TDS mismatch and ad hoc expense disallowance deleted where reconciliation and supporting details were accepted.

Mismatch between TDS reflected in Form 26AS and TDS claimed in the return was not enough, by itself, to sustain an addition where the assessee furnished reconciliation, explained PAN-reporting and other differences, and the books were not found defective; the addition was deleted. An ad hoc 10% disallowance of expenses was also unjustified because item-wise details were produced, the books were neither rejected nor shown to be defective, and no cogent material established that the es were inadmissible; the disallowance was deleted.

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Issues: (i) Whether the addition made on account of mismatch between TDS reflected in Form 26AS and TDS claimed in the return was sustainable. (ii) Whether the ad hoc disallowance of 10% of various expenses was sustainable.

Issue (i): Whether the addition made on account of mismatch between TDS reflected in Form 26AS and TDS claimed in the return was sustainable.

Analysis: The assessee produced reconciliation of the TDS entries and explained that part of the mismatch arose from incorrect PAN reporting by a deductor and other reconciliation differences. The remaining difference was shown to be small in relation to the total TDS credit. No defect in the books of account was found, and no independent enquiry was undertaken to dislodge the reconciliation or to establish receipt of income outside the books.

Conclusion: The addition based on the TDS mismatch was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the ad hoc disallowance of 10% of various expenses was sustainable.

Analysis: The assessee furnished item-wise details and explanations for the expenditure and the books of account were neither rejected nor found defective. The disallowance was made on a blanket estimate without bringing cogent material to show that the expenses were not incurred for business purposes or were otherwise inadmissible. In the circumstances, an ad hoc disallowance was held to be unjustified.

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

Final Conclusion: The appeal succeeded on the substantive grounds and the additions made by the lower authorities were set aside to the extent challenged and allowed by the tribunal.

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