DCIT, MEERUT vs. SH. RANJIT SINGH & CO., MEERUT

PER KULDIP SINGH, JUDICIAL MEMBER : The appellant, DCIT, Circle 2, Meerut (hereinafter referred

to as ‘the Revenue’) by filing the present appeal, sought to set aside

the impugned order dated 26.02.2016 passed by Ld. CIT

(Appeals), Meerut qua the Assessment Year 2012-13 on the

grounds inter alia that :-

“1. Whether in the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeals) has erred in law and fact in deleting the addition of Rs.4,35,16,201/- made by the AO due to 30% disallowance of certain expenses claimed by the assessee in P&L A/c ignoring the fact that the assessee failed to

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produce any documentary evidence to substantiate cash payment in respect of the said expenses and is maintaining neither any document of muster roll payment nor any self made cash voucher for these expenses.

controversy at hand are : The assessee is into the business of

turnkey construction of high voltage transmission line for Power

Grid Corporation of India Ltd., UP, Power Transmission

Corporation Ltd. & Power Transmission Corporation of

Uttarakhand Ltd. etc. since 1978. AO made addition of

Rs.4,35,16,201/- on account of bogus payment and violation of

section 40A(3) of the Income-tax Act, 1961 (for short ‘the Act’) by

disallowing the 30% disallowance amounting to Rs.4,35,16,201/-

out of claimed expenses of Rs.14,50,54,002/-.

ld. CIT (A) who has deleted the addition by partly allowing the

appeal. Feeling aggrieved, the Revenue has come up before the

Tribunal by way of filing the present appeal.

parties to the appeal, gone through the documents relied upon and

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orders passed by the revenue authorities below in the light of the

facts and circumstances of the case.

Rs.14,50,54,002/- on the basis of muster roll. AO disallowed 30%

of the expenditure to cover up possible leakage as bogus payment

in violation of section 40A(3).

shows that undisputedly, it is rightly observed that cash expenses

incurred by the assessee during the year under assessment are 65%

and not 80% as has been held by AO. It is also not in dispute that

the AO has impounded the books of account of the assessee during

the assessment proceedings and has not disputed the same rather

proceeded to make the disallowance on estimate basis by invoking

the provisions contained u/s 40A(3) of the Act.

the past, net profit @ 7.5% has been held to be fair by the Revenue

authorities and similar view has been taken in AYs 2004-05, 2005-

06, 2006-07 and 2007-08 which has also been confirmed by the

coordinate Bench of the Tribunal in assessee’s own case for AY 2011-12 in ITA No.3985/Del/2015 order dated 23.03.2018 by

upholding the finding returned by ld. CIT (A) who has considered

the net profit rate on receipt from erection work @ 7.5%. Even

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otherwise, when books of account have not been disputed by the

Revenue authorities and ld. CIT (A) has deleted the addition by

following the rule of consistency, there is no justification in

resorting to guesswork and estimation. In these circumstances,

disallowance made on ad hoc basis without assigning any reason as

to why 30% disallowance of expenses have been made, is not

sustainable in the eyes of law. So, we are of the considered view

that ld. CIT (A) has rightly decided the issue in question. So,

finding no illegality or perversity in the findings returned by the ld.

CIT (A), the present appeal filed by the Revenue is dismissed. Order pronounced in open court on this 16th day of January, 2019.

Sd/- sd/- (N.S. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 16th day of January, 2019 TS