Tirumala Estates Vs ITO (ITAT Hyderabad)
ITAT Hyderabad held that ad hoc disallowance of commission expense cannot be sustained since assessee has substantiated commission payment with relevant evidence. Further, mere non-submission of certain bills and vouchers cannot be reason for ad hoc disallowance of land and development expenditure.
Facts- The assessee is a partnership firm engaged in the business of real estate of purchasing land, development of land and plotting of the area and sale of plots. The case of the assessee was selected for scrutiny and the assessment was completed u/s. 143(3) of the Act by inter alia making an addition of Rs. 21,32,643/- towards 10% ad hoc disallowance of commission expenses and further, made addition of Rs. 43,94,659/- towards 10% ad hoc disallowance of land development expenses. CIT(A) rejected the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that, the assessee is able to substantiate the commission payment with relevant evidences. Therefore, in our considered view, the A.O. without giving any valid reasons, simply made ad hoc 10% disallowance of commission expenses. The Ld. CIT(A) without appreciating relevant facts, simply sustained the additions made by the A.O. Thus, we, set aside the order of the Ld. CIT(A) on this issue and direct the A.O. to delete the additions made towards ad hoc disallowance of 10% of commission expenses.
