SHREE VASAVI INDUSTRIES,GULBARGA vs. CIT, GULBARGA

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ITA 182/BANG/2016Status: DisposedITAT Bangalore15 July 2016AY 2010-113 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO should have pointed out specific defects in the vouchers before making an ad hoc disallowance. Since the assessee claimed to maintain all vouchers, the disallowance was considered to be based on surmises and was deleted.

What were the facts?

The assessee, a manufacturer of dal, claimed certain expenses. The Assessing Officer (AO) made an ad hoc disallowance of 10% of these expenses, citing a lack of proper vouchers with addresses and dates. The CIT(A) confirmed this disallowance.

What were the issues?

Whether an ad hoc disallowance of expenses is justified without identifying specific defects in supporting vouchers, especially when the assessee claims to maintain them.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCH C, BANGALORE

For Appellant: Shri. Shreehari Kutsa, CA

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER (Assessment Year : 2010-11) M/s. Shree Vasavi Industries, Sy.No.169, Kapnoor, 2nd Stage, Industrial area, Gulbarga .. Appellant PAN : ABLFS1021K v. Income-tax Officer, Ward – 1, Gulbarga .. Respondent Assessee by : Shri. Shreehari Kutsa, CA Revenue by : Smt. Swapna Das Heard on : 22.06.2016 Pronounced on : 15.07.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :

In this appeal filed by assessee, its grievance is that CIT (A) confirmed ad hoc disallowance of Rs.1,92,969/-, made by the AO.

2.

Assessee, a manufacturer of dal had filed his return of income for the impugned assessment year declaring income of Rs.10,49,790/-. During the course of assessment the AO after verifying the ledgers and bills produced ITA.182/Bang/2016 Page - 2 by assessee came to an opinion that some of the expenses were not supported by proper vouchers. Pleading of the assessee was that it was unable to update the vouchers and the bills due to busy schedule of his business. AO therefore made an ad hoc disallowance of 10% of expenditure claimed from bardan purchase, firewood purchase, machinery repair and maintenance, polish powder purchase, sorting and cleaning, sweet oil and labour charges.

3.

Aggrieved assessee moved in appeal before the CIT (A). However, CIT (A) chose to confirm the order of AO. As per the CIT (A), assessee could not produce any evidence for the vouchers in support of its case.

4.

Now before us, Ld. AR assailing the orders of lower authorities submitted that there was no specific defect pointed out by the AO. According to him the AO had given a clear finding that expenses were supported by vouchers. His only negative observation was that the assessee was not able to keep the vouchers up to date. According to him assessee was maintaining all the vouchers. If given an opportunity assessee would be able to satisfy the AO.

5.

Per contra, Ld. DR supported the orders of the authorities below.

ITA.182/Bang/2016 Page - 3

6.

We have perused the orders and heard the rival submissions. The reason for ad hoc disallowance of 10% made by the AO is that some of the expenses were not supported by proper vouchers with address and dates. CIT (A) has made an observation that assessee had accepted the ad hoc disallowance. In my opinion before making the disallowance the AO should have brought out specific defects listing out the payments where vouchers were defective. Especially so since assessee claimed maintenance of supporting vouchers for all the expenditure. I am of the opinion that the disallowance made was purely on surmises. Such disallowance stands deleted.

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