DCIT, SAMBALPUR vs. M/S. RAM KUMAR AGRAWAL ENGINEER PVT. LTD., BOLANGIR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND KULDIP SINGH JUDICIAL MEMBER

ITA No. 74/CTK/2015 Assessment Year :2010-2011

DCIT, Circle 2(1), Sambalpur Vs. Ram Kumar Agarwal Engineer Pvt Ltd., AT: Rly Station Road, PO;Dist: Bolangir PAN/GIR No. AADCR 1564 q (Appellant) .. ( Respondent)

Assessee by : Shri Nakul Agarwal, AR Revenue by : Shri A.Tigga, DR

Date of Hearing : 25/04/ 2017 Date of Pronouncement : 28 /04/ 2017

O R D E R Per N.S.Saini, AM This is an appeal filed by the revenue against the order of CIT(A)-

1, Bhubaneswar, dated 14.11.2016 for the assessment year 2010-2011.

restricting the disallowance to 1% as against the disallowance made by

the Assessing Officer.

lower authorities and materials available on record. The brief facts of

the case are that the Assessing Officer found that the assessee had made

purchase of substantial amount from unregistered dealers on account of

2 ITA No. 74/CT K/ 2015 Asse ssment Year :20 10- 201 1 dust, bolder, sand, stone, murrom, chips & metals. Before the Assessing

officer, the assessee furnished the ledger copy of expenses, item-wise

wherefrom, he observed that the assessee had made cash payment on

different dates each payment being below Rs.20,000/-. When the

Assessing Officer required the assessee to furnish party-wise list of

above expenses, the assessee expressed his inability to furnish party-

wise list. However, the assessee submitted that the above purchases

were made from unregistered dealers from the different site of works

and the suppliers are small traders having no PAN, TAN or TIN . The

unregistered suppliers do not issue bills & vouchers for their sale of

goods. Since the assessee could not furnish the partywise list and

vouchers to verify the genuineness of expenses under these heads, the

Assessing Officer disallowed 3 to 4% of the expenses of Rs.22,37,650/-

of 3 to 4% estimated by the Assessing Officer on the ground that the

assessee was doing the business in the remote area and payment in

cash may not be avoided while procuring the materials from the small

suppliers.

appeal before us.

disallowance out of genuine business expenditure can be made by the

Assessing Officer. He submitted that the materials were purchased at

3 ITA No. 74/CT K/ 2015 Asse ssment Year :20 10- 201 1 the worksites from small traders. He submitted that the materials were

purchased due to business exigencies in the remote areas where there

was no banking facilities and hence, no disallowance can be made out of

the same. The genuineness of the expenses has not been doubted either

by the Assessing Officer or by the CIT(A) and the disallowance should

be deleted.

available on record, we find that the Assessing Officer has estimated

the disallowance @ 3% to 4% of the total expenses debited in the profit

and loss account on the ground that the assessee could not produce bills

from the parties from whom purchases were made. The contention of

the assessee is that these purchases were made from small traders at

the worksites of the assessee out of business exigencies. It was

therefore, his submission that these were genuine business expenditure

and no disallowance can be made u/s.40A(3) of the Act. It has also

been argued and submitted by ld A.R. that the genuineness of the

expenditure is not doubted and it is not the case of the revenue that

the assessee has claimed bogus expenditure to reduce its income.

Therefore, is was prayed for deletion of adhoc disallowance of 1%

confirmed by the CIT(A).

lower authorities and materials available on record. We find that the

4 ITA No. 74/CT K/ 2015 Asse ssment Year :20 10- 201 1 Assessing Officer has estimated the disallowance without conducting any

enquiry as noted by the CIT(A). No material has been brought on record

by the revenue to disbelieve the contention of the assessee that the

materials were purchased from the small traders in remote areas and

were compelled to make payment in cash on account of business

expediency. This plausible explanation of the assessee has not been

found to be false by the Assessing Officer or by the CIT(A). Further, the

genuineness of the expenditure is not in doubt or debate. Hence, we find

no good reason to interfere with the order of the CIT(A). Hence, we

dismiss the grounds of appeal of the revenue

SR.PRIVATE SECRETARY ITAT, Cuttack