Ad hoc disallowances by the AO without sufficient grounds and failing to reject books of account are arbitrary; relevant supporting documents and compliance must be effectively considered.

ORDER

Per Bench:

Feeling aggrieved by appeal-order dated 30.05.2023 passed by learned Commissioner of Income-tax (Appeals)-3, Bhopal [“CIT(A)”] which in turn arises out of assessment-order dated 30.12.2016 passed by ITO, 1(3), Bhopal [“AO”] u/s 143(3) of the Act for AY 2014-15, the assessee and revenue both have filed the captioned cross-appeals.

2. Since these are the cross-appeals by parties against the same order of lower-authorities, they were heard together at the request of parties and are being disposed of by this consolidated order for the sake of convenience, brevity and clarity.

3. The background facts leading to present appeals are such that the assessee is a company engaged in the business of manufacture of spirit, IMFL & country liquor. For AY 2014-15, the assessee filed return u/s 139(1) declaring a total income of Rs. 11,44,12,420/-. The case of assessee was selected for scrutiny and notices u/s 143(2)/142(1) were issued from time to time. Ultimately, the AO completed assessment u/s 143(3) after making several additions on adhoc basis and determining total income at Rs. 26,79,97,140/-. Aggrieved, the assessee filed appeal to CIT(A) and succeeded to a large extent. Now, the assessee and revenue both have come in these appeals challenging the order of CIT(A).

Assessee’s Appeal:

4. The grounds raised in this appeal are as under:

1. That on the facts and in the circumstances of the case and in law, the findings and the decision of the Ld. CIT(A) in sustaining the disallowance of Rs. 8,21,450/- out of donation expenses are neither justified nor lawful and therefore that said disallowance of Rs. 8,21,450/- be kindly deleted.

2. That on the facts and in the circumstances of the case and in law, the findings and the decision of the Ld. CIT(A) in sustaining the disallowance of Rs. 4,090/- out of Manufacturing expenses are neither justified nor lawful and therefore that said disallowance of Rs. 4,090/- be kindly deleted.

3. That on the facts and in the circumstances of the case and in law the levy of interest u/s 234A, 234B & 234C are unlawful and without jurisdiction hence the said levies be kindly cancelled.

Ground No. 1:

5. In this ground, the assessee has challenged the CIT(A)’s action of upholding disallowance of Rs. 8,21,450/- out of total disallowance of Rs. 94,72,996/- made by AO on account of donation expenses. This assessee’s ground is a cross-ground to Ground No. 3 of revenue’s appeal, hence both assessee’s ground and revenue’s ground shall be adjudicated analogously in later part of this order. Finally, the assessee’s ground is allowed for statistical purpose as per detailed discussion to follow.

Ground No. 2:

6. In this ground, the assessee has challenged the CIT(A)’s action of upholding disallowance of Rs. 4,090/- out of total disallowance of Rs. 2,72,52,835/- made by AO on account of manufacturing expenses. This assessee’s ground is a cross-ground to Ground No. 4 of revenue’s appeal, hence both assessee’s ground and revenue’s ground shall be adjudicated analogously in later part of this order. Finally, the assessee’s ground is dismissed as per discussion to follow.

Ground No. 3:

7. In this ground, the assessee has challenged the levy of interest u/s 234A, 234B and 234C. The levy of interest u/s 234A, 234B and 234C is statutory as per provisions of Act. Further, no submission has been made by either side qua this ground. Being so, this ground is rejected.

Revenue’s Appeal:

8. The grounds raised in this appeal are as under:

Ground No. 1:

9. Ld. DR for revenue carried us to this ground which