Ad hoc disallowance requires factual basis, while cash purchase disallowance under section 40A(3) can stand on proven threshold breach.

Ad hoc or estimate-based disallowances require specific material or a demonstrated factual basis; on that principle, the note records deletion of professional expense disallowance, deletion of bank interest disallowance for lack of evidentiary foundation for rejection, and deletion of an estimated household expense addition. By contrast, where cash purchases are found to exceed the statutory limit, disallowance under section 40A(3) may be sustained on the facts. The commentary also notes that the assessment was modified accordingly, with relief granted on the principal additions except the section 40A(3) issue.

---

---

Issues: (i) Whether the ad hoc disallowance of professional expenses of Rs. 22,180 was justified; (ii) whether the disallowance of Rs. 29,689 under section 40A(3) was sustainable on account of cash purchases; (iii) whether the disallowance of bank interest of Rs. 64,563 was justified for want of supporting evidence; and (iv) whether the addition of Rs. 36,000 towards household expenses could be sustained on estimate.

Issue (i): Whether the ad hoc disallowance of professional expenses of Rs. 22,180 was justified.

Analysis: The disallowance was made on a general apprehension of possible leakage in electricity, telephone, mobile, conveyance and miscellaneous expenses. No specific defect in the books or expenditure was established.

Conclusion: The disallowance was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the disallowance of Rs. 29,689 under section 40A(3) was sustainable on account of cash purchases.

Analysis: The assessee did not dispute that the relevant purchases were made in cash above the statutory threshold. The claim that payments were split on different dates below the limit was not accepted on the facts found.

Conclusion: The disallowance was upheld and the issue was decided against the assessee.

Issue (iii): Whether the disallowance of bank interest of Rs. 64,563 was justified for want of supporting evidence.

Analysis: The assessee claimed the loan was for nursing home purposes, but the appellate authority sustained the disallowance for absence of supporting bank account details and evidence. The Tribunal held that the Revenue had not laid any factual basis to reject the claim.

Conclusion: The disallowance was deleted and the issue was decided in favour of the assessee.

Issue (iv): Whether the addition of Rs. 36,000 towards household expenses could be sustained on estimate.

Analysis: The addition was based only on an estimate of higher household expenditure without any concrete material showing understatement of actual .

Conclusion: The addition was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded on the principal additions except for the disallowance under section 40A(3), and the assessment was modified accordingly.

Ratio Decidendi: An ad hoc or estimate-based disallowance cannot be sustained without specific material or a demonstrated factual basis, whereas cash-purchase disallowance under section 40A(3) may be upheld where the statutory threshold violation is found on the facts.

---