ANTONY PAUL ,BANGALORE vs. ACIT,CIRCLE-1(2)(2), BANGALORE

This is an appeal filed by the assessee against the order passed by the NFAC, Delhi vide order dated 20/03/2025 in DIN No. ITBA/NFAC/ S/250/2024-25/1074743096(1) for the assessment year 2017-18.

The only issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance made by the AO of ₹21,17,047, being 20% of various expenses, on account of non-production of supporting vouchers.

The AO, during the assessment proceedings, found that the assessee had incurred various expenses under different heads. The details of the same are reproduced as under:

The AO further found that the assessee had deducted TDS on the expense/ payment of ₹1,50,00,650 out of the total expenses of ₹2,55,85,885.00 only. Besides the above, the AO also found that the assessee had not produced supporting documents to prove that these expenses were incurred for business purposes. Accordingly, the AO, on an ad-hoc basis, disallowed an amount of ₹21,17,047, being 20% of the expenditure, and added the same to the total income of the assessee.

On appeal, the learned CIT(A) confirmed the same by observing as under: “It is submitted that, during the assessment proceedings, vide notice U/s142(1) dated 16/09/2019 (Annexure 2) the assessing .

Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

The learned AR before us filed various paper books and made several contentions, including that the AO, during the assessment proceedings, only enquired about the deduction of TDS on the above- listed expenses, which was duly explained to him. According to the AR, there was no query raised by the AO about the supporting documents to justify the expenses. As such, the AO disallowed 20% of the expenses in an arbitrary manner, without putting any question to the assessee regarding the justification of such expenses. Accordingly, the learned AR contended that the disallowance made by the AO and confirmed by the learned CIT(A) is liable to be deleted.

On the other hand, the learned DR vehemently supported the orders of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. On perusal of the paper book filed by the assessee containing 75 pages, including various notices issued by the AO during the assessment proceedings—particularly from pages 8 to 34, we find that there was no enquiry raised by the AO about the genuineness of the expenses. Even at the time of hearing, the . learned DR could not bring anything on record to suggest that the AO had raised any such query before making the disallowance of ₹21,17,047, being 20% of the total expenses on which TDS was n ot deducted.

In the result, the appeal filed by the assessee is allowed.