Gaura Nitai Seva Trust Vs ITO (ITAT Chennai)
ITAT Chennai: Ad-hoc Disallowance of Expenses Not Permissible Without Pointing Specific Defects in Books
The assessee, Madurai District Co-operative Milk Producers Union Ltd., filed its return declaring income of ₹17.39 crore. During assessment u/s 143(3) r.w.s. 144B, the AO made ad-hoc disallowance of 15% of administrative overhead expenses (₹34.01 crore) and purchase expenses (₹24.13 crore) on the ground that the assessee failed to produce complete bills and vouchers. The disallowance resulted in an addition of ₹8.72 crore to the income.
On appeal, the CIT(A) deleted the addition holding that no ad-hoc disallowance can be made without identifying specific defects in the books of account.
Before the ITAT, the Revenue argued that the assessee failed to produce adequate supporting documents despite opportunities. However, the Tribunal observed that:
- The assessee is a government co-operative society engaged in milk procurement and processing.
- Its books of account were duly maintained and audited.
- The AO had not pointed out any specific defects in the books of account.
- Mere inability to upload voluminous records in faceless proceedings cannot justify ad-hoc disallowance.
The ITAT held that disallowance of expenses on an ad-hoc basis without establishing defects in books of account is not sustainable in law. Therefore, the Tribunal upheld the order of the CIT(A) deleting the disallowance.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
