Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi
Date of concluding the hearing : May 12, 2016 Date of pronouncing the order : June 03, 2016
Assessment year: 2009-2010 & Assessment year: 2009-2010 Page 2 of 7
O R D E R Per Shri P.M. Jagtap:- These two appeals, one filed by the assessee being Revenue being are cross appeals, which are directed against the order of the ld. Commissioner of Income Tax (Appeals), Asansol dated 18.03.2013.
As pointed out by the ld. counsel for the assessee, at the outset, the tax effect involved in the appeal of the Revenue is less than the revised monetary limit recently fixed by the CBDT vide Circular No. 21/2015 dated 10th December, 2015 at Rs.10,00,000/- for filing the appeal before the Tribunal and this position clearly evident from the grounds raised by the Revenue in this appeal is not disputed even by the ld. D.R. In Circular No. 21/2015 (supra) recently issued by the CBDT, the monetary limit for filing the appeal by the Revenue before the Tribunal has been increased to Rs.10,00,000/- and as clarified in the said Circular, the said monetary limit is applicable retrospectively even to the appeals pending before the Tribunal. The CBDT has also instructed that such pending appeals below this specified tax limit of Rs.10,00,000/- may be withdrawn/ not pressed. Keeping in view the instruction given by the CBDT vide Circular No. 21/2015 dated 10.12.2015, which is squarely applicable in the present case, the appeal filed by the Revenue is treated as withdrawn/not pressed and dismissed accordingly.
3. The grounds raised by the assessee in its appeal read as under:- “(1) That on the fact and circumstance of the case the Id. CIT(A) erred in confirming the disallowance of depreciation of Rs 487800, in the case of Hywa (dumper) WB-37B-2627 purchased from Rajesh Lodha on the ground that the appellant was not the owner of the vehicle where as substantial amount was paid and the balance sum was agreed to be paid in instalment and Assessment year: 2009-2010 & Assessment year: 2009-2010 Page 3 of 7
where as no hire charges was debited in respect of such dumper and where as the dumper was used in the business of the appellant.
2. That on the fact and circumstances of the case, the Id. CIT(A) erred in confirming the disallowance of Rs.11,69,614/- out of Rs.20,00,000/- disallowed by the assessing officer on ad-hoc basis where as regular books of accounts including bills and vouchers were produced before the AO and he could not pin point or single expenditure which was incurred otherwise then for the purpose of business of the appellant and where as the books of accounts were not rejected and were as the entire expense were incurred wholly and exclusively for the purpose of the business.
That on the fact and circumstances of the case, the Id. CIT(A) erred in not directing the AO to treat the sum of Rs.23,73,702/- as income from business where as the Assessing Officer has assessed this sum as income from other sources, which action of the AO was not correct as hire charges were incidental to the business of the appellant and is assessable under the head business only.
At the time of hearing before us, the ld. counsel for the assessee has not pressed Ground No. 1. The same is accordingly dismissed as not pressed.
The issue involved in Ground No. 2 of the assessee’s appeal relates to the disallowance of Rs.20,00,000/- made by the Assessing Officer out of various expenses, which is sustained by the ld. CIT(Appeals) to the extent of Rs.11,69,614/-.
The material facts relevant to this issue are that the assessee is a partnership firm, which is engaged in the business of executing civil contracts and erecting buildings and structures mainly for BHEL. The return of income for the year under consideration was filed by it on 30.09.2009 declaring total income of Rs.37,61,377/-. In the said return,
Assessment year: 2009-2010 & Assessment year: 2009-2010 Page 4 of 7 various expenses aggregating to Rs.9,05,67,687/- were claimed by the assessee as against the total receipts. During the course of assessment proceedings, the claim of the assessee for the said expenses was examined by the Assessing Officer. On such examination, he found that many expenses claimed by the assessee were paid in cash through self- made vouchers and the same were not supported by proper third party evidence. He also found that some of the expenses claimed by the assessee were in the nature of donation, etc., which were not allowable as deduction. He also found that the names of the recipients in respect of certain expenditure were not available with the assessee. When these adverse findings were confronted by the Assessing Officer to the assessee, the later agreed that he could not produce the supporting evidence in respect of certain expenditure due to some unavoidable reasons. He also said to have no objection for the Assessing Officer to determine his business income at 8% of the turnover after allowing deduction for material supplied by the contractee as against the profit of 6.8% declared in the return of income. This offer of the assessee was not found fully acceptable by the Assessing Officer. According to him, the net profit of 6.8% declared by the assessee was very low and keeping in view the adverse findings recorded by him in respect of various expenses claimed by the assessee, the disallowance of Rs.20,00,000/- was made by the Assessing Officer out of various expenses claimed by the assessee.
The disallowance of Rs.20,00,000/- made by the Assessing Officer out of various expenses was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and the following submission was made by the assessee before the ld. CIT(Appeals) in support of its case on this issue:- “Disallowance of expenditure amounting to Rs.20.00 lacs on ad-hoc basis: The Assessing Officer noticed that a substantial amount of expenditure is debited in P&L A/c. He further pointed out that some of the expenses are not subject to third party verification and some are covered by self made vouchers only. He also pointed out that Assessment year: 2009-2010 & Assessment year: 2009-2010 Page 5 of 7
A.R. has given no objection if the income is estimated @8% of the total turnover subject to further deduction on account of interest on capital to partners and remuneration to partners.
First of all, the Assessing Officer has not brought out a specific case where the expenditure is not verifiable from the third party. He has also not brought out on record the details of expenditure which are covered by self made vouchers only. It is true that In a contract business some of the expenses always Incurred on self made vouchers after obtaining the signature/thumb impression of the recipient and is always allowable as business expenditure. The assessee is a contractor and maintains regular books of accounts supported by all bills and vouchers and they were produced before the Assessing Officer in course of assessment proceedings, however a proposal came from the Assessing Officer that he wants to estimate the income @8% of the turnover and to this proposal the authorized representative appearing before him agreed on the condition that he will not make any disallowances when the income estimated is @8%. But the Assessing Officer did not do so and made various disallowances and in order to cover up the disallowance of expenditure a huge sum of Rs. 20.00 lacs, he has given the logic of 8% as agreed by the A.R. In fact, the entire expenses have been incurred wholly and exclusively for the purpose of business. No part of it is either capital expenditure or personal in nature. The various judicial pronouncements have adversely commented on ad-hoc disallowance of expenses as done by the present Assessing Officer.
I, therefore request you to kindly delete the entire disallowance of Rs.20.00 lacs made by the Assessing Officer”.
The above submission made by the assessee was not found fully acceptable by the ld. CIT(Appeals) and he proceeded to sustain the disallowance of Rs.20,00,000/- made by the Assessing Officer to the extent of Rs.11,69,614/- for the following reasons given in paragraph no. 19 & 20 of his impugned order:- “19. I had considered the contents of letter given during assessment, the views of Assessing Officer and the appeal notes. The thrust in appeal is that the condition of estimation at 8% admitted before appellant was subject to "he will not make any disallowance". I had gone through the contents of the letter. It is stated that "I have no objection if you assessed or determined the profit of the firm the tune of 8% on turnover after allowing material deduction which supplied by Assessment year: 2009-2010 & Assessment year: 2009-2010 Page 6 of 7
contractee, before allowing interest on capital and remuneration". Therefore the condition is implicitly present. 20. The addition sustained in appeal in para 3 to 15 of this order is as under:- (a) Artificial disallowance u/s 1,57,000 40(a)(ia) (b) Restriction of claim on 1,86,388 NTS 352 (South) 4,87,000 (c) Hywa depreciation 8,30,388
If the contention that above are to be absorbed in the same then the addition is to be restricted to Rs.11,69,614/-. This is the minimum to be sustained out of Rs.20,00,000/-“.
We have heard the arguments of both the sides and also perused the relevant material available on record. Besides reiterating the submissions made before the ld. CIT(Appeals), the ld. counsel for the assessee has contended that no specific or material defects are found by the Assessing Officer in the vouchers maintained by the assessee in support of its claim for various expenses. We are unable to accept this contention of the ld. counsel for the assessee. It is observed that specific and material defects were pointed out by the Assessing Officer in the vouchers maintained by the assessee in support of the various expenses and when the same were confronted by him to the assessee during the course of assessment proceedings, the assessee not only failed to rebut or controvert the same but also agreed for a disallowance out of various expenses by requesting the Assessing Officer to determine his profit at 8% of the turnover as against 6.8% declared in the return of income. Although the Assessing Officer did not accept this offer of the assessee for the reasons given in the assessment order, the ld. CIT(Appeals) vide his impugned order has restricted the disallowance of Rs.20,00,000/- made by the Assessing Officer on this issue to Rs.11,69,614/- on the basis of the offer made by the assessee himself. We, therefore, find no justifiable reason to interfere
Assessment year: 2009-2010 & Assessment year: 2009-2010 Page 7 of 7 with the impugned order of the ld. CIT(Appeals) on this issue and upholding the same, we dismiss Ground No. 2 of the assessee’s appeal.
As regards Ground No. 3, the ld. counsel for the assessee has submitted that the issue involved therein has virtually become infructuous as a result of the relief allowed by the ld. CIT(Appeals) by allowing the claim of the assessee for depreciation, which now stands confirmed as a result of dismissal of the Revenue’s appeal on account of low tax effect. Ground No. 3 accordingly is dismissed as infructuous.