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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R PER MANISH BORAD, A.M: This appeal by Revenue pertaining to A.Y. 2014-15 is directed against the order of Ld. Commissioner of Income Tax(Appeals)-2, Bhopal, (in short ‘CIT(A)’), dated 29.01.2018 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(hereinafter called as the ‘Act’) framed on 30.12.2016 by ITO, Bhopal.
Shri Prabhakar Colonizers & Developers Pvt. Ltd. ITANo.305/Ind/2018 2. The Revenue has raised following grounds of appeal: “On the fact and in the circumstances of the case, the Commissioner of Income Tax (Appeal-II) has erred in; The Ld. CIT(A)-2, Bhopal has erred in allowing 90% of wages expenses claimed by the assessee related to two projects.
When the case was called, non-appeared on behalf of the assessee therefore, the case was heard with the assistance of Learned Departmental Representative (Ld.DR) and available records on file.
The Sole grievance of the revenue is against the finding of Ld. CIT(A) allowing 90% of wages expenses claimed by the assessee related to two projects.
Brief facts as culled out from the records are that the assessee is a Private Limited Company engaged in construction of building. Nil income was declared in the return of income filed on 11.12.2015 for A.Y. 2014-15. Case was selected for scrutiny assessment as per CASS, followed by serving of notices u/s 143(2) & 142(1) of the Act. While examining the submissions filed by the assessee Learned Assessing Officer (in short Ld. AO) observed that in Schedule-16 of Profit and Loss account various expenses were claimed towards Labour charges, wages expenses and salary. On the perusal of muster roll. Ld. AO noticed that they were incomplete on various aspects as names of the workers, their signature were missing on some of the paper. Most of the payments were made by cash. There
Shri Prabhakar Colonizers & Developers Pvt. Ltd. ITANo.305/Ind/2018 was no contract agreement for the labour work. There was no licence for labour contractor with the assessee. Ld. AO accordingly disallowed various expenditure of Rs.1,74,12,042/- (wages expenses of Girnar Hills project of Rs.83,58,440/- wages expenses of Girnar Valley project of Rs.90,53,602/-)
Against the alleged disallowance assessee preferred an appeal before the ld. CIT(A) and partly succeeded. Ld. CIT(A) after considering the documents placed on record was of the view that it will not be fair to disallow 100% of wages payment however for incomplete details maintained by assessee, minor disallowance of 10% of the alleged wages was made, thereby making disallowance of Rs.17,41,205/- (10% for Rs.1,74,12,042/-).
Aggrieved Revenue is in appeal before the Tribunal.
Ld. DR vehemently argued submitting that the details filed by the assessee were incomplete and most of the payment is made in cash for the purpose of claiming expenditure. Assessee has not maintained proper supporting. Ld. DR also contended that the assessee has not filed any details about the total turnover and profits earned since the income as per the return has been shown as loss of Rs.76,26,149/- (as mentioned in the assessment order).
We have heard Ld. DR and perused the records placed before us.Only issue relates to disallowance of wages expenses incurred by the assessee on two projects at Girnar Hills & Girnar Valley at Shri Prabhakar Colonizers & Developers Pvt. Ltd. ITANo.305/Ind/2018 Rs. 83,58,440/- & Rs. 90,53,602/-. Ld. CIT(A) restricted the disallowance to 10% of the total wages expenses incurred for the two projects observing as follows:
“I have carefully considered the facts of the case. The appellant is a builder and during the period, it has undertaken Housing Project under the name of “Girnar Valley” & “Girnar Hills” at Bhopal. During the year, the appellant has employed daily wages workers for executing all types of civil work under taken at these two projects. The AO has disallowed these expenses incurred on both project on the ground that the appellant has not submitted labour licence and proper voucher were not kept and produced only Muster Role for payment of wages. The AO has only considered one day’s Muster Role i.e. of date 26.12.2013 as base for making disallowance of 100% wages for the entire years. The muster role for the entire year was produced during the appellate proceedings and a copy of the same has been submitted on record. The ledger copies of wages A/c for both the projects “Girnar Hills” and Girnar Valley” were also produced. 6.1 These wages pertain to the daily wages to workers employed for carrying out civil work on two projects as under: a) Wages expenses (Girnar Hills) Rs.83,58,440/- b) Wages Expenses (Girnar Valley) Rs.90,53,602/- it is observed that proper books of accounts have been maintained by the appellant which were produced before the AO during assessment. The books of accounts were duly audited both under companies Act and under the Income Tax Act. There is no adverse dining in any of the audit report as to these payments. 6.2 The AO was of the view that voucher in respect of these payments were not produced. It is seen and acknowledged by the AO that the muster roll was produced before the AO. It is observed that the muster roll contains full detail in respect of payment made to workers. The heading of the muster roll is “Weekly wages payment sheet. It is maintained date wise, full
Shri Prabhakar Colonizers & Developers Pvt. Ltd. ITANo.305/Ind/2018 name of labour is there, date wise attendance is not, number of days worked, rate of payment, total amount paid etc. is mentioned thereon. As acknowledgement of receipts of payment, the recipients have placed their signatures/thumb impressions on the muster rool. Thus, it is found that the appellant has maintained full record of payment made to daily wages workers showing the particulars of person appointed, attendance of worker, no of days attended and payment made to him and weekly payment made to each worker and total payment made. The entries in the books of accounts are passed on the basis of the muster roll only. It is therefore, to be concluded that the said muster roll is itself a voucher for making accounting entries in books of accounts as it contains full detail in respect of payment made to workers and receipt of such payment also. 6.3 The muster roll dated 26.12.2013 was examined on the basis of which the disallowance has been made by the AO of 100% of wages paid for the entire year. The AO’s finding are that “somewhere the names of the workers signature of the workers are missing”. It is observed that both in respect of Girnar Valley project and Girnar Hills the relevant weekly sheet do not show any instance where the name of the worker is missing. Further, in all cases barring very few, either signature or thump impression is appended. It appears that in some cases, on the photo copies submitted before the AO, thumb impression might not be clearly visible. This itself cannot be a ground for making full disallowance of payments made to daily wages worker. 6.4 As per the assessment order, the appellant had submitted before the AO that the labour licence is obtained by the contractor and they were not obliged to obtain the same. Having no labour licence cannot be a basis for making full disallowance of wages paid to workers at two sites. 6.5 Keeping in view the facts and circumstances of the case, it is contended that the AO has erred in disallowing 100% wages payment in respect of both the projects. However, examination of the muster roll for the entire year shows that in some cases, either signature or thumb impression of the labour as token of receipt is not found on the muster roll. In view of this fact, I hold 5
Shri Prabhakar Colonizers & Developers Pvt. Ltd. ITANo.305/Ind/2018 that some disallowance out of these wages is required. In the facts and circumstances of the case, I consider it reasonable to restrict the disallowance of 100% of wages payment to 10% of the wages payment made to the labour in respect of the two projects. The AO is therefore, directed to restrict the disallowance to Rs.17,41,205/- i.e. 10% of Rs.1,74,12,042/-.
The above finding of fact given by the Ld. CIT(A) has been challenged by the Ld. DR. There is no representation from the side of the assessee to bring on the facts and relevant financial statement on record. However on perusal of the finding of the Ld. CIT(A) we find that the necessary details have been examined including the muster roll. Ld. CIT(A) seems to be satisfied with the details mentioned therein however Ld. CIT(A) has also referred to minor discrepancy in the records. Mainly various vouchers of labour payments are unsigned. It is also noteworthy that the assessee being a building construction project has declared huge loss. No details have been filed for the tax deducted at source if any on the labour contract charges. Site wise details were also not available on record. Allegedly, most of the payments have been made in cash. Submissions given by the assessee before the ld. CIT(A) is general in nature. Labour licence stood expired on 31.03.2013. We are therefore, of the considered view that though 100% disallowance by Ld. AO was not justified but in the given facts and circumstances of the case, disallowance of 20% of the total impugned wages i.e. Rs.34,82,408/- ( 20% of Rs.1,74,12,041)
Shri Prabhakar Colonizers & Developers Pvt. Ltd. ITANo.305/Ind/2018 will meet the end to justice for both the parties. We, accordingly, order so and partly allowed the revenue’s appeal. 11. In the result, the appeal of the Assessee is partly allowed.
Order was pronounced in the open court on 26 .07.2019.