INCOME TAX ACT, 1961

Section 143(3) read with Section 37(1)

Assessment - Additions to income - AO did not disallow any of the expenditure on the basis of the individual instances of such expenditure - Validity of Ad hoc disallowances

Assessee was engaged in the business of dealing in surgical equipments and accessories, linen, etc. He was dealing with the government department as well as private hospital and also carrying on liaison of work for principal in India and abroad. Assessee was aggrieved by various disallowances made by AO while framing assessment under section 143(3). Held: AO did not disallow any of the expenditure on the basis of the individual instances of such expenditure and holding that those were not incurred for the purposes of the business and therefore, same were not allowable to the assessee under section 37(1) as they were not fully and exclusively incurred for the purposes of the business. In most of the disallowances made were ad hoc disallowance out of those expenditure. Therefore, in the interest of justice it would be proper and just if the net profit ratio of the assessee was assessed at certain percentage which will also take care of the lower net profit shown by the assessee.

REFERRED :

FAVOUR : Partly in assessee's favour

A.Y. : 2012-13

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