No disallowance just because vouchers produced by assessee as proof were handwritten: HC

Case details: V.C. Arunai Vadivelan v. ACIT - [2021] 128 taxmann.com 195 (Madras)

Judiciary and Counsel Details

• • T. S. Sivagnanam and Ms. R.N. Manhula, JJ.
  • A.S. Sriraman and S. Sridhar for the Appellant.
  • V. Pushpa, Sr. Standing Counsel for the Respondent.

Facts of the Case

Assessee filed a return of income, and his case was selected for scrutiny. During assessment proceedings, Assessing Officer (AO) held that some of the vouchers submitted by assessee in respect of weighing and unloading charges were handmade, and some vouchers were not available. Thus, 20% of the expenses were disallowed and added back to the returned income. Further, in the profit and loss account, assessee claimed expenses towards transport charges, for which bills were directed to be submitted. On verification of the bills, AO held that the vouchers were self-made/handwritten, and some vouchers are not produced. Therefore, 10% of the expenses claimed by assessee was disallowed and added back to the returned income.

Assessee contended that during assessment proceedings, AO had scrutinized the bills and details furnished by assessee with reference to the books of accounts, but no defects were noticed during the scrutiny. Further, the details and documents called for by AO were furnished by assessee, which AO had admitted. In such circumstances, there was no reason for an Adhoc disallowance by AO.

High Court Held

On appeal, Madras High Court held that assessee had produced the books of accounts, ledgers, purchase and sale registers, stock registers, bills, vouchers for expenses claimed, including purchase bills, freight bills as called for by AO. AO admitted this in the assessment order. AO was bound to scrutinize the documents produced and frame an assessment by granting/refusing eligible/ineligible deduction. AO had observed that the vouchers were self-made/handwritten, and some vouchers were not produced. Given the nature of the industry, computer-generated vouchers may not always be issued by the transporters unless they are an organization owning a large fleet. If AO had any doubt with regard to the genuineness of any one of the vouchers produced, he could have drawn sample vouchers and called upon assessee to establish its genuineness. Without doing so, making an Ad-hoc disallowance by not specifically assigning any reason to a voucher or bunch of vouchers was not legally tenable.

List of Case Referred to

• • Asstt. CIT v. Ganpati Enterprises Ltd. [2013] 32 taxmann.com 262/142 ITD 118 (Delhi – Trib.) (para 4)
  • Mukesh Kumar Mahawar v. ITO [IT Appeal No. 615 (LKW) of 2014, dated 16-9-2015] (para 4).