terming them "perverse to the facts on record."
All the connected appeals were thus allowed.
For Appellants: M.S. Jhanwar, CA and Kamlesh Mundra, CA
For Respondents: Seema Meena, CIT-DR