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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
This appeal by the Department is directed against the Order dated 7.3.2012 of Ld. CIT(A), Rohtak pertaining to assessment year 2008-09. 2. The grounds raised in the appeal of the Department read as under: “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the additions made by the AO amounting to Rs. 3,14,499/- on account of withdrawing the deduction u/s. 80P.
2. On the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the additions made by the AO amounting to Rs. 21,30,907/- on account of wages.
3. On the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the additions made by the AO amounting to Rs. 18,000/- on account of rent.
4. On the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the additions made by the AO amounting to Rs. 45,810/- on account of other expenses.”
The brief facts of the case are that the assessee is a co-operative Labour & Construction Society and filed return of income declaring NIL income after claiming 100% deduction of income u/s. 80P(2)(a)(vi) of the Act. In the absence of any evidence led by the assessee, the AO disallowed the deduction u/s. 80P(2)(a)(vi) of Rs. 3,14,499/- and only allowed deduction of Rs. 50,000/- u/s. 80P(2)(c) vide his assessment order dated 21.12.2010 passed u/s. 144 of the I.T. Act, 1961. 3.1 As the assessee did not produce the books of accounts, the AO made the following disallowances out of the various expenses claimed in the P&L a/c. (i) An amount of Rs 71,03,025/- was claimed as salary and wages payments but no documents were produced in support of the claim. Since the work carried out by the appellant society being labour intensive, the AO allowed only 70% of the expenses thereby making an addition" of Rs 21,30,907/- (ii) Payment on account of rent of Rs 18,000/- has also been disallowed in the absence of evidence. (iii) Out of the other expenses of Rs 1,52,697/-, the AO similarly disallowed 30% of expenses amounting to Rs 45,810/-. The AO made an addition of Rs 21,94,717/- as disputed in ground no. 2, 3 & 4 vide his order dated 21.12.2010 passed u/s. 144 of the I.T. Act, 1961.
Against the above assessment order, assessee appealed before the Ld. CIT(A) who vide his impugned order dated 7.3.2012 has partly allowed the appeal of the assessee. 5. Aggrieved, Revenue is in appeal before the Tribunal. 6. Ld. DR supported the order of the AO and reiterated the contentions raised in the grounds of appeal.
In this case, Notice of hearing to the assessee was sent by the Registered AD post, in spite of the same, assessee, nor his authorized representative appeared to prosecute the matter in dispute, nor filed any application for adjournment. Keeping in view the facts and circumstances of the present case and the issue involved in the present Appeal, we are of the view that no useful purpose would be served to issue notice again and again to the assessee, therefore, we are deciding the present appeal exparte qua assessee, after hearing the Ld. DR and perusing the records.
We have heard the Ld. DR and perused the records available with us, especially the orders of the revenue authorities. 8.1 With regard to issue involved in ground no. 2, 3 & 4 relating to addition of Rs. 21,30,907/- on account of wages; addition of Rs. 18,000/- on account of rent; and addition amounting to Rs. 45,810/- on account of other expenses, thus totaling to Rs. 21,94,717/- are concerned. We find that the assessee did not produce the books of accounts, the AO made the following disallowances out of the various expenses claimed in the P&L a/c. (i) An amount of Rs 71,03,025/- was claimed as salary and wages payments but no documents were produced in support of the claim. Since the work carried out by the appellant society being labour intensive, the AO allowed only 70% of the expenses thereby making an addition" of Rs 21,30,907/- (ii) Payment on account of rent of Rs 18,000/- has also been disallowed in the absence of any evidence. (iii) Out of the other expenses of Rs 1,52,697/-, the AO disallowed 30% of expenses amounting to Rs 45,810/-. 8.2 The AO made an addition of Rs 21,94,717/- as disputed in ground no. 2, 3 & 4 raised in the present Appeal, vide order dated 21.12.2010 passed u/s. 144 of the I.T. Act. We note that during the appeal proceedings, the AR submitted that the books of the assessee were lying with the Co-operative Department, Govt. of Haryana for their audit and therefore the assessee could not produce them before the AO during the assessment proceedings. The AR moved an application u/r 46A to produce the books of accounts before the AO. Having regard to the facts and circumstances of the case, the additional evidence was admitted in terms of the provisions of rule 46A. The remand report of the AO along with his comments on the written submissions of the assessee and the rejoinder of the assessee have been taken on record. In the remand report the AO stated that the assessee has produced the duly audited books of accounts. He has however stated that the correctness of the books of accounts is doubtful and the genuineness cannot be accepted in toto. The AR submitted before the Ld. CIT(A) that the duly audited books have been produced before the AO which have been test checked by him. Ld. CIT(A) has observed that it is not proper on the part of the AO to doubt the correctness and genuineness of audited books of accounts without pointing any defect/discrepancy in the entries or the bills/vouchers produced before him. The report of the AO that the books of accounts cannot be accepted in toto has no meaning. 8.3 We further find that the AO disallowed part of the expenses amounting to Rs.21,94,717/- in the absence of books of accounts. The books of accounts have since been produced before the AO and the AO has not pointed any specific defect/ discrepancy either in the books or in the bills/vouchers. Without any such factual finding, the statement of the AO that the books of accounts are doubtful and genuineness cannot be accepted in toto has no meaning. In view of the above, the disallowance made by the AO of Rs. 21,94,717/- was rightly deleted by the Ld. CIT(A). Therefore, we are of the considered view that the Ld. CIT(A) has passed a well reasoned order on the issues in dispute, which does not need any interference on our part, hence, the ground nos. 2, 3 & 4 raised by the Revenue stand dismissed.
With regard to issue involved in ground no. 1 relating to deletion of addition amounting to Rs. 3,14,499/- on account of withdrawing the deduction u/s. 80P is concerned, we find that the AO submitted in the remand report that ledger copy of labour reflects that payments have been made to both members and non members of the society. In this regard the AR submitted that out of the total expenditure of Rs 70,31,025/-, an amount of Rs 54,73,025/- was incurred on purchase of material and Rs 15,58,000/- was incurred on the salary and wage payment. Out of the total wage payments of Rs 15,58,000/- only Rs 1,54,000/- was paid to non members and the remaining amount of Rs 14,04,000/- has been paid to the members. In the case of the assessee for the AY 2005-06 wherein proceedings u/s 147/148 were dropped as it was seen from the wage register that the entire labour payments of Rs 16,61,135/- was made to the members only. The AR further furnished a copy of the assessment order u/s 143 (3) of the assessee for the AY 2007-08 wherein deduction u/s 80P (2) (a) (vi) was calculated on proportionate basis on the wages paid to non members. The AR therefore requested that deduction u/s 80P (2) (a) (vi) for the year under consideration may also be calculated on proportionate basis on the wages paid to non members. The disallowance of deduction u/s 80P (2) (a) (vi) comes to Rs 31,100/- as per the working given below:
Net profit x wages paid to non-members= 314499 x 154000= 31,100/- Total wages paid 1558000 9.1 For the purpose of execution of works contract, while the collective disposal of members of the society has been undertaken, a nominal amount had to be paid to non-members in view of the nature of the works contract. In view of the above, Ld. CIT(A) has rightly held that assessee is entitled for deduction u/s 8OP (2) (a) (vi). However, as some part of the wages have been paid to non-members, deduction u/ s 8OP (2) (a) (vi) requires to be calculated on proportionate basis on the wages paid to non-members, as done in the assessment order u/s. 143 (3) for the AY 2007-08. The taxable income of the assessee for the year therefore comes to Rs 31,100/-. In the background of the aforesaid discussions, we are of the view that the Ld. CIT(A) has passed a well reasoned order on the issue in dispute, hence, we uphold his finding on the issue in dispute and dismiss the ground no. 1 raised by the Revenue.
In the result, appeal of the Revenue is dismissed. Order pronounced in the Open Court on 04/12/2015.