Irayya Shidramayya Hirematha Vs ITO (ITAT Bangalore)
Bengaluru ITAT Deletes Ad Hoc Disallowance of Purchases and Expenses; Estimated Additions Without Identifying Defects Held Unsustainable
The Bengaluru ITAT deleted the addition of ₹43.04 lakh made in a reassessment, holding that the Assessing Officer could not make ad hoc disallowances of 8% of purchases and 10% of business expenses without identifying any specific bogus purchase, unverifiable expense, or defect in the books of account. The assessee, an APMC-registered trader in agricultural produce (onions), had furnished extensive documentary evidence, including purchase and sales registers, cash book, bank statements, APMC licence, vendor ledgers, PAN/Aadhaar details wherever available, URD purchase records, and tax audit report. The Tribunal observed that, although the reassessment was initiated based on information relating to cash deposits, cash withdrawals, and purchase of a motor car, no addition was ultimately made on those issues after the assessee furnished explanations. Instead, the Assessing Officer arbitrarily estimated profits by disallowing purchases and expenses despite accepting the sales. The Tribunal held that if any purchases were considered non-genuine, the Revenue ought to have identified and disallowed only those specific transactions rather than applying a blanket percentage disallowance. It further observed that there is no legal requirement for an APMC trader purchasing directly from farmers to maintain PAN or Aadhaar details of every seller. Finding the disallowances to be wholly ad hoc and unsupported by evidence, the Tribunal directed deletion of the entire addition of ₹43.04 lakh.
