Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHY
आदेश/ ORDER
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-40, Mumbai ( in short ‘the CIT(A)’) dated 04/02/2019 for the assessment year 2009-10.
The brief facts of the case as emanating from records are: The assessee is a trader and supplier of cement. Apart from trading in cement the assessee was also engaged in construction activity during the period relevant to the assessment year under appeal. The assessee had undertaken construction/ erection of factory shed and factory structures at two different sites i.e. Silvasa and Airoli. The assessee filed its return of income for the impugned assessment year on 30/09/2009 declaring total income of Rs.9,25,159/-. The assessment in the case of the assessee was reopened on the basis of income reported in Form 26AS. In reassessment proceedings the Assessing Officer made addition of Rs.39,82,154/- under the following heads:
(i) Labour expenses - Rs. 6,75,350/- (ii) Site Expenses - Rs. 22,06,804/- (iii) Travelling and conveyance - Rs. 6,00,000/- The primary reason for making disallowance under the aforesaid heads was that assessee could not produce documents in support of cash expenditure claimed. Aggrieved by the assessment order dated 26/03/2014 passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 ( in short ‘the Act’), the assessee filed appeal before the CIT(A). The First Appellate Authority, unimpressed with the submissions of assessee, upheld the assessment order. Hence, the present appeal by the assessee.
The assessee in appeal has raised as many as 10 grounds. The primary ground raised by the assessee in appeal is ground No.1 assailing the addition of Rs.39,82,154/- made by the Assessing Officer and sustained by CIT(A). The other grounds raised in appeal are argumentative and are in support of primary ground.
4 Ms.Kavita P. Kaushik, representing the Department vehemently defending the impugned order submitted that the assessee neither at the time of assessment proceeding nor at first appellate stage could produce evidence to substantiate the expenditure. The vouchers produced by the assessee were self serving documents. The ld.Departmental Representative prayed for dismissing the appeal of assessee and upholding the findings of CIT(A).
Submissions made by ld.Departmental Representative heard. Orders of authorities below examined. The assessee apart from the business of trading in cement is also engaged in construction activities. During the period relevant to assessment year under appeal, the assessee was engaged in erection of factory shed and factory structure. The assessee claimed expenditure in respect of construction business under three heads i.e. labour expenses, site expenses and conveyance and travelling. The details of total expenditure incurred, expenditure in cash claimed and the disallowance made by the Revenue is as under:
S.No. Head of expenses Amount(Rs.) Cash Disallowance of expenses(Rs.) cash expenditure. (Rs.) 1. Labour charges 68,12,345 13,50,700 6,75,350 2. Site expenses 33,89,901 33,89,901 27,06,804 3. Conveyance & 10,52,930 10,52,930 6,00,000 travelling Total 1 ,12,55,176 57,93,531 39,82,154 A perusal of the impugned order reveals that the Assessing Officer has made disallowance in respect of cash expenditure under the three heads on the ground that the assessee has failed to substantiate the expenditure with supporting documents. Undisputedly, the assessee could not produce cogent evidence in support of cash expenditure made at construction site. The assessee had produced some sample vouchers, that were rejected by the Assessing Officer. Thereafter, the Assessing Officer on estimation basis disallowed 50% of the expenditure claimed under the head labour charges. Similarly, under the head Site Expenses the Assessing Officer rejected the vouchers produced by the assessee in respect of refreshments ( tea and nasta for the labours) at construction site and also disallowed cash expenditure for which the assessee could not produced the vouchers. Thus, the Assessing Officer made total disallowance of Rs.27,60,804/- under the head Site Expenses. In respect of conveyance and travelling expenses the Assessing Officer made disallowance of Rs.6,00,000/- on estimation. Thus, the disallowance in respect of cash expenditure has been made merely on estimations. The construction activity carried on by the assessee is not under dispute. The cash expenditure claimed by the assessee is in respect of expenditure at construction site. In view of the fact that the assessee was novice in construction business and had no past experience of undertaking construction activities and maintenance of complete and proper documents supporting expenditure at construction site, specially in respect of day to day expenditure on labour, hence, some reasonable allowance can be made. I am of considered view that the disallowance made by Assessing Officer /CIT(A) is on the higher side. At the same time there are shortcoming on the part of assessee in not maintaining proper books, vouchers, etc., hence, the entire expenditure claimed cannot be allowed. Taking into consideration entirety of facts, disallowance @ 25% of the total expenditure claimed under the three heads i.e. labour charges, site expenses and conveyance and travelling expenses, would meet the ends of justice. I hold and direct accordingly.
In the light of above observations, the impugned order is modified and the appeal of assessee is partly allowed in the terms aforesaid.
In the result, appeal by the assessee is partly allowed.
Order pronounced in the open court on Tuesday the 8th day of December, 2020.