In the Income Tax Appellate Tribunal, Delhi Bench ‘SMC’, the case between Anil Kumar Goyal and ACIT, Circle-58(1), New Delhi for the assessment year 2017-18 was adjudicated. The appellant contested an ad hoc disallowance made out of business expenses which the tribunal reviewed thoroughly.
The deceased assessee, Anil Kumar Goyal, was engaged in the business of trading essential commodities like sugar, atta, and pulses. For the year in question, the Assessing Officer had noticed discrepancies in the declared profit ratios compared to the previous year and questioned the veracity of business expenses due to insufficient documentary evidence provided by the assessee.
During the scrutiny selected based on high revenue operations and significant cash deposits during the demonetization period, no adverse findings were noted on these issues. However, the Assessing Officer disallowed 30% of the total business expenses claimed, citing the lack of supportive documentation which made complete verification challenging. This led to an additional tax demand based on ad hoc disallowance.
The Commissioner of Income Tax Appeals (CIT(A)) partially upheld the disallowance, prompting the assessee to approach the Tribunal. The Tribunal, after careful consideration of the submissions and the marginal nature of the variations in profit ratios, deemed the ad hoc disallowance as based on conjecture rather than substantive evidence.
The Tribunal noted that the slight difference in profit ratios from the previous year did not justify a substantial disallowance and overturned the decision of the CIT(A), thus allowing the appeal in favor of the assessee. The Tribunal’s decision emphasized the necessity for the Assessing Officer to provide specific instances of non-compliance by the assessee rather than rely on general allegations to make ad hoc disallowances.
The case highlights the importance of detailed and specific documentation in defending against ad hoc adjustments by tax authorities and underscores the judicial expectation for precise evidence when challenging the claims of taxpayers.
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