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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: Shri N.V. Vasudevan, & Shri M. Balaganesh
This appeal of the assessee arises out of the order of the Learned CIT(A), Asansol in Appeal No. 187/CIT(A)/Asl/Cir-2/Asl/11-12 dated 18-03-2013 against the order of the Learned AO framed for the Asst Year 2009-10 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
The brief facts are that the assessee is engaged in the business of contract job with Eastern Railway. The assessee filed return of income together with the tax audit report. During the assessment proceedings, the Learned AO had made the following disallowance of expenses at the rate of 10% of respective expenditure as below:-
Nature of Expenditure Total Expenditure Expenditure disallowed @ 10% Transportation charges Rs. 2,02,432 Rs. 20,243 Travelling and Conveyance Rs. 73,627 Rs. 7,363 Hire Charges Rs.2,45,600 Rs.24,560 The assessee was asked by the Learned AO to file supporting evidences in the form of bills and vouchers to substantiate the claim of deduction. In response thereto, the assessee furnished the ledger accounts for the expenses along with some self debit vouchers. According to learned AO, the self made vouchers contained only the nature of expenditure but no specific name or address was given to whom exactly the money has been paid. None of the vouchers have any voucher number and most of them are not signed. In these circumstances, he held that the verification with regard to the genuineness and correctness of the vouchers cannot be verified. Accordingly, he disallowed 10% of respective expenditure on an estimated basis and added back to the total income of the assessee. On first appeal, the Learned CIT(A) held that the addition made on these counts are very reasonable and accordingly upheld the additions. Aggrieved, the assessee is in appeal before us on the following grounds :-
1. That on the fact and circumstance of the case the ld. CIT(A) erred in confirming the disallowance made by the A.O. on account of Transport Charges amounting to Rs.20,243/- calculated @ 10 % of total debit of Rs.202432/- which works out to 0.92 % of the total turnover whereas regular books of accounts were produced before the A.O. and transport payments were made on self made vouchers as they do not maintain bills for claiming payment on account of transport charges.
2. That on the fact and circumstances of the case, the ld. CIT(A)erred in confirming the disallowance of Rs.7,362/- calculated @ 10 % on total debit of Rs.73,627/- which works out to be 0.33 % of the total turnover whereas regular books of accounts were provided before the A.O. and traveling expenses were incurred through self made vouchers and entire expenses were incurred wholly and exclusively for the purpose of the business of the appellant.
3. That on the fact and circumstances of the case, the ld. CIT(A) erred in confirming the addition of Rs.24,560/- under the head hire charges calculated @ 10 % of the total debit of Rs.2,45,600/- which expenses is only 1.10 % of the total turnover and whereas hire charges debited is very small and incurred wholly and exclusively for the purpose of the appellant's business.
2.1. The Learned AO also disallowed 20% of total labour charges amounting to Rs. 19,75,830/- (20% of Rs. 98,79,150/-) in the assessment on an adhoc basis on the following allegations:- a) Certain names in the wage sheet contain finger prints which are made by the same person. b) Assessee did not furnish Site Supervisor’s certified copy of muster roll or wage sheet. c) Assessee did not submit any PF or ESI return to reconcile the list of employees and labourers covered thereon to substantiate his claims.
Based on the aforesaid general allegations, the Learned AO came to a conclusion that the wage sheet submitted by the assessee are mostly forged and doctored to substantiate its claim. According to him, these are mostly bogus and inflated purchases to pull down the profit margin and conceal taxable income. Accordingly, he disallowed 20% of total labour charges of Rs. 98,79,150/- which worked out to Rs. 19,75,830/- and disallowed the same in the assessment. On first appeal, the Learned CIT(A) held production of ESI /PF registers would have enabled the assessee to prove the genuineness of his claim of labour charges. He further observed that accurate comments on correctness of thumb impression can be given only by a finger print expert, but certain prominent features can be determined by any person, which has been done by Learned AO. He further observed that business of the assessee cannot be conducted without wages. He finally reduced the disallowance to Rs. 10,00,000/- in order to arrive at 10% of income to be brought as net profits from business which according to him was reasonable. Aggrieved, the assessee is in appeal before us on the following ground:- 4. That on the fact and circumstances of the case, the Id. CIT(A) erred in reducing the disallowance to the extent of Rs.1 0,00,000/- only on ad-hoc basis out of total disallowance of Rs.19,75,830/- calculated @ 20 % of the total debit whereas regular books of accounts including labour payments sheet were maintained and duly produced before the A.O. and whereas the entire expenses were incurred wholly and exclusively for the purpose of the business of the appellant.
The Learned AR argued that in the facts and circumstances of the case, there is no need to make any addition on an estimated basis as the Learned AO had not rejected the books of accounts of the assessee. Alternatively, he prayed that a reasonable estimate of 8% of turnover may be treated as taxable profits, for which, the Learned DR vehemently supported the orders of the lower authorities.
We have heard the rival submissions. We find that the learned AO had pointed out certain deficiencies in the vouchers and evidences submitted by the assessee before him and accordingly disallowance was made on an estimated basis which resulted in profit percentage of 14.5% which was brought down to 10% by the Learned CIT(A) as against the net profit returned by the assessee at 5.77%. In the facts and circumstances of the case, we find that the estimation of profits at 8% of turnover would meet the ends of justice. The Learned AO is accordingly directed to adopt 8% of turnover as business profits of the assessee. Accordingly, the ground nos. 1 to 4 raised by the assessee are allowed for statistical purposes.
We find that the other ground 5 to 7 are general in nature and does not require any adjudication in view of our findings given hereinabove.
In the result, the appeal of the assessee is allowed for statistical purposes. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 6-4 - 2016