The Income Tax Appellate Tribunal (ITAT), Jaipur Bench while deleting the addition ruled that no disallowance can be made out of the expenditures in absence of specific details.
The assessee, Ganga Ram Choudhary is an Individual and engaged in the business of Builder and Property Developer. The assessee filed his return of income for the Assessment Year 2013-14 declaring total income of Rs. 33,13,290.
The case of the assessee was selected for scrutiny assessment. While passing the assessment order under section 143(3), the AO made the addition of Rs. 9,00,000 out of expenses claimed of Rs. 45,92,528 to cover up the possible leakage.
The CIT (A) sustained the addition of Rs. 5,00,000 considering that the appellant failed to file any explanation or evidence which prove that development expenses are fully vouched or verifiable. The net profit rate is also decreased from 10.35% to 10.11% and the development expenses are not fully vouched. The CIT (A) considering the nature of business and expenses, restricted the addition to Rs. 5,00,000.
The assessee submitted that the addition/disallowance made by the AO under section 143(3) is bad in law and the CIT (A) has committed an error in partly confirming the disallowance of Rs. 5,00,000 made by the AO on account of development expenses out of total development expenses of Rs. 45,92,528.
The coram of Vikram Singh Yadav and Sandeep Gosain the revenue has failed to pin-point specifically regarding the missing bills with regard to development expenses. In the absence of specific details or objections, no disallowance can be made out of the expenditures incurred by the assessee. The revenue has simply mentioned that some kachhi slips were maintained where name and complete address of payee is not mentioned and has been placed on record.
The court at the same time noted that the AO and CIT (A) has failed to point out as to which documents do not contain the complete address of the payee.
The court while deleting the addition observed that the AO has not issued any summons to the respective parties to whom the documents belonged. Even the AO has not recorded the statements of the persons who have issued the bills. In the absence of contrary details filed by the revenue, the adhoc disallowance of expenses is not justified.
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