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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
The captioned appeal is preferred by the assessee and is directed against the impugned order dated 27/02/2015 of CIT(A)-32, Mumbai, pertaining to the assessment year 2011-12, which in turn has arisen from an order passed by the Assessing Officer dated 09/01/2014 under section 143(3) of the Income Tax Act, 1961( in short “the Act”).
In this appeal, the only grievance of the assessee is that the lower authorities have erred in sustaining adhoc disallowance of 10% of total
(Assessment Year : 2011-12) expenditure incurred towards casual labour and other expenses being telephone charges, business promotion expenses, labour welfare expenses, miscellaneous expenses and travelling expenses.
At the time of hearing, the Ld. Representative for the assessee explained that the assessee is an individual, who is carrying on the business of work contractor and interior decorator. The lower authorities disallowed Rs.1,13,585/-, out of total casual labour expenditure of Rs.11,35,850/- in an adhoc manner. Similarly, adhoc disallowance @10% of total expenditure on various expenses was made for Rs.18,922/-. The only plea raised by the assessee is that the accounts were audited and no specific instance has been brought by the lower authorities to say that any particular expenditure was unvouched or was incurred for non business purposes. In this context, it was also pointed out that the profit rate shown by the assessee is 11.32%, which is otherwise also reasonable considering even the presumptive taxation profit rate of 8%, is considered adequate.
On the other hand, Ld. Departmental Representative for the Revenue submitted that payments were made to casual labours and, therefore, in the absence of proper records, 10% of expenses were rightfully disallowed.
I have considered the rival submissions. Ostensibly, the entire addition is based on the perception of the Assessing Officer that certain
(Assessment Year : 2011-12) expenses must have been incurred by the assessee for personal and/or for non business purposes. However, the relevant discussion in the assessment order does not show any specific instance of such nature being brought out by the Assessing Officer in spite of the fact that assessee had filed his return of income based on audited financial statements, which were very much available with the Assessing Officer. Therefore, such adhoc disallowance in my view does not merit any sustenance. Accordingly, I set aside the order of the CIT(Appeals) and direct the Assessing Officer to delete the addition of Rs.1,13,585/- out of casual labour expenses and Rs.18,922/- out of other expenses.
In the result, the appeal of the assessee is allowed as above. Order pronounced in the open court on 29/02/2016.