INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Disallowance of consultation fees on an ad hoc basis - AO failed to point out any defects in the document submitted by assessee -

The issue raised for consideration as to whether CIT(A) was justified in sustaining the disallowance on account of consultation fees on an ad hoc basis in the facts and circumstances of the instant case. Held: AO had sought to disallow the consultancy charges on an estimated basis only during the year and no disallowance was made either in earlier years or in subsequent years. Books of account produced by the assessee was not rejected by the lower authorities. Assessee had furnished all the relevant documents that could be filed to prove the genuineness of consultancy charges from its side. AO had not pointed out any defect in the said details or had not found any defect in the books produced by it together with supporting evidences. Hence, there cannot be any justification on the part of the lower authorities to make any disallowance of expenses on an estimated basis.

Followed:Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 0858 (SC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : A.Y. 2006-07

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