Ad hoc disallowance of salary and bonus expenses fails where books are not rejected and payments are not shown bogus.

An ad hoc disallowance of 50% of salary and bonus expenses was held unsustainable where the books of account were not rejected and no finding was recorded that the payments were bogus or unverifiable. The assessment identified no specific defects or discrepancies; it relied only on a comparison with earlier years and an increase in expenditure. The Tribunal also noted that identical facts in the succeeding year had already resulted in relief for the assessee, and a remand would serve no useful purpose. The disallowance was therefore deleted.

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Issues: Whether the disallowance of 50% of salary and bonus expenses on an ad hoc basis was sustainable.

Analysis: The assessment made no finding that the books of account were rejected or that the salary and bonus payments were bogus or unverifiable. No specific defects or discrepancies in the accounts were pointed out, and the disallowance rested only on a comparison with earlier years and an increase in expenditure. The Tribunal also noted that on identical facts for the succeeding assessment year, relief had been granted by the appellate authority, and the present matter stood on the same footing. In these circumstances, a remand would serve no useful purpose.

Conclusion: The ad hoc disallowance of salary and bonus expenses was unsustainable and was deleted in favour of the assessee.

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