2020 (9) TMI 616

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.... against the action of the Ld. CIT(A) in confirming the ad-hoc disallowance of Rs. 2,09,135/- as made by the AO. 3. Brief facts of the case as noted by the AO are that the assessee had filed its return of income declaring loss of (-) Rs. 44,72,059/-. The case was selected for scrutiny through CASS. However, according to the AO the scrutiny was a complete scrutiny. The AO noted that the assessee had incurred an expenses of Rs. 2,09,135/- and all these expenses were incurred in cash and supported by self-made debit vouchers. Therefore, the AO issued show cause notice to the assessee mentioning as to why 10% of the expenses should not be disallowed. 4. The AO reproduced the reply of assessee as under:- "all the payments are made....

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....on of the Ld. CIT(A) in confirming the said ad-hoc disallowance as made by the AO. 7. We note that the assessee is into the business of running a Cold Storage at Garbeta, Dist-Midnapore, where potatoes are stored on payment of rent. The local farmers/traders stores potatoes at cold storages during the month of February/March and takes out the same from June onwards for sale in the market. For the conduct of this business, the assessee has to incur expenses in respect of collie and cartage charges for loading on the racks and unloading from the racks for loading on the truck/carts brought by the owner of potatoes. Some charges are incurred for shifting of potatoes from outside to Drying Shed as some potatoes, which are wet had to be dried....

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.... contention of the assessee and therefore, he dismissed the appeal. 9. We note that an assessee who would be claiming a deduction is expected to have some evidence of such expenditure incurred, as no one is expected to incur expense by any payment to another without there being any proof of it. Having said so, the AO should have item-wise examined the expenditure as claimed by the assessee and in case if he is not convinced by the genuinity of the expenditure as claimed by the assessee, then he can item-wise deny the expenditure. However, in this case, the AO without rejecting the books of account as required u/s. 145(3) of the Income-tax Act, 1961 ( hereinafter referred to the as the ' Act') has resorted to estimate the income by ad-hoc....