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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE – VIRTUAL COURT
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
आदेश / ORDER
PER R.S.SYAL, VP : This appeal by the assessee is directed against the order passed by the CIT(A) on 27-07-2018 in relation to the assessment year 2014-15. 2. The only issue raised in this appeal is against the confirmation of disallowance of Rs.18,06,027/- under the head `Labour charges’. 3. Tersely stated, the facts of the case are that the assessee is an Engineering Contractor. During the course of the assessment proceedings, it was observed by the AO that the assessee debited Rs.2.40 crore as Labour charges in its Profit and loss account. Profit for the year at 5.60% was found to be at lower side. On being called upon to explain as to why the expenses were so high, the assessee tendered his explanation.
The AO observed that the vouchers were self-made which were prepared for presentation during the course of scrutiny proceedings only. He referred to 5 vouchers dated 05-04- 2013, 11-04-2013, 14-04-2013, 20-04-2013 and 20-05-2013 with respective voucher numbers, which have been reproduced as such on pages 5, 6 and 7 of the assessment order.
Considering the fact that these cash vouchers were not maintained serially, the AO disallowed 15% of total Labour payment. This resulted into disallowance of Labour charges at Rs.36,04,054/-. The assessee contended before the ld. CIT(A) that the 5 vouchers taken note of by the AO in the assessment order pertained to some other party and not the assessee. The ld. CIT(A), without disputing this fact, held that some of the expenses incurred by the assessee under this head were not properly verifiable. He, therefore, restricted the disallowance from 15% as made by the AO to 7.5%, which resulted into sustenance of the addition at Rs.18,06,027/-. The assessee has come up in appeal against this addition.
Having heard the rival submissions through Virtual Court and gone through the relevant material on record, it is found as an admitted position that the AO made a reference to 5 vouchers which have been reproduced as such in the assessment order by noting that the assessee did not maintain vouchers serially. It can be seen that these vouchers pertained to an altogether different assessee, namely, M/s. Shilpi Engineering Pvt. Ltd., who has no link with the assessee in appeal. In view of the fact that the entire case made out by the AO for disallowing 15% of the Labour charge is ill-founded, we cannot sustain the disallowance so made by the AO.
However, it is worth noting that the ld. CIT(A) took note of the fact that the assessee had incurred some expenses without verifiable vouchers. Considering the entirety of the facts and circumstances of the instant case, we are of the considered opinion that it would be in the fitness of the things if the disallowance out of Labour charges is reduced to Rs.1.00 lakh, as against sustained in the first appeal at Rs.18,06,027/-. We order accordingly.
In the result, the appeal is partly allowed.
Order pronounced in the Open Court on 18th January, 2022.