DCIT, BHUBANESWAR vs. TRAHI JAGANNATH CONSTRUCTION PVT. LTD., BHUBANESWAR

Per N.S.Saini, AM

This is an appeal filed by the revenue against the order of the

CIT(A)-1, Bhubaneswar dated 30.3.2015 for the assessment year 2010-

2011.

the CIT(A) erred in deleting the addition of Rs.8,33,074/- under the head

incentive, commission, etc.”.

2 ITA No . 300/CT K/ 2015 Asse ssment Year : 20 10- 201 1 3. The brief facts of the case are that the Assessing Officer found that

the assessee has claimed expenses of Rs.1,65,56,746/- towards

incentives, brokerage and commission as under:

1) Incentive with TDS : Rs.42,32,601/-

2) Incentive to staff -P : Rs.27,96,100/-

3) Incentive to staff : Rs.10,25,222/-

4) Incentive : Rs.53,05,723/-

5) Brokerage and commission : Rs.31,97,100

Total: Rs.1,65,56,746/-

The Assessing Officer observed that although the list of payments was

furnished but it was not explained how such payments relate to land

transactions. The Assessing Officer further found that TDS has been

deducted for an amount of Rs.42,32,601/-. Hence, the Assessing Officer

disallowed Rs.12,32,414/- being 10% on estimate basis for the amount of

Rs.1,23,24,145/- (Rs.1,65,56,746 – Rs.42,32,601/-) and added the same

to the income of the assessee.

Assessing Officer before estimating the disallowance. The Assessing

Officer has himself admitted that the list of expenses runs 49 pages and

no sample enquiries were made to test the genuineness of the claim of

expenditure. The CIT(A) further observed that TDS has been made on

certain incentives. The iincentives paid to staff should not have been

subjected to the estimated disallowance. The Assessing Officer could have

3 ITA No . 300/CT K/ 2015 Asse ssment Year : 20 10- 201 1 reservations regarding payment of brokerage & commission for

Rs.31,97,100/-and incentives of Rs.53,05,723/-. He observed that the

estimate made by the Assessing Officer is wild one, hence the same

requires modification. Since the assessee has not supported the expenses

in the nature of brokerage & commission (Rs.31,97,100) and incentive

(Rs.53,05,723/-) totaling to Rs.85,02,823/-, the CIT(A) found it justifiable

to restrict the disallowance to 3% of such expenses, which comes to

Rs.2,55,085/-. He also further observed that since provisions of section

194H have been violated, the Assessing Officer was justified in disallowing

expenses of Rs.1,44,255/-. Accordingly, the CIT(A) restricted the

disallowance to Rs.3,99,340/- and allowed relief of Rs.8,33,074/- to the

assessee.

supported the order of the Assessing Officer.

lower authorities, we find that the Assessing Officer has made

disallowance on estimate basis without conducting enquiries although the

list of payments made by the assessee was furnished. As the details were

before the Assessing Officer, he could have test checked the genuineness

of incentives paid to different persons. No specific error could be pointed

out by ld D.R. in the findings of the CIT(A) in restricting the disallowance

to 3% as against 10% estimated by the Assessing Officer. In view of

4 ITA No . 300/CT K/ 2015 Asse ssment Year : 20 10- 201 1 above, we find no good and justifiable reason to interfere with the order

of the CIT(A), which is hereby confirmed and ground of appeal of revenue

is dismissed.

the CIT(A) erred in deleting addition of Rs.26,10,773/- under the head

“Project & land development expenses”.

the assessee has incurred expenses of Rs.5,22,15,468/- towards project

& land development expenses. According to the Assessing Officer, the

assessee failed to explain the nature and basis of such high expenses.

Therefore, he disallowed an amount of Rs.26,10,773/- @5% of

Rs.5,22,15,468/- on estimate basis.

furnished all the details and documents and explained the expenses made

during the assessment proceedings. He further observed that no

enquiries whatsoever were made by the Assessing Officer to find out that

the expenses are not genuine or any defects could be pointed out in the

bills & vouchers. Hence, the CIT(A) deleted the disallowance made by the

Assessing Officer.

that the assessee could not explain the nature and basis of expenses

5 ITA No . 300/CT K/ 2015 Asse ssment Year : 20 10- 201 1 before the Assessing Officer and, therefore, the CIT(A) was not justified

in deleting the addition.

authorities and materials available on record. We find that no material

could be brought before us by ld D.R. to controvert the above findings of

the CIT(A) that the Assessing Officer has not pointed out any defects in

the bills and vouchers furnished by the assessee. Therefore, we confirm

the order of the CIT(A) and dismiss the ground of appeal of the revenue.

the CIT(A) erred in deleting the addition of Rs.1,59,515/- under the head

“payment made in respect of prize and gift”.

Rs.31,90,319/- towards payments prizes and gifts. The Assessing Officer

observed that the assessee failed to furnish the primary documents/

evidence to substantiate that the expenses have been made wholly and

exclusively for the purpose of business. Therefore, he estimated the

disallowance @ 10% of Rs.31,90,319/- which comes to Rs.3,19,031/-.

@ 5% of Rs.31,90,319/- as against Rs.3,19,031/- estimate by the

Assessing Officer on the ground that all the expenses may not be for

business purposes.

6 ITA No . 300/CT K/ 2015 Asse ssment Year : 20 10- 201 1 17. During the course of hearing, ld D.R. relied on the order of the

Assessing Officer. He could not point out any specific error in the findings

of the ld CIT(A) that since all evidences were not produced, the expenses

have to be estimated. However, since estimate is on higher side, he

reduced the disallowance to Rs.1,59,516/- to meet the ends of justice. In

view of above, we do not find any good and justifiable reason to interfere

with the order of the ld CIT(A), which is hereby confirmed and the ground

of appeal of the revenue is dismissed.

Order pronounced in the open court on 21/09/2017.

Sd/- sd/-

(Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER

Cuttack; Dated 21 /09/2017 B.K.Parida, SPS

Copy of the Order forwarded to : 1. The Appellant : DCIT, Circle 1(2) Bhubaneswar. 2. The Respondent. Trahi Jagnnath Construction (P) Ltd., Plot No.481, Sahid Nagar, Bhubaneswar 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT-1, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. BY ORDER, //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack