2026 (2) TMI 1189 - AT - Income Tax

Adhoc disallowance is unsustainable where documentary evidence and TDS proof establish genuineness, leading to deletion.

Adhoc disallowance of professional fees was held unsustainable where the assessee produced exhaustive ledger entries, payment vouchers and TDS challans ... Disallowance of professional fee - non-furnishing of relevant details and evidence - AO made an adhoc disallowance @50% of the total professional expenses adopted by the assessee - HELD THAT:- As gone through the details furnished by the assessee which are exhaustive and each and every entry of professional charges debited in the profit & loss account have been placed in the paper book and all of them have been subjected to deduction of TDS and there remains no reason to doubt the genuineness of professional charges incurred and debited by the assessee during the year under consideration. Since genuine professional charges has been claimed by the assessee, AO grossly erred in making adhoc disallowance and further CIT(A) also erred in sustaining the adhoc disallowance in spite of the fact that all supporting documents for the alleged professional expenses incurred by the assessee have been placed before him. Accordingly, finding of CIT(A) is reversed and the impugned disallowance of professional fee is deleted -Appeal of the Assessee is allowed. Issues: Whether the adhoc disallowance of professional fees of Rs. 17,59,627/- sustained by the Commissioner (Appeals) for A.Y. 2007-08 was justified where the assessee furnished detailed ledger entries, payment vouchers and TDS challans.Analysis: The assessee, a private limited company with audited accounts for A.Y. 2007-08, placed before the assessing officer and the first appellate authority comprehensive documentary records including ledger accounts, payment vouchers and TDS challans covering the professional fees claimed. Despite these materials and the absence of any pointed discrepancy in the records, the assessing officer made an adhoc disallowance of 50% of the professional expenses. The Commissioner (Appeals) sustained the disallowance after significant delay, including a notice requesting additional evidence many years after the year in question. The Tribunal examined the documentary record in the paper book and found the entries exhaustive and supported by TDS evidence, leaving no reason to doubt the genuineness of the expenditure. The Tribunal therefore evaluated whether the adhoc disallowance was sustainable in the face of the documentary proof tendered by the assessee.Conclusion: The adhoc disallowance of professional fees of Rs. 17,59,627/- is deleted and the effective grounds of appeal on this issue are allowed in favour of the assessee.