BASANTI AUTO AGENCY,BALASORE vs. ACIT, CIRCLE BALASORE, BALASORE

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ITA 109/CTK/2023Status: DisposedITAT Cuttack26 June 2023AY 2017-183 pages
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What did the Tribunal hold?

The tribunal deleted the ad-hoc disallowance of 15% of expenses, stating it was made in vague terms without specific reasons. The issue regarding Section 40(a)(ia) was restored to the AO for re-adjudication.

What were the facts?

The assessee appealed against disallowances made by the AO. One disallowance was under Section 40(a)(ia) for non-deduction of TDS, and the other was an ad-hoc disallowance of 15% of expenses.

What were the issues?

Whether ad-hoc disallowance of expenses is permissible without specific reasons, and whether TDS was correctly disallowed under Section 40(a)(ia) for non-deduction.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194C

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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK

Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR

Hearing: 26/06/2023Pronounced: 26/06/2023

O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 31.01.2023, passed in DIN & Oder No.ITBA/NFAC/S/250/2022- 23/1049270091(1), for the assessment year 2017-2018.

2.

It was submitted by the ld. AR of the assessee that two issues have been raised in the appeal, one against the disallowance made by invoking provisions u/s.40(a)(ia) of the Act on the ground of non-deduction of TDS u/s.194C. The second issue was against the adhoc disallowance of 15% expenses under different heads totaling to Rs.2,13,330/-. It was the submission that in view of the decision of the Hon’ble Supreme Court in the case of R.G.Buildwell Engineers Ltd., 259 Taxman 370 as the books of accounts have not been rejected, no adhoc disallowance can be made.

1.

In respect of the disallowance made by invoking the provisions of Section 40(a)(ia) of the Act, it was submitted that the AO had made disallowance in respect of professional charges, annual maintenance charges and carriage outward, respectively. It was the submission that to such extent as TDS is liable to be made, the assessee has made the same and the AO has not considered the fact that the TDS was not required to be made on the said payments, the assessee has not made the TDS as the amounts were below the limits for deduction of TDS. He had no objection if the issue is restored to the file of AO for verification and re-adjudication of the issue.

3.

In reply, ld.Sr. DR vehemently supported the order of the ld. AO and ld. CIT(A) and submitted that the details have not been produced in respect of non-deduction of TDS.

4.

We have considered the rival submissions. A perusal of the facts of the present case, clearly shows that the AO has made adhoc disallowance by stating that “in the absence of all the details like bills/vouchers and taking into account the unreasonable increase in the expenses, booked under the head and also the personal use of the above expenses cannot be ruled out”, he has disallowed 15% of the expenses. If the AO is of the view that the details have not been produced or that expenses are unreasonable or that there is personal use, any personal expenses has been brought into accounts of the assessee, then it is open to the AO to make the specific disallowance. A disallowance cannot be made on vague terms. This being so, respectfully following the decision in

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