SAIZER ELECTRONICS LTD.,ERODE vs. ITO, CC-1,, COIMBATORE

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ITA 1233/CHNY/2024Status: DisposedITAT Chennai21 August 2024AY 2018-19Bench: SHRI SS VISWANETHRA RAVI (Judicial Member), SHRI JAGADISH (Accountant Member)1 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 an ad hoc disallowance is not justified for a public limited company with audited accounts without concrete evidence. However, it is essential that expenses are substantiated with appropriate documentation.

What were the facts?

The assessee, Salzer Electronics Ltd., engaged in manufacturing electrical switches, filed its return of income. The Assessing Officer (AO) disallowed 10% of 'other expenses' amounting to Rs. 7,93,96,612/- because the assessee allegedly failed to submit bills/vouchers for verification.

What were the issues?

Whether the ad-hoc disallowance of expenses without proper verification is justified, especially for a listed company with audited accounts.

Which sections of the Income-tax Act were involved?

10% of other expenses

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH

Hearing: 08.08.2024Pronounced: 21.08.2024

O R D E R PER JAGADISH, A.M: Aforesaid appeal filed by the assessee for Assessment Year (AY) 2018-19 arises out of the order of Learned Commissioner of Income Tax (Appeals), [NFAC], Delhi [hereinafter “CIT(A)”] dated 27.02.2024. 2. The only effective ground of appeal is against adhoc disallowance of 10% under the head “other expenses” on the ground :- 2 -: that the assessee has not submitted the bills and vouchers for verification.

1.

3. The brief facts of the case are that the assessee is a public Ltd., company engaged in the business of manufacturing electrical switches, cam operated rotary switches, modular switches, wires and cables etc. The assessee has filed return of income showing total income of Rs. 18,51,74,670/-. The A.O has disallowed 10% of other expenses of Rs. 7,93,96,612/- on the ground that the assessee has not furnished bills/vouchers for verification in respect of above expenses. The Ld. CIT(A) has confirmed the addition.

4.

The Ld. AR before us has submitted that the assessee is a listed company with the turnover of Rs. 450 Cr. and all expenditure are well documented and audited and therefore, adhoc disallowance is uncalled for. The Ld. AR has also submitted that no such disallowance has been made in past years.

5.

The Ld. DR has justified the disallowance made by the A.O as the assessee has not submitted the bills/vouchers.

6.

We have heard the rival submissions and perused the materials on record. Considering the nature and size of the assessee's business, :- 3 -: we find merit in the Ld. A.R's submission that an ad hoc disallowance, especially in a case involving a public limited company with audited accounts, is not justified without concrete evidence. However, it is also essential that the expenses claimed are substantiated with appropriate documentation. Therefore, we set aside the assessment order and remand the matter back to the AO with a direction to the assessee to submit the relevant bills and vouchers for verification of the claimed expenses. The AO is directed to verify the expenses based on the documents submitted and pass a fresh order as per law.

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