What I-T assessees must know about expenses, audits
Disallowance of an expenditure by an auditor is neither binding on assessee nor on the AO
When eligible businesses get a statutory audit done by an independent auditor, there could be cases wherein the auditor disallows certain expenses claimed by assessees in their profit and loss (P&L) statement. Assessees have to be careful about audit provisions prescribed under the Income Tax (I-T) Act, 1961, and the consequences if any expenditure is disallowed by the auditor. The assessees have an option to claim any expenditure—disallowed by the auditor during audit—as a deduction while filing their Income-Tax Return (ITR). If the assessee does so, as per section 143(1)(a) of the I-T Act, it shall be adjusted in the total taxable income by the Assessing Officer (AO) while processing the ITR.