Ad-hoc Disallowance of Expenses for Lack of Documents: ITAT Upholds CIT(A)'s Deletion of Rs. 5.92 Crore Addition [Read Order]
Citing judicial precedents, ITAT ruled that disallowances without specific defects were legally unsustainable
![Ad-hoc Disallowance of Expenses for Lack of Documents: ITAT Upholds CIT(A)s Deletion of Rs. 5.92 Crore Addition [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/04/ITAT-ruling-Income-Tax-Tribunal-Tax-disallowance-taxscan.jpg "Ad-hoc Disallowance of Expenses for Lack of Documents: ITAT Upholds CIT(A)s Deletion of Rs. 5.92 Crore Addition [Read Order]")
The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT) upheld the deletion of the Rs. 5.92 crore disallowance made on an ad-hoc basis due to lack of supporting documents. The Revenue-appellant, appealed against the order dated 30.10.2023,passed by Commissioner of Income Tax(Appeals) [CIT(A)] for the Assessment Year 2016-17.In this case, H.V....
The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT) upheld the deletion of the Rs. 5.92 crore disallowance made on an ad-hoc basis due to lack of supporting documents.
The Revenue-appellant, appealed against the order dated 30.10.2023,passed by Commissioner of Income Tax(Appeals) [CIT(A)] for the Assessment Year 2016-17.In this case, H.V. Infratex Ltd.,respondent-assessee,involved in government civil and construction contracts, filed its return for A.Y. 2016-17 on 17.10.2016, declaring total income of Rs. 49,20,980/- and book profit of Rs. 61,33,174/-.
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The case was selected for limited scrutiny, and the Assessing Officer(AO) issued multiple notices, but the assessee did not fully comply. As a result, the AO passed an ex-parte assessment order on 10.12.2018, adding Rs. 5,92,53,633/- by disallowing 25% of other expenses of Rs. 23,70,14,534/- due to lack of supporting documents.
The assessee appealed to the CIT(A) against the ad-hoc disallowance and submitted additional evidence, including ledgers and invoices. The CIT(A) sent this to the AO for verification. The AO objected but eventually submitted a remand report confirming most expenses were genuine.
The AO accepted some expenses but questioned cash payments and certain expenses like rent and salary. The CIT(A) noted that the AO didn’t reject the books of accounts or find any bogus expenses. Since the accounts had been audited with no issues, the CIT(A) ruled the disallowance was unjustified. The CIT(A) deleted the 25% disallowance and granted relief to the assessee.
The Revenue aggrieved by the decision appealed before the tribunal.
The The two member bench comprising T.R.Senthil Kumar(Judicial Member) and Makarand V.Mahadeokar(Accountant Member) upheld the deletion of the Rs. 5,92,53,633/- disallowance, which the AO had made on an ad-hoc basis due to incomplete supporting documents.
Read More:Disallowance of Rs. 2.97 Crore as Bogus Expenditure u/s 69C: ITAT Upholds 10% Disallowance
It noted that the AO had not rejected the books of accounts, the tax audit report had not flagged any discrepancies, and the remand report had not identified specific defects. Several expenses were accepted as genuine, and similar expenses were allowed in other years.
Read More:Adhoc Disallowance made without Rejecting Books of Account is Invalid: ITAT
Citing judicial precedents, the tribunal held that ad-hoc disallowances without specific defects were unsustainable. As the Departmental Representative (DR) provided no new arguments, the ITAT found no error in the CIT(A)’s decision to delete the addition.
In short,the appeal filed by the Revenue was dismissed.
To Read the full text of the Order CLICK HERE
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