Delhi ITAT Set Aside Disallowances Based on Ad Hoc Due to AO Mistake

The disallowances would have been performed on the grounds of ad hoc excluding specifying the precise mistake. The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held.

The orders of the authorities below have been set aside by the two-member bench of Astha Chandra (Judicial Member) and Shamim Yahya (Accountant Member) and would have decided the problem in the taxpayer’s favour and sees that AO does not have indicated the particular documents which were overlooking.

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The petitioner on the problem of the disallowance of subcontractor charges challenged the ad hoc disallowance. The taxpayer would have debited Rs 6,37,62,122 as subcontractor expenses, AO witnessed. The taxpayer was requested to provide the vouchers, however, the AO sees that the taxpayer can not provide enough supporting vouchers, therefore ad hoc disallowance of Rs 3,00,000 would have been made by him.

Complying the plea of the taxpayer, CIT(A) would differentiate the net profit of the taxpayer and the gross profit ratio for the Assessment years 2013-14 and 2014-15 and revealed that the taxpayer’s net profit would get diminished from 6.96% in the AY 2013–14 to 5.90% in the AY 2014–15. Thus he moves to ensure the disallowances.

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The taxpayer, on the basis of ad hoc with no cogent reason these additions would have completed. Particular documents were not found and is been pointed out by AO. No authorization to make ad hoc disallowance would be provided merely on the basis that the ratio would fall a little bit.

The petitioner’s appeal would be permitted by the tribunal and set aside the disallowance made on ad hoc grounds.