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2025 (5) TMI 1082 - AT - Income TaxDisallowance of expenses debited to profit and loss account on ad hoc basis - HELD THAT - While completing assessment the AO required the assessee to produce supporting evidences vouchers bills etc. in respect of expenses debited to profit and loss account under the head other expenses . On verification of the vouchers bills etc. on check test basis the AO observed that few vouchers and bills pertaining to these expenses were not in order. As observed by the AO that some of the vouchers are self made and not verifiable therefore the AO disallowed Rs. 10 lakhs on ad hoc basis from out of the expenses debited to profit and loss account under the head other expenses . CIT(A) sustained the ad hoc disallowance made by the AO Perusal of the assessment order shows that the AO did not point out any specific voucher and bill where there are defects found by him. Therefore in the absence of any specific instance pointed out by the AO there cannot be any ad hoc disallowance in general. Thus the disallowance made by the AO is hereby deleted.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Appellate Tribunal (AT) in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Condonation of Delay in Filing Appeal Relevant legal framework and precedents: The limitation period for filing an appeal before the Tribunal is prescribed under the Income Tax Act, and delay beyond this period requires condonation by demonstrating "sufficient cause" as per the principles established in various judicial pronouncements. The Tribunal exercises discretion to condone delay if the reasons are bona fide and the appellant is not guilty of willful negligence. Court's interpretation and reasoning: The Tribunal carefully examined the affidavit and petition filed by the assessee explaining the delay. It was stated that the Chartered Accountant who was responsible for filing the appeal inadvertently failed to file the same due to oversight. The delay came to light only upon receipt of a penalty notice nearly two years later. Upon discovery, immediate efforts were made to file the appeal. Key evidence and findings: The affidavit and explanation of the assessee were accepted as genuine and sufficient cause. The Tribunal noted the absence of any mala fide intention or deliberate delay. Application of law to facts: Applying the principle of substantial justice, the Tribunal held that the delay was unintentional and condoned the delay to enable the appeal to be heard on merits. Treatment of competing arguments: The Revenue might have argued that delay was excessive and should not be condoned, but the Tribunal prioritized the interest of justice and the prima facie case of the assessee. Conclusion: Delay of 640 days was condoned and the appeal admitted for hearing. Issue 2: Validity of Ad Hoc Disallowance of Rs. 10 Lakhs from Expenses Relevant legal framework and precedents: Under the Income Tax Act, expenses claimed must be supported by proper evidence such as vouchers and bills. However, any disallowance must be based on specific findings of defect or inadmissibility. Ad hoc disallowances without pointing out specific defective documents are generally not sustainable. The principle of natural justice and fair assessment requires the Assessing Officer to specify the grounds of disallowance. Court's interpretation and reasoning: The Tribunal scrutinized the assessment order and found that the Assessing Officer did not identify any particular voucher or bill as defective. The disallowance was made on an ad hoc basis without specific evidence or explanation. The Tribunal emphasized that such general disallowance is not permissible. Key evidence and findings: The absence of any pointed-out defective documents or vouchers in the assessment order was critical. The assessee had produced vouchers and bills, and the Assessing Officer's check test did not reveal any specific irregularity warranting disallowance. Application of law to facts: The Tribunal applied the principle that disallowance must be based on specific and tangible evidence. Since the Assessing Officer failed to identify any particular defective document, the ad hoc disallowance was unwarranted. Treatment of competing arguments: The Revenue's reliance on the general observation that some vouchers were "self made and not verifiable" was rejected due to lack of specificity. The Tribunal held that vague and general remarks cannot justify disallowance. Conclusion: The ad hoc disallowance of Rs. 10 lakhs was deleted. 3. SIGNIFICANT HOLDINGS "In the absence of any specific instance pointed out by the Assessing Officer there cannot be any ad hoc disallowance in general." The Tribunal established the core principle that disallowance of expenses must be founded on specific defects in supporting documents and cannot be made on an arbitrary or ad hoc basis. The Tribunal also reinforced the principle that delay in filing appeals can be condoned if sufficient cause is shown, especially where the delay is unintentional and the appellant has a prima facie case. Final determinations:
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