Audited books and business expediency: rent and cultivation expense disallowances were deleted for lack of specific defect or contrary material.

Where audited books are accepted and no specific defect or contrary material is shown, business expenditure cannot be disallowed merely on a subjective view of reasonableness or an assumed link between cost and output. Rent paid for office premises was accepted as business expenditure because it was incurred for business premises and had already been taxed in the recipient's hands, so the addition was deleted. Cultivation expenses were also upheld because the accounts were audited, unrejected, and the revenue identified no particular inadmissible item or basis to replace commercial judgment with its own view; the disallowance was therefore unjustified.

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Issues: (i) whether the disallowance of rent paid for office premises was justified; (ii) whether the disallowance of cultivation expenses as excessive and unreasonable was justified.

Issue (i): whether the disallowance of rent paid for office premises was justified.

Analysis: The rent payment was found to have been made for business premises and had already been subjected to tax in the hands of the recipient. No material was brought to dislodge the finding that the assessee's claim was not unreasonable, and no basis was shown to interfere with the view taken by the first appellate authority.

Conclusion: The disallowance of rent was not justified and the deletion of the addition was upheld, in favour of the assessee.

Issue (ii): whether the disallowance of cultivation expenses as excessive and unreasonable was justified.

Analysis: The books of account were audited and were not rejected. No specific defect in the accounts, no particular inadmissible item, and no material showing that cultivation expenses must move in direct proportion to actual production were established. The expenditure was held to depend on business conditions such as labour cost, soil, climate, plant condition, and pests, and the revenue could not substitute its own view of commercial expediency for that of the businessman.

Conclusion: The disallowance of cultivation expenses was not justified and the deletion of the addition was upheld, in favour of the assessee.

Final Conclusion: The appellate order was sustained on both substantive issues, and the revenue challenge failed in entirety.

Ratio Decidendi: Where audited books are accepted and no specific defect or contrary material is shown, the revenue cannot disallow business expenditure merely on a subjective view of its reasonableness or on an assumed correlation between expenditure and output.

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