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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI JAMLAPPA D BATTULL
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-I, Raipur dated 16.05.2016, which in turn arises from the order dated 25.02.2015 passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) for assessment year 2012-13. Before us the assessee has assailed the impugned order on the following grounds of appeal:
“1. Because, the Ld. Commissioner of Income Tax (Appeals) erred in law as well as on facts while confirming the lump sum addition of Rs.2,50,000/- made by the Ld. Assessing Officer.
2. Because, the Ld. CIT(Appeals) has erred in overlooking and summarily rejecting the detailed statements of facts submitted along with written submission of appeal and accepted the incorrect version of the learned Assessing Officer.
3. The appellant reserves the right to add, amend or alter any ground or grounds of appeal.”
Briefly stated, the assessee who is engaged in the business of manufacturing of CI casting & Ingot Moulds had filed e-filed its return of income for A.Y 2012-13, declaring an income of Rs.13,15,470/-. The return of income was initially processed as such u/s. 143(1) of the Act. Subsequently, the case of the assesse was selected for scrutiny assessment u/s. 143(2) of the Act. During the course of assessment proceedings, it was observed by the Assessing Officer that the Gross profit/Net profit ratio of the assessee had declined as in comparison to the preceding year. After perusing the records, the Assessing Officer culled out the comparative Gross profit/Net profit ratio of the assessee for the year under consideration as against those for the immediately two preceding years, as under :
S. NO. A.Y. Turnover Gross Ratio % Net Profit Ratio % Profit 1 2012-13 1124.94 36.15 3.21% 13.68 1.22% 2 2011-12 1068.88 44.26 4.14% 20.01 1.87% 3 2010-11 1075.19 72.14 6.71% 20.87 1.94% It was further observed by the Assessing Officer that the assessee had debited a heavy amount of Rs.12,57,438/- on account of wages and salary paid to workers a/w salary expenses of Rs.1,47,300/-. On perusal of the records, it was observed by the Assessing Officer that not only the assessee had failed to maintain proper salary register, but even the vouchers which were produced by him did not contain the requisite details i.e. working hours, duration of work, bifurcation of skilled/semi-skilled labour etc. As can be gathered from the assessment order, it was further observed by the Assessing Officer that vouchers were unsigned or lacked the requisite information which was required to determine the proper amount of wages and salary payment. Backed by his aforesaid observation, the Assessing Officer in order to cover up the suppression of profit by the assessee worked out an ad-hoc disallowance of Rs.2.50 lac out of the aforesaid wages and salary expenses.
Being aggrieved, the assessee carried the matter in appeal before the CIT(Appeals), however, without any success.
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. We have heard the Ld. Authorized Representative for both the parties, perused the orders of the authorities below as well as materials available on record. As observed by us hereinabove, two fold reasons had weighed in the mind of the Assessing Officer for making the aforesaid ad-hoc disallowance of Rs.2.50 lac in the hands of the assessee, viz. (i) the Gross profit/Net profit ratio of the assessee had declined in comparison to preceding year; and (ii) that the vouchers in support of the salary and wages expenses did not contain the requisite details. After deliberating at length on the issue in hand, we are unable to persuade ourselves to subscribe to the view taken by the lower authorities. Admittedly, the Gross profit/Net profit ratio of the assessee had declined as in comparison to the preceding years. However, a careful perusal of the details culled out by the Assessing Officer, therein, at the very face of it does not instill any confidence as regards the view taken by him that the assessee had inflated certain expenses for suppressing his income. In our considered view, though there can be multiple reasons for fluctuation in the Gross profit/Net profit ratio and fall in the same, but the said fact on a standalone basis can by no means justifiably lead to the conclusion that the assessee had inflated expenses for facilitating suppression of his business income. In fact, we find that the assessee on being confronted with the comparative fall in its Gross profit/Net profit ratios had categorically explained that the same had occasioned due to heavy competition in the market of CI Casting and Ingot Moulds which had resulted to the downward trend in the said line of business. However, we find that the aforesaid claim of the assessee had been summarily rejected by the Assessing Officer, i.e, without placing on record any material which would negate the veracity of the same. We, thus, in terms of our aforesaid observation are unable to subscribe to the adverse inferences drawn by the Assessing Officer by drawing support from the comparative fall in the Gross profit/Net profit ratio of the assessee during the year under consideration.
As regards the observation of the Assessing Officer that the assessee had debited a heavy amount on account of wages and salary which cannot be factually verified as the vouchers in support thereof did not contain the requisite details, i.e. working hours, duration of work, bifurcation of skilled/semi-skilled labour etc., in our considered view, is nothing short of a generalized observation which on a standalone basis would not justify the disallowance of assessee’s claim of the aforesaid expenses in question. Admittedly, the claim of the assessee for deduction of certain expenses is as per the mandate of law required to be supported by irrefutable documentary evidence. As such, in case the assessee’s claim for deduction of expenses is not supported by the requisite documentary evidences, then, the same would be liable to be disallowed by the A.O. However, we cannot remain oblivious of the fact that the Assessing Officer before drawing adverse inferences as regards the assessee’s claim of expenses is obligated to specifically point out those expenses which as per him are not supported by the requisite corroborating documentary evidences. Now, the Assessing Officer in the case before us had though pointed out that vouchers produced by the assessee did not contain requisite details, i.e., working hours, duration of work, bifurcation of skilled/semi-skilled labour etc., but then, we cannot be oblivion of the fact that there is no whisper of any single instance of expenditure in the body of the assessment order which as per the Assessing Officer could not be verified. In our considered view, a generalized observation as regards the non-verification of the assessee’s claim for deduction of any expenditure cannot, on the said standalone basis, justify the disallowance of the said expenditure. Apart from that, we find the Assessing Officer had not uttered a word as regards the basis for determination of the ad-hoc disallowance of the salary and wages expenses at Rs.2.50 lac. Backed by our aforesaid observations, we not being able to persuade ourselves to subscribe to the ad-hoc disallowance of Rs.2.50 lac(out of salary and wages expenses), thus, vacate the same. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and vacate the disallowance of Rs. 2.5 lac (supra) made by the Assessing Officer. The Ground of appeal No.1 is allowed.
The Grounds of appeal No(s). 2 to 4 are general in nature and hence, the same are dismissed as not pressed.
Resultantly, the appeal of the assessee is allowed in terms of the aforesaid observations. Order pronounced on 21st day of February, 2022.