ITO Vs Govindam Agro Foods Private Limited (ITAT Ahmedabad)
Revenue challenged four deletions made by CIT(A). ITAT upheld all four, dismissing the appeal in full.
Sec 41(1) – Alleged cessation of liability (₹1.06 crore):
AO invoked Section 41(1) claiming old unsecured loans had ceased. CIT(A) found, based on audited evidence, that the loans were taken before commercial operations began & were used for capital expenditure, not working capital. Hence Section 41(1) did not apply, & ITAT confirmed this finding.
Sec 37(1) – Disallowance of expenses (₹7.66 lakh):
AO made an ad hoc 30% disallowance alleging non-submission of vouchers. CIT(A) found that Assessee had filed all bills, vouchers, & ledgers, which AO ignored. ITAT held that once evidence exists, estimated disallowance has no basis.
Sec 40A(3) – Cash payment disallowance (₹1.08 crore):
AO disallowed expenses assuming cash payments above ₹10,000. CIT(A) verified the salary sheets & bank statements showing all payments were made through banking channels. ITAT agreed that Section 40A(3) was wrongly invoked.
Sec 28 – Audit fee provision (₹1.59 lakh):
AO disallowed provision for audit fee citing lack of evidence. CIT(A) noted that the provision was as per accounting standards, certified by auditors, & included prior-year provisions. ITAT held that mere outstanding balance cannot justify disallowance.
