Case Law Details
Dynamix India Drill-Con Co. Vs ACIT (ITAT Delhi)
ITAT Delhi held that disallowances of expenditure on ad hoc basis without specifying particular mistake is untenable and bad in law.
Facts- AO made ad hoc disallowance of Rs. 3 Lakhs against debit of Rs. 6,37,62,122/- as sub-contractor expenses and ad hoc disallowance of Rs. 2 Lakhs against total expenditure of Rs. 45,72,236/-. Further, AO made ad hoc disallowance of Rs. 87,351/- in case of business promotion expense.
CIT (A) compared the assessee’s net profit and gross profit ratio for AYs 2013-14 & 2014-15 and noted that net profit of the assessee has decreased from 6.96% in AY 2013-14 to 90% in AY 2014-15. Hence, he proceeded to confirm the disallowances. Against this order, assessee is in appeal before us.
Conclusion- Held that the disallowances have been done on ad hoc basis without specifying particular mistake. Such approach cannot be supported by noting that there is slight fall in the GP ratio as done by the ld. CIT (A). Accordingly, we set aside the orders of the authorities below and decide the issue in favour of the assessee. In the result, the appeal of the assessee is allowed for statistical purposes.
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