Reasoned appellate adjudication and proper assessment procedure required deletion of ad hoc business-expense disallowances.

Ad hoc disallowances of Diwali expenses, Pooja expenses and godown rent were criticised because the prescribed assessment procedure was not followed after review suggestions, including an opportunity for the Assessing Officer to confront the assessee. The first appellate authority was also required to decide the appeal on merits through a reasoned order under Section 250(6), rather than dismissing it for non-prosecution. The material before the Tribunal indicated that the expenses were incurred for business purposes, and the additions were deleted.

---

---

Issues: Whether the disallowances of Diwali expenses, Pooja expenses and godown rent could be sustained when the prescribed assessment procedure was not followed and the first appellate order dismissed the appeal for non-prosecution without deciding the merits.

Analysis: The assessment initially accepted the assessee's explanation, but additions suggested during review were made without remitting the matter for the Assessing Officer to confront the assessee and complete the requisite assessment procedure. The disallowances were ad hoc and lacked justification. The appellate authority also failed to adjudicate the appeal on merits through a reasoned order as required under Section 250(6) of the Income-tax Act, 1961. The material placed before the Tribunal established that the expenses were incurred for business purposes.

Conclusion: The additions towards Diwali expenses, Pooja expenses and godown rent were deleted in favour of the assessee.

---