What did the Tribunal hold?

The Tribunal found some justification for disallowance due to unverifiable self-made debit vouchers. However, a blanket 10% disallowance was not supported. The Tribunal reduced the disallowance to a random amount of Rs. 5 lakhs.

The assessee appealed an ad-hoc disallowance of 10% of operating and other expenses made by the AO without pointing out specific defects. The AO noted that some bills consisted of self-made debit vouchers which were not verifiable.

What were the issues?

Whether an ad-hoc disallowance of expenses is permissible without specific defects being identified. The extent of disallowance for unverifiable expenses.

Urban Infraprojects Pvt. Ltd. vs A.C.I.T., Circle-6(2) | ITAT Kolkata 2020

Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA

Before: Sri J. Sudhakar Reddy & S.S. Godara

Appearances by: Sh. Manish Tiwari, FCA, appeared on behalf of the Assessee. Smt. Ranu Biswas, Addl. CIT, appeared on behalf of the Revenue. Date of concluding the hearing : August 13th, 2020 Date of pronouncing the order : August 19th, 2020 ORDER

Per J. Sudhakar Reddy, AM:

This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)-2, Kolkata, [hereinafter the “CIT(A)”], passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), dated 23.01.2019 for the Assessment Year 2015-16.

The sole ground of appeal

is against the ad-hoc disallowance of 10% of operating and other expenses made by the AO. The assessee’s contention is that the AO, without pointing out any specific defects has disallowed an amount of 23,07,536/-. He relies on the jurisdictional High Court’s decision for the proposition that such ad-hoc disallowance cannot be permitted.

3. The ld. DR submitted that the assessee is in the business of civil construction and the AO recorded at para 4 of the order that the portion of the bills consist of self made debit vouchers, which are not verifiable. He relied on the order of the AO as well as the ld. CIT(A).

4. After hearing rival contentions, we find part justification in the order of the AO. We find that the AO has recorded that the portions of the bills of self made debit Assessment Year: 2015-16 Urban Infraprojects Pvt. Ltd. vouchers which are not verifiable. Anyhow disallowing 10% of the expenditure on the ground that profit leakage has to be plugged cannot be supported. Keeping in view the facts and circumstances of the case, some disallowance of a random amount of 5 lakhs, in our view, would meet the end of justice.

5. In the result, the balance disallowance is deleted and the appeal of the assessee is allowed in part. Kolkata, the 19th August, 2020. Sd/- Sd/- [S.S. Godara] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated: 19.08.2020 Bidhan Copy of the order forwarded to:

1. 1. Urban Infraprojects Pvt. Ltd., 1st Floor, Room No. 8, 23A, Netaji Subhas Road, Kolkata-700 001.

2. ACIT, Circle-6(2), Kolkata.

3. CIT(A)-2, Kolkata. (sent through mail) 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. (sent through mail)

URBAN INFRAPROJECTS PVT. LTD.,KOLKATA vs. A.C.I.T.,CIRCLE-6(2), KOLKATA

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

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