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2019 (10) TMI 659 - AT - Income TaxDisallowance of expenses paid in cash - expenditure not open to verification - ad-hoc addition - HELD THAT:- Assessing Officer has passed order u/s 143(3) of the Act and has made the disallowance on ad hoc basis without pointing out any defect in the books of account of the assessee. He simply held that the expenses paid in cash were completely not open to verification and therefore, to cover up the possible leakage, 1/5th of the expenses have been disallowed. Such a disallowance is not warranted under the law as the Assessing Officer has to point out the specific voucher or expenses which he deems to be fit for disallowance. Addition on account of advertisement expenses - HELD THAT:- AO issued notices to 11 parties to whom the assessee had claimed to have paid advertisement expenses and such notices had returned back. AO has held that the bills produced by the assessee were not genuine as the notices had returned back. AO has further held that the notices were returned back with the remark that the address is not correct. However, find that assessee was not confronted with the fact of returning back of notices. Remit the issue back to the Assessing Officer who should redecide the issue after confronting the assessee and after hearing the assessee. As a result, this issue is allowed for statistical purposes. Disallowance out of interest expenses - HELD THAT:- Assessee had paid interest @18% to relatives as well as to non relatives. There is bound to be difference between the interest charged by the bank and the interest charged by private lender as for obtaining loans from bank, the assessee needs to maintain margin also and there are other expenses charged by bank in the form of bank charges, penalty etc. Therefore, the basis for disallowance made by the AO and confirmed by CIT(A) is not correct. It is not in dispute that assessee had made payments of interest after deducting tax at source and it is also not the case of the authorities below that loans were not utilized for the business purposes. Under these facts, see no reason in sustaining the disallowance. Accordingly, the order of learned CIT(A) is reversed and this ground of assessee is allowed.
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