Without Pointing Out Any Specific Defect In Audited Books Of Accounts AO Can't And Should Not Make Any Estimated Addition: ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that without pointing out any specific defect in the audited books of accounts, the AO cannot and should not make any estimated addition.

The bench of Kul Bharat (Judicial Member) and N. K. Billaiya (Accountant Member) has observed that the expenses claimed by the assessee were also test-checked, and while making the addition, the AO says that the books of account vouchers were not produced. The logical question arises: if the books and vouchers were not produced, then from where did the AO test check the expenses?

The appellant/assessee is in the business of News Network, broadcasting and telecasting. The return for the year was electronically filed on November 29, 2014, declaring a loss of Rs. 4,47,68,848. The return was selected for scrutiny and assessment, and statutory notices were issued and served upon the assessee.

The assessee made the ad hoc disallowance of 20% of expenditure of Rs. 25401898. The only reason for making the ad-hoc addition is that "the assessee could not produce the books of accounts and vouchers; therefore, the provisions of Section 145(3) are invoked.”.

The AO notes that the books of account vouchers were not produced, even though the assessee's alleged expenses were also verified by testing.

The ITAT noted that if the records and vouchers were not produced, then it makes sense to wonder where the AO test verified the spending.

The tribunal directed the AO to delete the impugned addition of Rs. 5080380.

Counsel For Appellant: Gautam Jain

Counsel For Respondent: Vivek Vardhan

Case Title: Priyamda Media & Infotainment Private Limited Versus DCIT

Case No.: ITA No.7489/Del/2017 & 1598/Del/2020

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