October 2025
Taxpayers are increasingly facing disallowances of genuine expenses and purchases simply because vendors have not filed returns or complied with their own obligations. This “indirect-tax mindset” is creeping into direct tax assessments, even though the Income-tax Act contains no statutory basis for such disallowances. Courts, including the Supreme Court, have consistently held that once an assessee furnishes proper documentation and banking trail, vendor non-compliance alone cannot justify denial of deduction. Yet, in practice, taxpayers are dragged into needless disputes, demands, penalties, and coercive recovery.
