DCIT Vs Theon Pharmaceuticals Limited (ITAT Chandigarh)
Adhoc 30% Expense Disallowance Deleted – No Specific Defects or Verification by AO – ITAT Chandigarh
ITAT dismissed Revenue’s appeal and upheld deletion of adhoc disallowance of ₹3.45 crore (30% of ₹11.52 crore expenses) made by the AO. Tribunal noted that the assessee, a large pharma exporter with turnover exceeding ₹457 crore, had maintained audited books and furnished party-wise details and sample invoices. The AO failed to identify specific defects, segregate discrepant invoices or conduct independent verification u/s 133(6), and merely relied on general observations such as absence of vehicle numbers or e-way bills.
ITAT agreed with CIT(A) that many expenses like marketing, distribution, sales commission, design and logistics would not necessarily require transportation details. Travelling & conveyance expenses related to export quality audits were also held to be for business purposes. Since the disallowance was purely adhoc without proper enquiry, the deletion was upheld and Revenue’s appeal dismissed
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
1. Aforesaid appeal by revenue for Assessment Year (AY) 2023-24 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 03-07-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) of the Act on 21-03-2025. The sole grievance of the revenue is deletion of adhoc disallowances of expenses as made by Ld. AO in the assessment order. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
