ACIT Vs H.V. Infratex Ltd. (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT) Ahmedabad dismissed the revenue’s appeal against the Commissioner of Income Tax (Appeals) [CIT(A)]’s order, which had deleted an ad-hoc disallowance of Rs. 5,92,53,633 made by the Assessing Officer (AO) under Section 37 of the Income Tax Act. The AO had disallowed 25% of the assessee’s total other expenses, citing a lack of supporting documents. The assessee, H.V. Infratex Ltd., had provided additional evidence during the appellate proceedings, including ledgers and invoices, which the CIT(A) forwarded to the AO for verification under Section 250(4) of the Act, resulting in a remand report confirming the genuineness of most expenses.
The revenue argued that the CIT(A) erred in admitting additional evidence, citing Rule 46A of the Income Tax Rules. However, the ITAT found that the CIT(A) acted within the powers granted by Section 250(4), allowing for further inquiry, and that the AO had the opportunity to verify the evidence. The tribunal also noted that the AO’s remand report did not identify specific defects in the expenses, and the assessee’s books of accounts were not rejected. The ITAT emphasized that ad-hoc disallowances without specific defects are unsustainable, and since the AO failed to pinpoint unverifiable expenses, the CIT(A) rightly deleted the disallowance. The ITAT dismissed the revenue’s appeal, affirming the CIT(A)’s order and highlighting the importance of proper verification and specific findings in assessment proceedings.
