Case Law Details
Brief Facts of the Case
The assessee during the year under consideration had shown sales of Rs.3,76,70,648/- and has declared gross profit of Rs.25,75,650/- and net profit of Rs.8,28,918/-. The AO, from the balance sheet of the assessee found that the assessee has made provision for unpaid expenses. The AO observed that due to this provision, the income of the assessee was reduced. According to the AO, almost entire expenditure debited to the Trading and Profit & Loss account is appearing as outstanding expenses in the balance sheet. Therefore, he held that only expenses shown for electric power, ESIC, FBT, telephone, sales tax, TDS and tax on contractor were reasonable, and therefore, he made disallowance of Rs.1,12,36,305/- out of total expenses shown in the balance sheet as outstanding payment.
Question of Law
Whether any provision or unpaid expenses relating to business duly accounted for can be disallowed by treating them as unverified and unproved?
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