2017 (8) TMI 1615

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.... that the AO was of the opinion that the expenses claimed by the assessee under the head "Donation & Subscription" was not supported by any receipt or 80G certificate, therefore, he disallowed the entire expenses claimed on that behalf. According to the assessee, the expenses incurred under the head "Donation & Subscription" comprised of subscription to different organizations for puja and social activities. According to assessee, in order to run the business peacefully it is unavoidable necessity to contribute to local religious festivals and social activities. Since the assessee company is engaged in the business of cold storage and to have good relationship with the local residents, the subscription is thus a business necessity. We note ....

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.... and which were paid in cash. Therefore, he observed that since there is a possibility of excess claim or inflation of expenses, 20% of such expenses of Rs. 9,65,289/- being Rs. 1,91,258/- was added to the total income of the assessee. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who confirmed the same. Aggrieved, the assessee is before us. 5. We have heard rival submissions and gone through facts and circumstances of the case. We note that the AO has made ad hoc disallowance of 20% taking note of the fact that the expenses were made in cash and there were only internal voucher to support the sameand since there is no way to verify the same and there being chances of inflation of the claim of expenses he made the disa....

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....from pages 148 to 150 of the paper book, which we have test checked and found to be correct. In such a scenario, when all the evidence were filed before the AO and from the bills the addresses of the service providers are available, so, if the AO wanted to verify the veracity of the bills he could have easily verified the veracity of the bills from the service providers. Thus we note that the AO has made the disallowance only on the basis of surmises and conjectures. We note that the assessee maintained books u/s. 44AB of the Act which was duly audited u/s. 44AB of the Act as well as u/s. 227(4) of the Companies Act, 1956. The assessee had produced the copy of the ledger account and the supporting vouchers and bills before the AO, therefore....