2022 (7) TMI 478 - AT - Income Tax

Ad-hoc disallowance of the expenditure - case of the assessee was selected for scrutiny assessment and by making the assessment u/s. 143(3) AO made disallowance of expenditure @ of 10% - CIT(A) restricted the disallowance to the extent of Rs. 50,000/- out of the total disallowance - HELD THAT - AO has made disallowance purely on ad-hoc basis, there is no material on record suggesting that the Assessing Officer has pointed out discrepancy in the accounts of the assessee. In the absence of such finding, there was no justification for making disallowance, therefore, direct the Assessing Officer to delete this disallowance. The ground raised in this appeal is allowed.

Summary

Issues:
- Ad-hoc disallowance of expenditure by the Assessing Officer

Analysis:
The judgment involves two appeals by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) for the Assessment Years 2012-13 and 2013-14. The main issue in both appeals is the ad-hoc disallowance of expenditure made by the Assessing Officer. In the first appeal (ITA No. 277/Asr/2018), the only effective ground raised was that the Ld. CIT(A) erred in sustaining the addition made by the Assessing Officer through ad-hoc disallowance of expenditure amounting to Rs. 2,76,388. The assessee contended that all vouchers supporting the expenses had been furnished and requested the Ld. CIT(A) to verify the same from the assessment record. Despite this, the Ld. CIT(A) sustained the addition of Rs. 50,000 without perusing the record. The Judicial Member found that the Assessing Officer made the disallowance on an ad-hoc basis without pointing out any discrepancies in the accounts of the assessee. Consequently, the Judicial Member directed the Assessing Officer to delete the disallowance, allowing the ground raised in the appeal.

In the second appeal (ITA No. 300/Asr/2018) for the AY 2013-14, the facts were identical to the first appeal. The Ld. DR adopted the same arguments, and since there were no changes in the facts and circumstances, a consistent view was taken. The Judicial Member directed the Assessing Officer to delete the disallowance for this year as well, allowing the grounds raised in this appeal. In conclusion, both appeals filed by the assessee were allowed, and the order was pronounced in the open court on 16.06.2022.