2025 (2) TMI 293

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....r Section 144 of the Income Tax Act, 1961 [hereinafter referred to as "the Act"] by the Assistant Commissioner of Income Tax, Circle 2(1)(1), Ahmedabad [hereinafter referred to as "AO"] for the Assessment Year (AY) 2016-17. Facts of the Case: 2. The assessee is a Public Limited Company engaged in the business of government civil and construction contracts. The assessee filed its return of income for A.Y. 2016-17 on 17.10.2016, declaring total income of Rs. 49,20,980/-, and book profit under Section 115JB of the Act at Rs. 61,33,174/-. The case was selected for limited scrutiny under CASS. The AO issued multiple notices under Sections 143(2) and 142(1) of the Act, but the assessee did not fully comply. Consequently, the AO passed an ex....

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.... non-genuine expenses. The assessee's accounts were audited under the Companies Act and the Income Tax Act, and no adverse remarks were given in the tax audit report. The CIT(A) relied on judicial precedents, emphasizing that an ad-hoc disallowance without specific defects is not sustainable in law. The CIT(A) found that in the absence of evidence to prove that expenses were not incurred for business purposes, disallowance under Section 37 of the Act was unwarranted. The CIT(A) ruled that additional evidence was rightly admitted under Section 250(4) of the Act and not Rule 46A of I.T. Rules as the AO was given an opportunity to verify it. Since the AO failed to pinpoint specific unverifiable expenses, the ad-hoc disallowance of 25% was arbi....

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....ull opportunity to verify the additional evidence, and the remand report dated 19.07.2023 confirmed that the expenses were properly examined. The AR placed reliance on the decision of Delhi Bench in the case of ACIT vs. Anu Bajaj (ITA No. 1943/DEL/2023, dated 19.01.2024), where it was held that once relief is granted based on AO's remand report, the Revenue cannot challenge it further. 6.1. On the ground relating to deletion of disallowance of Rs. 5,92,53,633/-, the AR stated that The AO disallowed 25% of total other expenses (Rs.23,70,14,534/-) on an ad-hoc basis, without identifying any specific unverifiable transactions. The AR further stated that the assessee's books of accounts were duly audited, and no adverse remarks were made in ....

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.... additional evidence was not admitted directly by CIT(A) but was forwarded to the AO for verification through a remand report. iii. The AO examined the additional evidence and submitted his findings, confirming the genuineness of most expenses by way of a remand report dated 19.07-2023. iv. Since the AO had full opportunity to verify the documents, the admission of additional evidence does not violate Rule 46A. 8.1. Therefore, we find no merit in the Revenue's contention that Rule 46A was violated. The CIT(A) followed the correct legal procedure, and accordingly, Ground No. 1 of the Revenue's appeal is rejected. 9. The AO had disallowed 25% of total other expenses of Rs. 23,70,14,534/- on an ad-hoc basis, citing the ....