Appellate Tribunal reduces adhoc expense disallowance from 10% to 5% due to lack of evidence The Appellate Tribunal partially allowed the appeal, reducing the adhoc disallowance of expenses from 10% to 5%. The decision was based on the lack of ...
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Appellate Tribunal reduces adhoc expense disallowance from 10% to 5% due to lack of evidence
The Appellate Tribunal partially allowed the appeal, reducing the adhoc disallowance of expenses from 10% to 5%. The decision was based on the lack of concrete evidence supporting the initial disallowance percentage. The Tribunal emphasized the need for specific defects or deficiencies to justify disallowances rather than relying on general presumptions. The order was pronounced on 09.08.2019, with the AO directed to implement the revised disallowance percentage.
Issues: Adhoc disallowance of expenses under various heads by AO and confirmation of the same by CIT(A) at 10% - Appeal against the order.
Analysis:
Issue 1: Adhoc Disallowance of Expenses The AO observed that the assessee had claimed expenses under different heads totaling to Rs. 1,15,93,429. Previous year's disallowance under these heads was at 10%. The AO, noticing that most vouchers were self-made and expenses were in cash, made an adhoc disallowance at 10% amounting to Rs. 11,59,343. The CIT(A) upheld this disallowance reasoning that since the expenses were based on self-made vouchers and paid in cash, a 10% disallowance was reasonable.
Issue 2: Appellate Tribunal's Decision Upon review, the Appellate Tribunal found the adhoc disallowance made by the authorities to be based on presumptions and surmises, lacking specific identification of defects or deficiencies. Consequently, the Tribunal deemed it appropriate to reduce the disallowance from 10% to 5% as the original disallowance was arbitrary. The Tribunal directed the AO to adjust the disallowance accordingly.
Conclusion The Appellate Tribunal partially allowed the assessee's appeal, reducing the adhoc disallowance of expenses from 10% to 5%. The decision was based on the lack of concrete evidence supporting the initial disallowance percentage. The Tribunal emphasized the need for specific defects or deficiencies to justify disallowances rather than relying on general presumptions. The order was pronounced on 09.08.2019, with the AO directed to implement the revised disallowance percentage.
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