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2019 (1) TMI 1519 - AT - Income TaxAdhoc disallowance of direct expenses - discounts to sales - basis for disallowing the claim of the assessee - Held that:- CIT(A) has agreed that in the earlier years, discount on sales was reduced from the sale figure and only net sale was shown in the P&L A/c and whereas in the impugned assessment year, gross sales figure has been shown in the receipts side of P&L A/c and the discounts were shown as direct expenses in the payment side of the P&L A/c. When the CIT(A) has accepted this explanation, there is no basis for disallowing the claim of the assessee. There is not finding that the discounts given were more than the previous year as a percentage of sales. When the percentage of discounts to sales is consistent over the years then the ad-hoc disallowance is bad in law. Just because there are certain difficulty in verification of bills, the discounts cannot be restricted to the absolute figure of what amount was allowed in the immediately previous year. The discount in question is linked to the sales and is business expenditure. We see no reason why the discount should be restricted by the CIT(A) while agreeing with the contention of the assessee. The adhoc disallowance made by the AO, in our view is factually and legally not sustainable. We allow Ground of the assessee and direct the AO to grant deduction of the balance amount of discount claimed by the assessee. Disallowance of collection charges - Held that:- The grant of disallowance cannot be sustained. No disallowance can be made on the ground that verification of documents/evidences is time consuming. Admittedly the assessee has produced bills and vouchers as desired by the AO in the remand proceedings, when this fact is not denied, the disallowance cannot be sustained, thus, Ground of assessee is allowed.
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