Ad hoc expense disallowance based on suspicion alone fails where accounts and vouchers show no specific defect.

An ad hoc disallowance of loading and unloading expenses cannot be sustained where the assessee produced vouchers and supporting material, the books of account were not rejected, and no specific defect, discrepancy, or bogus expenditure was identified. A general suspicion of inflation and the absence of any objective basis for fixing 20% as the disallowance were insufficient in law, so the addition was deleted.

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Issues: Whether the ad hoc disallowance of 20% out of loading and unloading expenses, made only on the basis of self-made vouchers and an apprehension of inflation, was sustainable.

Analysis: The assessee had produced vouchers and supporting material during assessment. The disallowance was made without rejection of books of account and without pointing out any specific defect, discrepancy, or instance of bogus expenditure in the vouchers. The addition was made only on a general suspicion that expenses may have been inflated, and no objective basis was shown for selecting 20% as the disallowance.

Conclusion: The ad hoc disallowance was held unsustainable and was deleted.

Ratio Decidendi: An expenditure disallowance based merely on suspicion, without rejection of accounts or identification of a specific defect in the supporting vouchers or evidence, cannot be sustained in law.

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