What did the Tribunal hold?

The Tribunal reduced the disallowance on contract expenses to 1% of the total expenses. For salary, miscellaneous, travelling, and convenience expenses, the Tribunal upheld 50% of the disallowances made by the lower authorities.

The assessee challenged disallowances made by the Assessing Officer on contract expenses, salary, miscellaneous, travelling, and convenience expenses. The lower appellate authority had restricted these disallowances. The assessee argued that the disallowances were made on an estimation basis without sufficient justification.

What were the issues?

Whether estimated disallowances on contract expenses, salary, and other miscellaneous expenses are justified and whether the quantum of disallowance is reasonable.

M/S C.K. Construction, Ranchi vs DCIT | s.143(3) | ITAT Ranchi 2020

Income Tax Appellate Tribunal, : RANCHI BENCH, RANCHI

Before: SHRI S.S.GODARA, JM & DR. A. L. SAINI, AM

For Appellant: Shri Devesh Poddar, Advocate

For Respondent: Smt. Nisha Singhmarr, JCIT(DR)

Hearing: 03.03.2020Pronounced: 03.03.2020

Date of hearing 03.03.2020 Date of pronouncement 03.03.2020 O R D E R PER BENCH(Oral): These assessee’s two appeals for assessment years 2010-11 & 2011-12 arise against the Commissioner of Income Tax (Appeals), Ranchi’s separate orders; both dated 10.12.2015, involving proceedings u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’); respectively.

Heard both the parties. Case file perused.

It transpires at the outset that the assessee’s identical first substantive grievance canvassed in the instant appeals challenges correctness of contract expenses disallowance on estimation basis @10% made by the Assessing Officer and restricted to 2% in lower appellate proceedings. Suffice to say, both the learned lower authorities have proceeded to disallow the impugned sum on estimation basis keeping in mind the fact that the same could not be satisfactorily proved by the assessee. Learned counsel has made vehement attempts in submitting various comparative charts in preceding and succeeding assessment years qua the impugned item(s) of expenditure. In our opinion, mere submission of a comparative chart is not a ground to delete the impugned estimated disallowance. The fact also remains &93/Ran/2016 M/s C. K. Construction that the assessee appears to have duly maintained books of accounts and profit ratio vis-a- vis the expenditure; prima facie, also does not show any abnormal trend. We therefore deem it appropriate that a lumpsum estimated disallowance of 1% only regarding contract expenses would be just and proper. We order accordingly. Necessary computation including that of interest to follow as per law.

Same reasoning to follow in assessee’s second identical substantive grievance in both these appeals challenging correctness of salary payment disallowance followed by second and fourth substantive grievance in latter assessment year regarding miscellaneous, travelling and convenience expenses @5%. We make it clear that we have upheld both the learned lower authorities’ action to the extent of 50% of all the disallowance heads in all these four issues. Necessary computation including that of interest shall follow as per law. It is further clarified that our instant estimation would not be treated as precedent in any other case.

These two assessee’s appeals are partly allowed in above terms.

Order is pronounced in the open court on 03.03.2020.

M/S C.K. CONSTRUCTION,RANCHI vs. DCIT, RANCHI

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