TaxTMI 
TaxTMI 
2026 (9) TMI 1714
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....the ad hoc disallowance of 25 per cent of the total expenditure, amounting to Rs 42,86,402 out of Rs 1,71,45,607 claimed, as arbitrary and without any basis. Ground No. 3 is the usual leave to add to, amend or withdraw the grounds. 3. Briefly stated, the facts of the case are that the assessee is a society registered with the Registrar of Societies, Government of Rajasthan, stated to carry on educational activities and to run shelter facilities for street children. It filed its return of income for the year under consideration on 28.02.2018 declaring nil income. It was not registered under section 12AA of the Act during the year and claimed no exemption under sections 10, 11 or 12 of the Act. Its income and expenditure account disclosed receipts of Rs 1,72,78,351 and expenditure of Rs 1,71,45,607, leaving a surplus of Rs 1,32,744. 4. The case was selected for scrutiny under CASS. By a query letter dated 18.06.2019 the AO called for the details of the expenditure and required the books of account, bills and vouchers to be produced for verification. There was no compliance. Penalty under section 272A(1)(d) of the Act was initiated on 26.08.2019 and imposed on 30.09.2019, and a ....
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.... 2018-19 98.80 2019-20 96.23 He submitted that the expenditure claimed for the year under consideration is in line with that of the adjacent years and that the rate adopted by the AO is inconsistent with the assessee's own audited results, and prayed that the addition be deleted. 7. The learned Departmental Representative (hereinafter referred to as "the learned DR") supported the orders of the authorities below and submitted that the assessee produced neither the books of account nor the bills and vouchers at any stage before the AO, despite repeated opportunity and even after penalty had been imposed upon it for that very default, and that an assessee who withholds the primary record cannot be heard to complain of an estimate. 8. We have heard the rival contentions, perused the material available on record and considered the orders of the authorities below. 9. Ground No. 1 relates to the rejection of the books of account under section 145(3) of the Act, which enables the AO to make an assessment in the manner provided in section 144 of the Act where he is not satisfied about the correctness or completeness of the accounts of the assessee. The books of account....
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....itions or deletions in the income. Therefore, merely because there is some deficiency in the books of account or merely because of rejection of books of account, it does not mean that it must lead necessarily to additions in the returned income of the assessee." 12. In the above case, the Commissioner (Appeals) had sustained an addition, in the words reproduced at paragraph 6 of the judgment, "to cover up the possible leakages in the books of account on account of unverifiability, non-maintenance of quantitative and qualitative details, etc.". The Tribunal deleted it and the Hon'ble High Court upheld the deletion, observing at paragraph 7 that "in the absence of recording any finding by the Commissioner (Appeals) that the expenses incurred on any account appear to be unreasonable or excessive, the additions, sustained merely on suspicion of pilferage or leakage, were not justified", and answering the reference at paragraph 8 by holding that "there was no error in the order of the Tribunal in deleting the entire additions to the trading results after holding that proviso to section 145 was applicable". 13. Applying these tests, the rate of 25 per cent cannot be sustained. The ....
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....he Income-tax (Appellate Tribunal) Rules, 1963, which denies the parties any entitlement to produce additional evidence but empowers the Tribunal, for reasons to be recorded, to allow a document to be produced where the Tribunal requires it to enable it to pass orders. Since the disallowance cannot stand, since we must determine what should take its place, and since that determination must rest upon material and not upon apprehension, we require these statements in order to pass orders, and admit them on our own motion under the first limb of rule 29 for the reasons here recorded. That is not in conflict with the refusal of the learned JCIT(A) to admit evidence under rule 46A of the Income-tax Rules, 1962, upon which we express no opinion, that rule governing the first appellate authority and the entitlement of the appellant, whereas rule 29 governs this Tribunal and what it requires in order to pass orders. 16. We are nonetheless unable to compute the disallowance upon these statements ourselves. On their face they disclose a band of 96.23 per cent to 100 per cent, the ratio for the year under consideration working out to 99.23 per cent and falling between those of the immediat....