Asstt. CIT v. Ganpati Enterprises Ltd.

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The Tax Publishers2013 TaxPub(DT) 1349 (Del-Trib) : (2013) 142 ITD 0118 : (2013) 154 TTJ 0001 Income Tax Act, 1961 --Business expenditure --Adhoc disallowance No mistake in the account--On the perusal of the P&L a/c, assessing officer observed that assessee had debited expenses under various heads. Assessee also produced bills and vouchers for verification of the same. On verification, some of the expenses were found to be unverifiable for want of complete bills and vouchers. Consequently a lump sum disallowance of Rs. 5,00,000 on estimate basis is made to cover up all possible leakages. Commissioner (Appeals) deleted disallowance on the ground that assessing officer had not properly examined the books of account and not demonstrated as to how the expenses were not admissible to assessee. *Held:* Scheme of Act does not authorize the assessing officer to make a disallowance according to his wishes, rather it provides that he should first point out the defects in the accounts of assessee. Assessing officer nowhere indicated what was the total amount of expenditure claimed by assessee, which specific vouchers was not in accordance with law. In a just sweeping statement, assessing officer observed that on verification, some of the expenses were found to be unverifiable, but what were those expenses, he should make out in the assessment order, only then he could disallow them. Income Tax Act, 1961 Section 37(1) Income Tax Act, 1961 Section 145(3) IN THE ITAT, Delhi C Bench Rajpal Yadav, J.M. & Shamim Yahya, A.M. Asstt. CIT v. Ganpati Enterprises Ltd. ITA No. 6112/Del/2012 A.Y. 2009-10 15 February, 2013 Income-tax Act, 1961, ss. 37(1) & 145(3); In favour of: Assessee Revenue by : Satpal Singh Assessee by : Ankii Gupta ORDER *Rajpal Yadav, J.M.* The Revenue is in appeal before us against the order of learned Commissioner (Appeals) dated 27-8-2012 passed for assessment year 2009-10. 2. In the first ground of appeal, Revenue has pleaded that learned Commissioner (Appeals) has erred in deleting the ad hoc disallowance of Rs. 5,00,000 out of total expenditure claimed by the assessee. 3. The brief facts of the case are that assessee has filed its return of income on 26-9-2009, in the status of a firm declaring an income of Rs. 28,88,455. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) of the Income Tax Act, 1961, was issued on 23-8-2010. The learned assessing officer has passed an assessment order under section 143(3) on 26-12-2011. He has made an ad hoc disallowance of Rs. 5,00,000 out of the expenditure claimed by the assessee. The discussion for making this addition is running into only 5 lines which reads as under : SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1349 (Del-Trib) : (2013) 142 ITD 0118 : (2013) 154 TTJ 0001

Income Tax Act, 1961

--Business expenditure --Adhoc disallowance No mistake in the account--On the perusal of the P&L a/c, assessing officer observed that assessee had debited expenses under various heads. Assessee also produced bills and vouchers for verification of the same. On verification, some of the expenses were found to be unverifiable for want of complete bills and vouchers. Consequently a lump sum disallowance of Rs. 5,00,000 on estimate basis is made to cover up all possible leakages. Commissioner (Appeals) deleted disallowance on the ground that assessing officer had not properly examined the books of account and not demonstrated as to how the expenses were not admissible to assessee. Held: Scheme of Act does not authorize the assessing officer to make a disallowance according to his wishes, rather it provides that he should first point out the defects in the accounts of assessee. Assessing officer nowhere indicated what was the total amount of expenditure claimed by assessee, which specific vouchers was not in accordance with law. In a just sweeping statement, assessing officer observed that on verification, some of the expenses were found to be unverifiable, but what were those expenses, he should make out in the assessment order, only then he could disallow them.

Income Tax Act, 1961 Section 37(1)

Income Tax Act, 1961 Section 145(3)

IN THE ITAT, Delhi C Bench

Rajpal Yadav, J.M. & Shamim Yahya, A.M.

Asstt. CIT v. Ganpati Enterprises Ltd.

ITA No. 6112/Del/2012

A.Y. 2009-10

15 February, 2013

Income-tax Act, 1961, ss. 37(1) & 145(3); In favour of: Assessee

Revenue by : Satpal Singh

Assessee by : Ankii Gupta

ORDER

Rajpal Yadav, J.M.

The Revenue is in appeal before us against the order of learned Commissioner (Appeals) dated 27-8-2012 passed for assessment year 2009-10.

2. In the first ground of appeal, Revenue has pleaded that learned Commissioner (Appeals) has erred in deleting the ad hoc disallowance of Rs. 5,00,000 out of total expenditure claimed by the assessee.

3. The brief facts of the case are that assessee has filed its return of income on 26-9-2009, in the status of a firm declaring an income of Rs. 28,88,455. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) of the Income Tax Act, 1961, was issued on 23-8-2010. The learned assessing officer has passed an assessment order under section 143(3) on 26-12-2011. He has made an ad hoc disallowance of Rs. 5,00,000 out of the expenditure claimed by the assessee. The discussion for making this addition is running into only 5 lines which reads as under :