Tax Authorities Cannot Disallow Legitimate Journal Entries Without Evidence of Bogus Expenses Under Section 145(3)

ITAT overturned the AO's disallowance of Rs.36,25,56,616 across five assessment years for alleged bogus bulk journal entries, finding they were legitimate transfers between ledger accounts. The Tribunal upheld CIT(A)'s findings that individual site operating expenses were properly documented with TDS deductions, year-end provisions were valid, and cash payments for coolie and wages couldn't be entirely disallowed as bogus. ITAT rejected Revenue's alternative arguments under s.40A(3) and s.40(a)(ia), noting these provisions were inapplicable to the expenses in question. However, the Tribunal agreed with CIT(A) on rejecting the assessee's books under s.145(3), but modified the profit estimation from 12.5% to 10% of contractual receipts, considering contemporary economic conditions rather than outdated precedents from the 1980s-90s. .....

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