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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: S/SHRI N.S SAINI & PAVAN KUMAR GADALE
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.
Brief facts of the case are that the Assessing Officer observed that
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.
On appeal, the CIT(A) confirmed the action of the Assessing Officer.
Being aggrieved by the order of the CIT(A), the assessee is in appeal
before us.
The only argument of ld A.R. of the assessee that the disallowance
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.
After considering the rival submissions and perusing the materials on
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.
Ld D.R. could not controvert the above statement of facts filed
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.
In revenue’s appeal, the sole issue is that the CIT(A) erred in deleting
the bad debts written off of Rs.42,78,386/-.
Brief facts of the case are that the Assessing Officer observed that in
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.
On appeal, the CIT(A) observed that the assessee has written of the
amounts as irrecoverable in its books of account and, therefore, same is
allowable as bad debts to the assessee and deleted the addition.
Ld D.R. supported the order of the Assessing Officer whereas ld A.R.
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.
After considering the rival submissions and perusing the materials
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.
In the result, appeal of the assessee is partly allowed and the appeal
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