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TMI Blog2015 (4) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 28.91 lacs on account of miscellaneous expenses, the A.O. has disallowed an adhoc sum of ₹ 10 lacs out of which the ld. CIT(A) has confirmed the disallowance of ₹ 5 lacs. However, while sustaining the disallowance, the ld. CIT(A) observed that the A.O. has not pointed out any specific requirement because of which he has doubted the genuineness of expenditure, therefore, keeping in view the fact that the expenditure was not supported by necessary supporting evidence, the ld. CIT(A) has confirmed the disallowance to 50%. We do not find any infirmity in the order of ld. CIT(A), accordingly, the disallowance of ₹ 5 lacs confirmed by the ld. CIT(A) is hereby upheld. Accordingly ground raised by assessee & Revenue are dismissed. We have considered the rival contention and found that a categorical finding has been recorded by the ld. CIT(A) to the effect that at no stage the A.O. had any material on record or any verification report for quantification of probable cash expenditure above ₹ 20,000/- which would be hit by mischief of section 40A(3) of the Act. The ld. CIT(A) further found that even the tax audit report did not include any list of cases where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken following grounds:- Grounds of appeal by assessee: 1) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in sustaining disallowance of ₹ 54,43,439/- on account of raw materials discarded and the reasons assigned by him for doing so are contrary to the facts of the case and provisions of Income Tax Act, 1961, and Rule made thereunder. 2) On the facts 'and in the circumstances of the case and in law, the learned CITCA) erred in sustaining disallowance of ₹ 5,OO,000/- on adhoc basis, out of adhoc disallowance of Rs.l0,00,000/- made by the learned AO. from miscellaneous expenses of ₹ 28,91,6951- incurred by the appellant, without taking into consideration the details filed and the nature of expenses so incurred and the reasons assigned by him for doing so are contrary to the facts of the case and provisions of Income Tax Act, 1961, and Rules made thereunder. 3) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in sustaining disallowance ofRs.25,00,000/- on adhoc basis out of adhoc disallowance of ₹ 50,00,OOO/- made by the learned A.O. from expenses of Rs., 6,58,50,19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish any detail to the satisfaction of A.O. After considering the remand report, the ld. CIT(A) has confirmed the disallowance vide para 14.5 of his appellate order which has not been controverted by the ld. A.R. by bringing any positive material on record. Accordingly we do not find any reason to interfere with the orders of ld. CIT(A) confirming the disallowance of ₹ 55,43,439/- on account of raw material discarded. Accordingly ground No. 1 of assessee s appeal is dismissed. 6. Ground No. 2 of assessee s and Revenue s appeal pertains to disallowance out of miscellaneous expenses of ₹ 28,91,695/- incurred by the assessee company. The A.O. disallowed an adhoc amount of ₹ 10 lacs out of which ₹ 5 lacs was sustained by the ld. CIT(A. Both assessee and Revenue are in appeal before us. 7. We have heard the rival contention and found that disallowance of ₹ 10 lacs made by A.O. was sustained by the ld. CIT(A) at ₹ 5 lakhs after having following observation:- 15.3 I have considered the submission and gone through the submissions and books of accounts and vouchers. It is not clearly understood what specific requirement was there from the side of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e auditor which would attract mischief of section 40A(3), ordinarily no adverse view would be taken unless the AO has brought on record something in concrete on this issue. The AO not having brought anything on record on this count it would be difficult to sustain the disallowance in such a eventuality. It is also not the case of the A.O. that the tax audit report is unreliable. It has been contented by the assessee at the stage of hearing that the cash book was in fact produced before the A.O. at the time of preparation of remand report but somehow A.O. failed to take cognizance of the same and preferred to stick to his earlier position. The assessee's argument that the company had stopped the activities relating to production and accordingly the fact that the cash expenses were not required under the given circumstances merits consideration. Moreover in the original order the AO had held that since in earlier year the assessee had incurred expenditure in cash in excess of ₹ 20,OOO/ - for the year also the same would have incurred the expenditure in cash of that order and on that basis had estimated such probable cash expenditure at ₹ 50 lacs. It is needless to men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of manufacturing expenses incurred by the assessee amounting to ₹ 6,58,50,190/-. The A.O. disallowed on adhoc basis amounting to ₹ 50 lacs out of which ₹ 25 lacs was deleted by the ld. CIT(A) Similarly ground No. 4 of assessee s appeal and ground No. 3 of Revenue s appeal pertains disallowance of administrative and selling expenses. The assessee has incurred and debited administrative and selling expenses of ₹ 52,73,632/- out of which the A.O. has disallowed an amount of ₹ 10 lacs on adhoc basis. The ld. CIT(A) sustained the addition to ₹ 5 lacs. Observation of ld. CIT(A) for sustaining 50% of disallowance both in case of manufacturing expenses and administrative expenses was as under:- 18.5 The assessee in his rejoinder apart from reiterating whatever was stated earlier had further submitted that all the details were produced to the AO at the stage of preparation of remand report and apart from the same the books of accounts were also produced. However the AO refused to take cognizance of the same and has observed that genuineness of such expenditure was not verifiable. In fact the AO did not ask for any further details or any fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d selling expenses of ₹ 52.73 lacs. The ld. CIT(A) observed that he has gone through the submission of the assessee as well as books of account and vouchers wherein it was not clear as to what specific requirement was there from the side of the A.O. which pursue him to disallow a sum of ₹ 10 lacs. However, disallowance of ₹ 5 lacs was sustained by the ld. CIT(A) by observing that the proper vouchers were there. However, there was no precise mention of particular expenditure which was not supported by corroborative evidence. Both the A.O. and the ld. CIT(A) have made an adhoc disallowance. We also found from record that during remand proceedings, the assessee has produced all the details along with books of account, bills and vouchers of expenses. However, no mistake was pointed out even during the remand proceedings. Just by mentioning that genuineness of expenditure was not verifiable, the A.O. has made an adhoc disallowance. Keeping in view the fact that assessee has filed return of income at a loss of ₹ 58.33 crores, there does not appear to be any valid reason for claiming any bogus expenses. Further neither the A.O. nor the ld. CIT(A) pointed out any ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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