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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI P.K. BANSAL & SHRI AMARJIT SINGH
PER AMARJIT SINGH, J.M.
The assessee has filed the present appeal against the order dated
31st July 2013, passed by the learned Commissioner (Appeals)-II,
Nagpur, relevant to the assessment year 2007-08.
The assessee has raised the following grounds:-
“1. Based on the facts and circumstances of the case, assessment order passed by learned Addl. Commission of Income Tax, Wardha Range, is ab initio bad in the eyes of law and needs to be set aside.
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Addition of ` 12,00,000 made on account of entries in impounded diary B–13, needs to be deleted as the same is covered by declaration of ` 12.00 lacs under survey and already included in return of income.
Addition of ` 15,21,488 on account of disallowance of labour charges @ 5% is excessive and unwarranted and needs to be deleted.
Interest charged u/s 234B and 234D of the Income Tax Act, 1961 being consequential in nature needs to be deleted.
Brief facts of the case are that the assessee filed its return of income on 15th November 2007, declaring total income to the tune of `
26,79,110. The assessee is engaged in the business of executing civil
contracts. The survey was conducted at the business premises of the assessee on 28th March 2007. The assessee declared additional income
to the tune of ` 12 lakh. Subsequently, the assessment was completed
under section 143(3) of Income Tax Act, 1961 (for short “the Act”) on 15th December 2009 after making disallowance for ` 4,18,850 under
section 40(a)(ia) of the Act. Subsequently, order under section 263 of the Act was passed by the learned Commissioner on 29th April 2010 in
which the entire assessment was ordered to be set aside to be made
denovo. The assessee was asked to furnish books of account, bills,
vouchers, etc. The assessee failed to produce the said record but
produced the copy of panchanama of Police Station, Pusad, in which it
was reported that the record of the assessee was burnt. Thereafter,
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the assessment of the assessee was completed on the basis of records
available and the income of the assessee was assessed to the tune of `
88,12,950 vide order dated 31st December 2010. Aggrieved by the
said order, the assessee filed an appeal before the learned
Commissioner (Appeals) who partly allowed the appeal of the
assessee. Since the assessee was not satisfied with regard to the other
claim which was not allowed by the learned Commissioner (Appeals),
therefore, the assessee has filed the present appeal before us.
ISSUE NO.1
The learned Counsel for the assessee did not press this issue.
Therefore, this issue is decided in favour of the Revenue and against
the assesee being not pressed.
ISSUE NO.2
Under this issue, the assessee has challenged the confirmation of
disallowance of Rs.12 lakh made on account of entry found in the
impounded diary B-13. In the present case, the case of the assessee
was taken up in view of the provisions of section 263 of the Act. At the
time of scrutiny, cash book, register and diary no.B-13 were
impounded and accordingly, on account of non-explanation about the
entry in the said documents, the assessee declared an amount of
Rs.12 lakh as his income. The declaration was accompanied by challan
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of tax payment of ` 4,03,920 dated 2nd August 2007, copy of which
lies at Page-53 to 59 of the paper book. Subsequently, the Assessing Officer on the basis of diary, further made the addition to the tune of `
12 lakh. The Assessing Officer was of the view that the said entry was not verified at the time of surrender of income to the tune of ` 12 lakh. The documents were impounded on 28th March 2007. The assessee made the declaration on 2nd August 2007, after the gap of
about four months. This situation leads to the fact that the documents
were duly verified. If it is not examined then only on the basis of the
material impounded, the assessee had already surrendered the income to the tune of ` 12 lakh. Thereafter, on the basis of search, further
addition of ` 12 lakh on the basis of diary does not seems justifiable.
No other documents are highlighted by the Revenue on the basis of which the assessee surrendered the income to the tune of ` 12 lakh.
Taking the contradictory plea at the time of assessment and at the
time of appeal, lead to the fact that the assessee was unable to
explain the entry in the diary B-13 or other documents impounded,
therefore, the assessee has surrendered the additional income to the tune of ` 12 lakh. In view of the notice dated 31st August 2007 lies at
Page-63 of the paper book it came to the notice that the kachha cash book diary and register were impounded on 28th March 2007, whereas the assessee voluntarily declared his additional income on 2nd August
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2007. If the diary was not examined then in these circumstances also
surrender of additional income nowhere leads to the justification of
addition of ` 12 lakh on the basis of diary B-13. Accordingly, the
addition does not seems justifiable, hence, not liable to be sustained in
the eyes of law. Accordingly, we set aside the findings of the learned
Commissioner (Appeals) on this issue and delete the addition of ` 12
lakh. Thus, the issue is decided against the Revenue and in favour of
the assessee.
ISSUE NO.3
Under this issue, the assessee has challenged the confirmation of
addition of ` 15,21,488 on account of disallowance of labour charges
@ 5%. In the instant case, the assessee claimed the labour charges
which was disallowed to the extent of 5% on estimation basis. The
books of account and audited report, etc., were not rejected by the
Assessing Officer. The disallowance to the extent of 5% was without
any basis or material available with the Assessing Officer. It is purely
estimation. The disallowance is not sustainable on the basis of
estimation without rejection of books of account. In this regard, we
also find support of law settled in the case of ACIT v/s Allied
Construction, [2007] 106 TTJ 616 (Del.), wherein it has been held that
“ad–hoc disallowance of labour expenses could not be made simply on
the basis that the vouchers were self–made and not reliable without
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making any test check and pinpoint which item of expenditure is not
verifiable”. This issue being covered by the aforesaid decision of the
Tribunal, respectfully following the same, we delete the addition @ 5%
of the labour charges to the tune of ` 15,21,488 this issue is also
decided in favour of the assessee and against the Revenue.
ISSUE NO.4 AND 5
These issues are consequential in nature depending upon the
demand raised by the Revenue, therefore, needs no adjudication at all.
In the result, assessee’s appeal is allowed.
Order pronounced in the open Court on 29.06.2017
Sd/- Sd/- P.K. BANSAL AMARJIT SINGH VICE PRESIDENT JUDICIAL MEMBER
NAGPUR, DATED: 29.06.2017
Copy of the order forwarded to:
(1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
(Dy./Asstt.Registrar) ITAT, Nagpur