Dr. C. Vijayabaskar Vs DCIT (ITAT Chennai)
Quarry Expenses Fully Allowed Undisclosed Sales Deleted – Estimated Disallowance Without Rejecting Books Held Invalid
The Chennai ITAT allowed the assessee’s appeals for AYs 2017-18 and 2018-19 and partly allowed the appeal for AY 2016-17 by deleting both the estimated disallowance of quarry expenses and the addition on account of alleged undisclosed sales of blue metal. The Tribunal held that quarry expenses were genuine business expenditure incurred for procuring raw material under a valid business arrangement with licensed quarry holders and could not be disallowed merely on suspicion. Since neither the Assessing Officer nor the CIT(A) had rejected the books of accounts under Section 145(3), the Tribunal ruled that an estimated disallowance of 30% of quarry expenses was impermissible and based only on conjectures and surmises.
On the issue of undisclosed sales, the Tribunal accepted the assessee’s revised workings showing that even after considering excess excavation as per the RDO’s report, the resultant estimated sales were lower than the sales already disclosed in the return for AY 2017-18. Hence, no unaccounted sales or profit could be presumed and the entire addition was deleted. The Tribunal reaffirmed that profit estimation without rejecting books and without establishing excess real sales is unsustainable, and accordingly granted full relief to the assessee.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
