KAMAL KANT,,BATALA vs. THE INCOME TAX OFFICER, BATALA

The following grounds of appeal have been raised by the assessee. “1. The Ld. CIT(Appeals)-1, Amritsar has unjustifiably upheld the disallowance of Rs.1,31,300/- made by the ITO, Ward-1, Batala without considering the arguments of the appellant and without appreciating the material/evidence on record. The addition is in the nature of disallowance of claim of Cupola expenses which were genuine, true and correct and absolutely in order as the same were exclusively necessary and incidental to the charging of cupola for production of manufactured goods i.e. C.I. casting.

The brief facts of the case are that the assessee has challenged the two disallowances made by the AO and affirmed by the Ld. CIT(A)-1, relates to Rs.1,31,300/- qua claim of Cupola expenses which was disallowed by the Assessing Officer on the premises that the vouchers produced by the assessee are not the documents which can be relied upon to prove the correctness of assessee’s claim of expenditure of Rs.1,31,300/-. These vouchers are prepared in single sitting, in the same ink and handwriting and signatures are open to suspicion. The said disallowance was affirmed by the Ld. CIT(A) on the grounds that the said Cupola expenses are not supported by bills and vouchers are in same handwriting, with same line and seems to be made at a single sitting. No receipts/slips or confirmations from the labour or staff have been provided even at appellate stage. Thus, the AO has rightly added the amount of Rs.1,31,300/- to the income of the assessee being unvouched expenses which are without any documentary evidences.

During the course of argument before us, the Ld. AR has submitted that the Cupola expenses are necessary for production of manufacturing of goods i.e. C.I. casting as no business could be run without incurring these expenses. The appellant purchases pig iron which is main source of use as raw material and the pig iron is melted in the Cupola by charging the same with the hard coke. Thereafter, the melted iron so obtained is put into the moulds to secure the products manufactured through this process, therefore, the Cupola expenses are necessary, genuine and incidental to the business of manufacturing of goods i.e. C.I. casting. It was further submitted that the assessee/appellant has effected sales to the tune of Rs.97,09,701/- of the goods so manufactured. The Cupola was operated on 12 occasions in the

On the contrary, the Ld. DR rebutted the claim of the assessee.

Having heard the parties and considering the peculiar facts and circumstances and also the technical specifications as demonstrated by the assessee. The appellant is engaged in the manufacturing and sales of C.I. casting sanitary pipe and pipe fittings. Further the pig iron which is main source for use as a raw material melted in the Cupola by charging the same with the hard coke and therefore, the melted iron is put into the moulds to secure the products manufactured through this process, therefore, it seems that these are necessary and incidental to the business of the manufacturing of C.I. casting. Even otherwise, the assessee had also claimed the similar expenses which have been allowed by the Assessing Officer in the preceding Asst. Year. The authorities below doubted the vouchers simply on the reasoning that the same appears to be in the same handwriting and in a single sitting, without understanding the nature of expenses and the volume, because the assessee had clearly shown in its account ledger, the expenses of Rs.1,31,300/- on account of Cupola expenses as it reflects from the

Now coming to the disallowance to the tune of Rs.4,40,000/- which was incurred on improvement of property. The authorities below disallowed the said expenses on the ground that the repair debited as costs of improvement is without any documentary evidence and there is not even a single bill. Although the assessee has pleaded that the contractor was hired, however, none of the contractors payment exceeded Rs.75,000/-. It was further observed by the authorities below that although the vouchers have been made and all the contractors issued the bill for the work done & payments received, however, it is apparent that the entire amount is debited with a view to reduce the tax liability. During the course of argument, it was submitted by the Ld. Counsel of the assessee that vouchers were prepared and entries were duly made in the books of account written in the normal course of business which have been accepted by the AO. On one side the Assessing Officer accepted the book results, but at the same time doubted the vouchers.

On the contrary, the Ld. DR relied upon the order of authorities blew.

We have perused the documents filed by the assessee from which it appears that the assessee had made the vouchers for repairing of industrial building through some builders and in all the vouchers, the signature of different recipients are thereon on different dates. The said expenses are also reflected in the books of account. Hence, we do not find any justification in disallowing the said expenses, therefore, we feel it appropriate to allow the said expenses and hence, the addition of Rs.4,40,000/- stands deleted.

In the result, the appeal filed by the assessee stands allowed and order impugned herein passed by the Ld. CIT(A) is set aside and quashed. Order pronounced in the open Court on 19.12.2018.