Ad hoc truck rent disallowance reduced where prior year facts supported only a 2% estimate and unpaid rent needed verification.

Ad hoc disallowance of truck rent expenses was held unsustainable at 20% because it was made without comparable verification and similar facts in the assessee's own earlier year had attracted only a 2% disallowance. In the absence of distinguishing material, the higher estimate was reduced to 2% of truck rent expenses. The unpaid motor truck rent was treated as part of the overall truck rent claim and was remitted for fresh verification to avoid duplication in disallowance. The issue was thus partly decided in favour of the assessee.

---

---

Issues: Whether the ad hoc disallowance of truck rent expenses at 20% and the consequent treatment of unpaid motor truck rent were sustainable.

Analysis: The assessment was made under section 143(3) of the Income-tax Act, 1961. The disallowance was made on an ad hoc basis without comparable verification, and the unpaid motor truck rent formed part of the overall truck rent expenditure. A prior assessment year in the assessee's own case had resulted in a 2% disallowance on similar facts. In the absence of distinguishable facts, the higher disallowance was not justified, and the unpaid rent required fresh verification to avoid duplication.

Conclusion: The ad hoc disallowance was reduced to 2% of the truck rent expenses, and the unpaid motor truck rent was remitted for verification. The issue is partly in favour of the assessee.

---