INCOME TAX ACT, 1961

Section 143(3)

Assessment - Estimated disallowance of expenses - Despite multiple opportunities assessee failed to substantiate the expenses incurred -

AO made enquiry on the expenses incurred and asked assessee to corroborate such expenses with necessary evidences. AO, however, noted that despite multiple opportunities being given, assessee failed to substantiate the expenses incurred. AO listed the sequence of events and pointed out that the adjournment was given from one date to another but the assessee has totally failed to comply therewith and has failed to support the claim. Crippled by the alienating attitude and lack of substantiation, AO resorted to disallowance estimated at 20% of such expenses claimed, holding the same to be excessive in nature and not incurred wholly and exclusively for the purpose of business. Assessee contended to have incurred similar expenses in earlier years. Held: The explanation of assessee to justify genuineness of 'other expenses' claimed without any cogent support material had no leg to stand. It was for the assessee to corroborate entries in the financial records with documentary evidences when called for. Merely because similar expenses were incurred in the earlier year by itself could be no ground to summarily allow the expenses in the subsequent years without production of any documentary evidence and attendant enquiry, if so needed. It went without saying the process of assessment could not be regarded as an empty formality. The AO, as quasi-judicial functionary, was entrusted with sacrosanct task of making fair assessment with the aid of collection and collation of evidences and data and after making such enquiry as might be considered expedient. As a corollary, AO was within his power to estimate disallowances under such circumstances, in discharge of quasi-judicial function. The action of AO in making estimations thus could not be dubbed as asymmetric or beset with any illegitimacy. Therefore, estimated disallowance made by AO was justified.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 68

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