Case Law Details
ACIT Vs Merchant Agri Global Private Limited (ITAT Mumbai)
The case of ACIT Vs Merchant Agri Global Private Limited was brought before the Mumbai ITAT. The appellant sought to overturn the order passed by the CIT(A) regarding the adhoc disallowance of expenses without rejecting the books of account.
The appellant, Merchant Agri Global Private Limited, declared a total income of Rs. 3,22,87,840 for the assessment year 2017-18. However, during scrutiny, the Assessing Officer (AO) observed discrepancies in the claimed direct expenses amounting to Rs. 78,55,48,913. Despite explanations from the assessee, the AO made an adhoc disallowance of 10% of the expenses, totaling Rs. 7,85,54,891.
Upon appeal, the CIT(A) upheld the addition made by the AO. However, the Mumbai ITAT, after careful consideration, found the adhoc disallowance unjustified. They emphasized that the books of account, duly audited under section 44AB of the Income Tax Act, were not rejected by the AO. Referring to legal precedents, including the case of Principal Commissioner of Income Tax vs. R.G. Buildwell Engineers Ltd., the ITAT highlighted that adhoc disallowance without rejecting the books of account is unsustainable.
The ITAT further noted that the appellant had submitted relevant documents, and there were no specific discrepancies found by the AO in the audited books of account. Additionally, they pointed out that similar expenses had been allowed in previous and subsequent assessment years.
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