ASSISTANT COMMISSIONER OF INCOME-TAX vs. MR. SANJAY RAMBHAU SHINDE,, AURANGABAD

The cross appeals filed by the Revenue and assessee were heard together and are being disposed of by this consolidated order for the sake of convenience.

The Revenue in ITA No.67/PUN/2014 has raised following grounds of appeal:-

The assessee in ITA No.443/PUN/2014 has raised following grounds of appeal:-

Briefly, in the facts of the case, the assessee was an individual, whose case was selected for scrutiny. Several opportunities were given to the assessee by the Assessing Officer. There were certain discrepancies noted in the books of account and reference was made for special audit under section 142(2A) of the Act. The special auditor prepared the audit report under section 142(2A) of the Act based on the documents provided to him by the Assessing Officer, as the assessee did not cooperate in the audit proceedings. He thus, recasted the Cash Book, General and Bank Book based on the details made available to him and prepared fresh Balance Sheet and Profit and Loss Account. In the credit side, the receipts of labour contract business as per 26AS taken at ₹ 48,87,211/- as against ₹ 46,42,531/- shown by the assessee. The other entries were also recasted. Another point which was noted was the claim of expenditure, wherein major expenses were on salary and wages of ₹33,29,493/- The auditor gave a remark that the Assessing Officer may allow some expenses

The CIT(A) in respect of first estimation of profit and disallowances on salary and wages claimed by the assessee, considered the issue together and held that the percentage adopted by the Assessing Officer in the labour oriented business was high and hence, he observed that the disallowance of ₹ 26,00,520/- out of salary and wages expenditure was not justified. In respect of addition out of other expenses, wherein the Assessing Officer had allowed 25% of total expenditure, the CIT(A) held that ends of justice would be met if the disallowance is restricted to 40%. Another addition made in the hands of assessee was on account of cash deficit, wherein the CIT(A) held that on proportionate basis the disallowance has to be worked out and though the contention of assessee was not proved to the hilt, was held to be reasonable by the CIT(A) and addition was confirmed to 50% of ₹ 2,22,976/-

Both the assessee and the Revenue are in appeal against the order of CIT(A).

Shri Abhay A. Avachat appeared on behalf of the assessee and Shri Mukesh Jha appeared on behalf of the Revenue and put forward their contentions.

We have heard the rival contentions and perused the record. The first issue raised by the assessee in ground of appeal No.1 is against estimation of profit in the hands of assessee and the Revenue is also in appeal against the order of CIT(A) vide ground of appeal No.1 in scaling down the estimation of profit. The ground of appeal No.2 raised by the assessee is against restriction of disallowance under several heads to the extent of 40% by the CIT(A) totaling ₹ 3,25,776/-. The limited plea raised by the learned Authorized Representative for the assessee before us is that it can justify its claim of salary expenses to the extent of ₹ 33,29,493/- and even for other expenses totaling ₹ 3,25,776/-. He stated that inadvertently, these details were not available before the Assessing Officer in assessment proceedings. In the totality of the above said facts and circumstances and looking at the disallowances made in the hands of assessee especially where the assessee is engaged in labour oriented business, the claim of assessee of having paid labour charges cannot be denied. So, following the principles of natural justice, we deem it fit to restore the issue of claim of salary at ₹ 33,29,493/- and claim of other expenses at ₹ 3,25,776/- back to the file of Assessing Officer. The assessee is directed to justify the claim along with supporting vouchers and the Assessing Officer is directed to allow the claim of assessee after verifying the same and providing reasonable opportunity of hearing to the assessee, who is also directed to cooperate and produce the evidence before the Assessing Officer. The Assessing Officer shall compute the balance income in the hands of assessee accordingly. The grounds of appeal 1 and 2 raised by the assessee and grounds of appeal No.1 and 2 raised by the Revenue are thus, allowed for statistical purposes.

Now, coming the last issue raised by way of ground of appeal No.3 by the assessee and also ground of appeal No.3 raised by the Revenue, which is

In the result, both the appeals of assessee and the Revenue are partly allowed.