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2017 (12) TMI 615

er went up substantially as compare to last year - Held that:- As perused all the records and gone through the order of the CIT(A) wherein the CIT(A) has rightly deleted the addition as the Assessing Officer made the estimated addition or ad-hoc addition without assigning any reason to that effect. Merely, on the basis of surmises, the Assessing Officer cannot make an addition when the assessee has given all the details about the expenses and the same was never doubted by the Assessing Officer at any point of time. - CIT(A) rightly held that the Assessing Officer made estimated disallowances because of some expenses which had gone up, however, the Assessing Officer had not brought on record a single instance of expenses not being vouche .....

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012 and was duly served on the assessee. The authorized representative of the assessee appeared from time to time and filed detailed reply along with books of accounts cash book ledger and other documents. The same was placed on record. During the course of assessment proceedings the Assessing Officer noted that the turnover of the assessee has gone up from ₹ 22,84,22,128/- in the previous year to ₹ 26,01,09,470/- in this year, but the net profit had come down from ₹ 2,52,05,645/-. Thus, the Assessing Officer observed that even while the turnover has gone up the profit had declined and the decreasing profit was mainly due to abnormal increase in two expenses i.e. the profit monitoring expenses which has gone from ₹ 3 .....

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er held that there was no allegation that the expenditure occurred out of any other activity and Assessing Officer did not bring on record any instance of the expenditure being used for purposes of the other business. Thus, the addition made in routine manner and on an ad-hoc basis was deleted by the CIT(A). 5. The Ld. DR submitted that the Assessing Officer has rightly disallowed the expenses to the extent of 50%, as to increase business no one will get a less profit. Thus, the Ld. DR submitted that the CIT(A) failed to see this aspect and the order may be set aside. 6. We have heard both the parties and perused the material available on record. Despite sending the notice no one has appeared for the hearing. We have perused all the records .....

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Thus it appears that the addition has simply been made on a suspicion of leakage. No suspicion can be the basis of a sustainable addition. In the absence of any specific reference to any expenditure that the AO had found to not be incurred or to be incurred for a purpose other than business or incurred in a manner that made them eligible for deduction, an estimated disallowance only on account of the fact that an expenditure may have increased in comparison to the previous year is not justified. In the circumstances there does not appear to be any reason to make the disallowance of expenditure without bringing specific material on record to justify the disallowance. Thus, the addition has been made in a routine manner and on an adhoc basis .....

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