Ad-hoc disallowance not within permissible arena of taxing statute which is essentially welfare in nature – ITAT
ABCAUS Case Law Citation:
ABCAUS 2671 (2018) (12) ITAT
Important Case Laws Cited/reliedupon:
M/s Bajaj Auto Centre, Kanpur vs. Income Tax Officer
M/s Bhullar Oxygen Pvt. Ltd. vs. Income TaxOfficer
The appeal was preferred by the assessee against the order of CIT(A) in upholding ad-hoc addition made by the Assessing Officer.
The assessee was a Limited Company engaged in the business of M.S ingots. It filed the return declaring Nil income and with taxable income under section 115JB of the Income Tax Act, 1961 (the Act).
The return was processed under section 143(1) of the Act computing the income of the assessee under section 115JB of the Act, resulting into a refund which was issued to the assessee.
Later on, the case was taken up for scrutiny. The trading results of the assessee for the relevant year was considered as compared to the last two assessment years.The Assessing Officer noticed that there was an increase in the gross loss and on that ground he made an ad-hoc addition.
The CIT(A) upheld the addition.
Before the Tribunal, the assessee argued that all the relevant documentary evidences were produced and were test checked by the Assessing Officer and merely because there was an increase in gross loss, ad-hoc addition was made, which was not permitted within the purview of taxing statute.
The assessee further submitted that there was decrease in sales figure and therefore it was natural that the figure of gross loss also will decrease. The Assessing Officer,without any specific reasoning and finding any defect in the accounts, had on ad-hoc basis disallowed the amount.
The ITAT observed that that all relevant documentary evidences were placed before the Revenue authorities by the assessee. However they neither brought any specific defect in the books of account of the assessee, nor any specific enquiry was conducted to substantiate the reasons for disallowance being made.
Whereas,the assessee, on the other hand, had demonstrated decline in sales figure and corresponding decline in gross loss.
Thus the ITAT opined that the ad-hoc disallowance had been made by the Assessing Officer without bringing out any nexus.
The ITAT held that the ad-hoc disallowance made by the Assessing Officer was not within the permissible arena of taxing statute which is essentially welfare in nature and in this realm of welfare legislation; ad-hoc disallowance is not justified.
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Accordingly,the Tribunal set aside the order of the CIT(A) and directed deletion of ad-hoc disallowance.
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