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2016 (9) TMI 545 - AT - Income TaxDisallowance made u/s 14A - Held that:- We notice that the Ld CIT(A) has restricted the disallowance to 5% of the dividend income. However he has committed an error in working out the disallowance of 5% of the dividend income. Accordingly we modify the order of passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s 14A to 5% of the dividend income.- Decided in favour of assessee partly Disallowance made out of bad debts claim - Held that:- As the assessee has submitted that there was inadvertent error in mentioning the date of invoice. Further, the debt has actually been written off. In view of the Circular issued by CBDT, wherein the decision rendered by Hon’ble Supreme Court in the case of TRF Ltd (2010 (2) TMI 211 - SUPREME COURT ) has been followed, there is no justification in disallowing the sum of ₹ 55,000/- actually written off. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance.- Decided in favour of assessee Adhoc disallowance of manufacturing and other expenses - Held that:- there is merit in the submissions so made by the Ld A.R. In case of companies, which are having large volume of transactions, it would be practically difficult to bring all the evidences in one go. Hence the ledger account copies are furnished to the tax authorities and normally they are verified on a test check basis. In the instant case, the assessee has furnished copies of invoices and vouchers on a sample basis and it is stated that the assessing officer did not find any defects therein after carrying out examination. Also that the assessee has furnished the reasons for the fall in turnover and increase in manufacturing expenses. The sales relating to manufactured products have fallen from ₹ 233.74 crores to ₹ 210.65 crores, whereas the sales relating to traded goods have gone up from ₹ 14.15 crores to ₹ 35.51 crores. The assessee has stated that the change in the sales product mix coupled with the inflationary increase of prices and expenses have contributed to the increase in manufacturing expenses. When we look at this analysis furnished by the assessee, we do not find any infirmity in it. We notice that the AO has also not commented adversely on this analysis. Any deficiency noticed in the samples given would normally trigger further investigation. According to the assessee, the AO did not find any defect and further, did not ask for furnishing of further evidences. These discussions show that the assessee was willing to co-operate fully with the assessing officer and could not furnish all the volumes of invoices/vouchers due to practical difficulty only. Under these set of facts, in our view, there is no justification in finding fault with the assessee. There is no justification in making disallowance out of various expenses on ad-hoc basis, when the AO has not found fault or deficiency in any of the items of expenditure. Accordingly, we set aside the order passed by the Ld CIT(A) on this issue and direct the AO to delete the ad-hoc disallowance - Decided in favour of assessee
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