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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI ASHWANI TANEJA
This is an appeal by the assessee against the order dated 8th November 2010, passed by the learned Commissioner (Appeals)-11, Mumbai, for the assessment year 2007-08. The assessee is aggrieved with the disallowance of expenditure of an amount of ` 10,15,157, made by the Assessing Officer and confirmed by the first appellate authority.
M/s. Metafeild Spintex Pvt. Ltd. 2
Briefly stated the facts are, assessee a company is engaged in the business of manufacturing yarns and trading in fabrics. For the assessment year under consideration, the assessee filed its return of income on 31st October 2007, declaring total income at nil. During the assessment proceedings, the Assessing Officer, while examining the genuineness of expenditure claimed by the assessee found that there are no bills and vouchers in respect of cash payment of ` 16,91,928, which comprises of the following:-
Wages and labour charges ` 10,57,576 Compensation ` 2,41,581 Repair and Maintenance ` 3,92,771 –––––––––– ` 16,91,928 –––––––––– He observed, when the assessee is having regular employees and incurred expenses on software and staff welfare, further expenses on wages and labour in the absence of supporting evidence is doubtful. He also observed that self-made vouchers and kachha receipts cannot be considered to be sufficient evidence for allowing the claim. Relying upon certain judicial precedents, he ultimately disallowed 60% of the expenditure claimed which worked out to ` 10,15,157. Though the assessee preferred appeal challenging the disallowance but the learned Commissioner (Appeals) also upheld the disallowance.
M/s. Metafeild Spintex Pvt. Ltd. 3 3. The learned Counsel for the assessee, at the outset, submitted before us a petition under rule 29 of I.T. Rules, seeking permission to furnish certain documents as additional evidence in support of the expenditure claimed. It was submitted in the petition though, these documents were produced before the Assessing Officer and verified but he has not referred to them while making disallowance. He submitted as these documents have a crucial bearing on the issue, they were admitted as additional evidence. He submitted, assessee has maintained regular books of account as provided under the provisions of statute and the Assessing Officer has not pointed out any specific defect or deficiency in the books. He, therefore, submitted, when the assessee has maintained regular books of account and all expenditures including the labour charges are supported by proper bills and vouchers no disallowance can be made.
The learned Departmental Representative has no objection if the issue is restored back to the file of the Assessing Officer for deciding afresh after verifying the additional evidence submitted by the assessee.
We have considered the submissions of the parties. As could be seen, out of the expenditure claimed, the Assessing Officer has disallowed 60% and allowed 40%. Thus, Assessing Officer accepts the M/s. Metafeild Spintex Pvt. Ltd. 4 fact that assessee has incurred some expenditure on labour payment, etc. However, on what basis he has quantified disallowance @ 60% is not forthcoming. When assessee claims to have maintained regular books of account as required under statute the Assessing Officer must provide valid reasons why entries in the books of account are not acceptable. On a perusal of the document sought to be produced as additional evidence, which are available from Pages–54 onwards of assessee’s paper book, it is noticed that they are ledger extracts, muster rolls, receipts and various other documents. According to the learned Counsel for the assessee, though, these documents were produced before Assessing Officer, ignoring them, he has disallowed assessee’s claim. However, this claim of the learned Counsel for the assessee is not forthcoming from assessment order. Be that as it may, considering the fact that these documents may have some bearing on assessee’s claim, we admit them as additional evidence. However, keeping in view the fact that these additional evidences were not verified either by Assessing Officer or by learned Commissioner (Appeals), we consider it fair and proper to remit the issue back to the file of the Assessing Officer for deciding afresh after considering the additional evidence and any other material which the assessee may produce. Needless to say, Assessing Officer must afford reasonable opportunity of being heard to the assessee. We make it clear, our aforesaid direction is restricted to claim of expenditure of ` 16,91,628.
M/s. Metafeild Spintex Pvt. Ltd. 5
In the result, assessee’s appeal stands allowed for statistical purposes. Order pronounced in the open Court on 30.10.2015