SHI vs. HANKAR G. LATURE,LATURVS.INCOME-TAX OFFICER, WARD - 1, LATUR

आदेश / ORDER

PER D. KARUNAKARA RAO, AM

This is the appeal filed by Assessee is directed against the order of CIT(Appeals)-2, Aurangabad dated 03.05.2017 for the assessment year 2012- 13.

2 ITA No.1649/PUN/2017 A.Y.2012-13

is engaged in the business in providing telecom infrastructure under the

name and style of “Suyog Telematics” and providing consultancy under the

name “M/s. Savyasachi Consultants”. Assessee filed return of income

declaring total income of Rs.12,45,220/-. In the assessment proceedings

u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’),

Assessing Officer assessed total income of assessee at Rs.22,37,078/- after

making the addition of Rs.9,99,858/-. The Assessing Officer made ad-hoc

disallowance @5% of the labour charges (Rs.3,18,444/-) as well as the

transport expenses (Rs.7,195/-). The Assessing Officer also made

disallowance u/s. 14A of the Act which is not subject matter of appeal filed

before me.

the ad-hoc disallowance on labour and transport expenses (@5% of the

claim), Assessee submitted various contentions against the said ad-hoc

disallowance. At the end of the First Appellate Proceedings, the CIT(A)

confirmed the Assessing Officer’s manner of disallowance applying flat rate

@5% claimed with respect to labour and transportation expenditure.

Contents of Para 23 are relevant. The CIT(A) deleted the disallowance

u/s.14A of the Act also. For the sake of completeness, contents of Para 23

are extracted as under:

“23. I have given a careful thought to the submissions made by the assessee and the manner in which the disallowance has been made. I find that this kind of disallowance was also made in the assessment for the A.Y.2013-14 and in the appellate order keeping in view the totality of facts and circumstances of the assessee's case I had directed the assessing officer to reduce the quantum of addition to 5% of the expenses claimed. Since in this year the assessing officer has restricted the addition to 5% of the total expenses claimed in respect of labour charges and transport charges, there is no need to interfere with the action of the assessing officer keeping in mind the finding given by the assessing officer that quite a few expenses were made on self-made

3 ITA No.1649/PUN/2017 A.Y.2012-13

vouchers and hence their veracity and consequently the genuineness of expenses could not be proved. Ground No.2 is decided against the assessee.”

following grounds:

“1.Commissioner of Income Tax (Appeals) has erred in confirming arbitrary ad-hoc disallowance Rs.3,25,639/- i.e. 5% of expenses claimed. Appellant prays to delete the whole of the disallowance. 2. Appellant prays for just equitable relief.”

contested the manner of making disallowance by the Assessing Officer and

the manner of confirming the addition by the CIT(A). Ld. Counsel for the

assessee raised objection not only on the ad-hoc disallowance but also flat

rate of 5% adopted by the Officers. Further, he relied on the submissions

made by the assessee before Assessing Officer & CIT(A).

5.1 During the course of argument, Ld. Counsel for the assessee filed a

letter submitting as under:

“Appellant is in the business of securing and executing contracts in the line of Infrastructure for telecom. This contracts are spread over in different area of Maharashtra and particularly Rural areas, as to digging and laying cables, etc. Assessing Officer in Para 3 of the Order has stated that Against the turnover of Rs.1,36,57,376/ - Appellant has debited Labour Charges Rs.63,68,883/-,material purchases Rs.22,49,889/- and transport of Rs.1,49,900/- and has disallowed 5% of these expenses are not fully verifiable for the reason that on some of the Vouchers complete name and address of recipient labour and nature of work done, is not appearing , Thumb Impression and signatures on some vouchers is illegible. Hence he made estimated disallowance of 5% i.e. Rs.3,18,444/-. In Para.22 of The Order Honourable CIT(A), for the same reasons as stated by Assessment Year has confirmed the disallowance. Appellant submitted that Assessee has declared 9% Net Profit, Account of the assessee are audited.

4 ITA No.1649/PUN/2017 A.Y.2012-13

Assessment Officer and CIT(A), has pointed out some irregularity in Vouchers, but has not doubted that expenditure having incurred. Assessing Officer has made above disallowance though books and vouchers are produced before him. Ad-hoc. Appellant prays for deletion of disallowance, or alternatively restricting the disallowance to nominal amount of say 30,000-35,000.”

From the above submission, Ld. Counsel submitted without prejudice

that disallowance may be restricted to the nominal amount of Rs.30,000/- to

Rs.35,000/-.

heavily on the orders of Assessing Officer and the CIT(A).

labour and transportation expenditure. I find that Assessing Officer has

resorted ad-hoc disallowance merely for the reasons of cash vouchers, lack of

third party evidence, lack of complete address of recipients of expenditure,

assessee’s failure to demonstrate the purpose of expenditures. The Assessing

Officer also noticed some imperfections in the matters of the quality of the

vouchers in respect of labour charges filed before the Assessing Officer.

Considering the said discrepancies in the manner of furnishing evidences by

Assessee, I find, in principle, there is requirement of making some

disallowance. I also consider the Ld.A.R.’s submissions for restricting the

disallowance to the extent of Rs.30,000/- to Rs.35,000/-.

not given any reason for the said rate of 5%. Therefore, all is not well with

the documentation furnished by the assessee and also the decision of the

Assessing Officer in resorting to ad-hoc disallowance adopting the flat rate of

5%. Therefore, I am of the opinion that making disallowance around some

5 ITA No.1649/PUN/2017 A.Y.2012-13

figure of Rs.1,00,000/- would meet the ends of justice on estimation basis. Accordingly, grounds raised by assessee are partly allowed.

Order pronounced on 03rd day of October, 2018.

Sd/- (डी.क�णाकरा राव/D. Karunakara Rao) लेखा सद�य / ACCOUNTANT MEMBER

पुणे / Pune; �दनांक / Dated : 3rd October, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-2, Aurangabad. 4. The Pr. CIT-2, Aurangabad. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.