M/S. GURJANJHORA TEA & INDUSTRIES LTD.,JALPAIGURI vs. ACIT, CIRCLE - 1, JALPAIGURI, JALPAIGURI

This appeal preferred by the assessee is against the order of the Ld. CIT(A), Jalpaiguri dated 08.02.2018 for AY 2012-13.

At the outset itself, the Ld. Counsel for the assessee drew our attention to the fact that the issue raised by the assessee in this appeal is only in respect of ad-hoc disallowances made by the AO in respect of repairs to buildings Rs.4,99,133/-, repairs to machinery Rs.14,51,562/-, repairs to vehicles Rs.3,77,809/-, Sundry repairs Rs.4,37,141/-, General charges Rs.1,25,981/-, subscription Rs.81,558/- and sundry expenses Rs.1,31,392/- totaling to Rs.31,04,576/-. However, on appeal the Ld. CIT(A) restricted the disallowance to 5% from 10% as done by the AO. Aggrieved by the ad-hoc disallowance of 5% of the expenses claimed assessee is before us. 3. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee company’s accounts are audited and the AO while scrutinizing the expenses claimed by the assessee disallowed the same to the tune of Rs. 8,86,176/- which was 10 percentage of the expenses claimed because the assessee produced before the AO self-made debit vouchers. We note that the AO could have ventured into estimation only after rejecting the books of accounts of the assessee u/s. 145(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) and thereafter resorted to Best Judgment Assessment u/s. 144 of the Act. Here, in this case, admittedly, the AO has not Gurjanjhora Tea & Industries Ltd., AY- 2012-13 passed any order u/s. 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses with the self-made vouchers. According to us, the AO while scrutinizing the expenditure claimed by the assessee finds that the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for ad hoc disallowance on percentage basis of the expenses claimed by the assessee, which action of the AO per-se is arbitrary in nature and cannot be sustained. Therefore, on the same reasoning, we set aside the Ld. CIT(A) order wherein also he had restricted the expenses claimed @ 5% of expenses which is also ad hoc disallowance. Therefore, the addition is directed to be deleted. Other grounds of appeal