TOMAR AND BROTHERS,ETAWAH vs. INCOME TAX OFFICER, WARD-2(2)(5), ETAWAH

Learned DR, however, supported the order of ld. CIT(Appeals) pointing out that the ld. CIT(Appeals) has been just enough in reducing the disallowance made by the Assessing Officer from 10% to 7.5%. He contended that submissions of the assessee relating to past history of the net profit rate assessed of the assessee require no consideration.

We have heard the contentions of both the parties and we find merit in the contention of the ld. Counsel for the assessee. Undisputedly, in the absence of proper books of accounts maintained by the assessee, 3 | P a g e the Revenue has resorted to an adhoc disallowance of expenses being made. Though, admittedly, the assessee has no justification for the expenses claimed by it, but be that so, any adhoc exercise by the revenue authorities has to be justified and cannot be an arbitrary exercise. Even the ld. CIT(Appeals) has in so many words stated so but while applying a just and reasonable rate of disallowance, he has referred and relied upon the decision of Hon’ble Punjab & Haryana High Court in the case of CIT vs. Prabhat Kumar (supra) for applying rate of 7.5% for disallowance of expenses. Learned counsel for the assessee has rightly pointed out that the said case is not applicable to the facts of the present case .As noted in the order of ld. CIT(Appeals) himself in the case of CIT vs. Prabhat Kumar (supra), Hon’ble High Court had approved a net profit rate of 12% in a similar activities carried out by the assessee and the Ld. CIT(A) ,noting that assessee’s profit would come to 11.8% of the gross turnover after disallowance of 7.5% of the expenses,he accordingly applied rate of 7.5% to the adhoc disallowance.

Ground No. 4 relates to disallowance u/s. 40(a)(ia) of the Act amounting to Rs.9,53,000/- on account of non-deduction of tax at source on various expenses, which are mentioned in the ground reading as under :

Both the authorities below had noted several expenses incurred by the assessee to be without TDS and in absence of any cooperation from the assessee in this regard, disallowance of these expenses were made u/s. 40(a)(ia) of the Act amounting in all to Rs.9,53,000/-. The expenses which attracted impugned disallowance are as under :

Before us, the contention of the ld. Counsel is that the authorities below had noted an incorrect fact that no details had been furnished by 5 | P a g e the assessee. He contended that two replies were filed by the assessee on 09.09.2022 and 09.09.2023 on the e-portal vide e-acknowledgement No. 479853791090922 and 240859541090923 of the assessee and a chart was furnished providing the details of all the payments made for JCB, Poclane, Roller and tractor rent. He contended that it was evident from the details of all the payments were below Rs.1,20,000/- which is the limit provided for TDS. With respect to the payment of water tanker rent amounting to Rs.2,10,400/-, learned counsel fairly admitted that no details were submitted. Written submission of the assessee in this regard is reproduced hereunder :

Learned DR, however, reiterated that in absence of any details submitted by the assessee as noted by the revenue authorities, the disallowance needs to be confirmed.

Having heard the contention of both the parties, we find that the assessee has submitted as a matter of fact that the details of payment amounting to Rs.7,42,600/- which were visited with the disallowance u/s. 40(a)(ia) of the Act for non-deduction of tax at source, were submitted before the authorities below vide two replies. Even e-acknowledgement of submission made were furnished. Learned DR is unable to controvert this fact. The details submitted as reproduced above, supports the contention of ld. Counsel that none of the payments made exceeded Rs.1,20,000/-, which is a limit for tax deduction at source. The DR was unable to point out any counter to the facts and position of law. In view of the same, we hold that the payment of Rs.7,42,600/- could not be visited with the disallowance in terms of provision of section 40(a)(ia) of the Act.

Appeal of the assessee is partly allowed.