ACIT, CUTTACK vs. M/S. UTKAL HIGHWAYS, CUTTACK

Per N.S.Saini, AM

These are cross appeals filed by the revenue and the assessee against

the order of the ld CIT(A)- Cuttack, dated 27.2.2015 for the assessment

year 2010-11.

2 ITA No. 246 /CT K/ 2015 ITA No. 241/CT K/ 2015 Asse ssment Year:20 10- 11 2. In the assessee’s appeal, the grievance of the assessee is that the

addition sustained by the CIT(A) of Rs.11,18,426/- under the head

operation and maintenance expenses” and Rs.4,55,999/- under the head

“salary and wages” on estimation are without any basis and liable to be

deleted.

the assessee failed to produce details of documents regarding expenses

under the head “operation and maintenance”. Since no part of the

expenditure could be verified by the Assessing Officer despite opportunities

given to the assessee, the Assessing Officer disallowed 2% of the claim of

the expenditure amounting to Rs.11,18,426/- from the total expenditure

claimed under this head. The Assessing Officer further found that claim of

salary, wages and bogus amounting to Rs.98,05,660/- are not fully

vouched. Therefore, he disallowed Rs.4,55,999/- out of such expenses.

before us.

made by the Assessing Officer and confirmed by the CIT(A) is very high

and, therefore, the disallowance may be restricted to 1% of the expenses

under the head “operation and maintenance” and 50% under the head

“salary, wages and bonus”.

3 ITA No. 246 /CT K/ 2015 ITA No. 241/CT K/ 2015 Asse ssment Year:20 10- 11 7. On the other hand, ld D.R. relied on the order of the lower authorities.

record, we find in the statement of facts filed, the assessee has stated that

the assessee is a partnership firm and carries on the Business of Extraction,

Mechanical Loading & unloading and transportation coal form open cast

mines under MCL by deploying heavy machineries and transport vehicles.

The assessee is carrying on the same line of Business for the last 30 years.

Its accounts comes under regular scrutiny by the income tax department

for the last ten years. The assesee maintains all Books of accounts including

the Bills and vouchers against the each and every expenses claimed in the

Audited profit and loss account. The major head of expenses are the

Operation and maintenance expenses and salary and wages expenses. The

operation and maintenance expenses includes Oil and lubricant, Spares and

accessories and Repair and maintenance of heavy machineries and

transport vehicles. The salary and wages includes salary paid to the

Machines operators, transport vehicle drives, supervisors and office staffs.

The assessee maintains all Bills and vouchers against such expenses,

salary register and salary acknowledgment statement in support of the

salary payment. During the course of assessment, the Assessee furnished

all the Books of accounts, registers and the Bills and vouches for

verification. The Assessing officer verified the Books of account, registers

and vouchers in detail and found everything in order. But unfortunately,

while passing the assessment order, he disallowed 2% of the operation

4 ITA No. 246 /CT K/ 2015 ITA No. 241/CT K/ 2015 Asse ssment Year:20 10- 11 Maintenance expenses at Rs.11,18,426/-. The reasons assigned for such

disallowance is that " No part of the expenditure could be verified in spite

of repeated Notices issued". It is stated that this is base less allegation.

The Assessing officer should have specified that part of the expenses which

the assessee could not furnish for verification. Instead of doing that, the

Assessing office has disallowed randomly @2% of the expenditure. The

action of the Assessing officer is confusing. On one hand, he is saying no

part of the expenses could be verified on the other he is disallowing

randomly 2% of the entire expenses claimed. Therefore, the disallowance

is arbitrary and liable to be deleted. It is also stated that during the course

of assessment, the assessee furnished the salary register including the

acknowledgement of the employees. The Assessing officer disallowed the

salary and wages paid to the extent of Rs.4,55,999/- on the ground that

the salary and wages expenses are not fully vouched. If the salary and

wages are not fully vouched, it should have been quantified to what extent

it has not been vouched. The disallowance is without any basis.

alongwith the appeal before us during the course of hearing. Be that as it

may, as ld A.R. of the assessee before us has stated that the disallowance

made is on higher side and disallowance should be sustained at 1% of the

total expenses of Rs.11,18,426/- under the head “ operation and

maintenance expenses” and 50% of the disallowance out of expenses under

the head “salary, wages and bonus” , therefore, keeping in view the above

5 ITA No. 246 /CT K/ 2015 ITA No. 241/CT K/ 2015 Asse ssment Year:20 10- 11 stated statement of facts, which remained uncontroverted by ld D.R.,

accept the plea of ld A.R. of the assessee and modify the order of the CIT(A)

accordingly. The Assessing Officer is directed to disallow 1% of the

expenses claimed under the head “operation and maintenance” and retain

50% of the disallowance made under the head “salary, wages and bonus”.

Thus, the appeal filed by the assessee is partly allowed.

the bad debts written off of Rs.42,78,386/-.

the profit and loss account, the assessee has debited Rs.42,78,386/- as

bad debts. He observed that bad debt is allowable as deduction under

section 36(1)(vii) of the Act only if it is written off as irrecoverable in the

books of account of the assessee in the previous year in which claim for

deduction is made. He observed that the assessee failed to produce

relevant documents relating to the bad debts and, therefore, he disallowed

for the same.

amounts as irrecoverable in its books of account and, therefore, same is

allowable as bad debts to the assessee and deleted the addition.

of the assessee supported the order of the CIT(A) and relied on the decision

of Hon’ble Supreme Court in the case of TRF Limited vs CIT(2010), 323

6 ITA No. 246 /CT K/ 2015 ITA No. 241/CT K/ 2015 Asse ssment Year:20 10- 11 ITR 397 (SC), wherein, it has been held that it is necessary for the

assessee to establish that actually it has written off the amount in the

books of accounts, and it is not necessary for him to prove that the amount

has actually become bad.

on record, we find that no material has been brought on record by the

revenue to show that the assessee has not written off the debts as bad in

its books of account. Further, ld D.R. could not point out any specific error

in the order of the CIT(A). Hence, we confirm the order of the CIT(A) and

dismiss the ground of appeal of the revenue.

of the revenue is dismissed.

Order pronounced on 12 /07/2017. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 12 /07/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The assessee : M/s. Utkal Highways, Shree Vihar Colony, Tulsipur, Cuttack 2. The Revenue: JCIT, Range-2, Cuttack 3. The CIT(A)- Cuttack 4. The Pr. CIT- Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//

BY ORDER,

SR.PRIVATE SECRETARY, ITAT, Cuttack