Mayur Construction,, Surat vs Department Of Income Tax
- CitationITA No. 1185/Ahd/2011
Ratio decidendi
The rule this decision rests on
Where a Revenue appeal challenges the deletion of ad hoc disallowances of business expenditure, the Tribunal will not interfere with the First Appellate Authority's findings of fact where those findings are reasoned and the Assessing Officer has not pinpointed a specific instance of the claimed expenditure being personal or otherwise impermissible, so that the disallowance rests on suspicion rather than evidence. Payments to labourers at remote sites made in cash do not, by themselves, warrant an adverse inference against the assessee where the labourers are shown to be illiterate and the payments are already reflected in the total labour charges debited to the profit and loss account. An ad hoc percentage disallowance of labour charges on the ground that labour contractors were not produced, and that TDS may therefore not have been deducted, cannot be sustained where the assessee has shown that payments were made to contractors and TDS was deducted, and the details have been duly maintained; any residual discrepancy is adequately covered by a nominal allowance.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
The Income-tax Officer M/s. Mayur Construction, W ard 7(3), Room No. 624, 7/4672, Prakash Talkies Aayakar Bhavan, Majura Vs Compound, Station Road, Gate, Surat Surat (Appellant) PAN: AAEFM1982F (Respondent)
Revenue by: Shri Roopchand, Sr.D.R. Assessee by: Shri Mehul Shah, A.R.
Date of heari ng : 24-04-2015 Date of pronouncement : 22-05-2015
आदेश /ORDER
PER : RAJPAL YADAV, JUDICIAL MEMBER:-
Revenue is in appeal before us against the order of CIT(A)-V dated 10-12-2010 passed for assessment year 2007-08.
I.T.A No. 1185/Ahd/2011 A.Y. 2007-08 Page No 2 ITO vs. M/s. Mayur Construction
2. The assessee has filed its return of income on 31-10-2007 declaring income at Rs. 3,33,740/-. The assessee at the relevant time was working as civil contractor. The case of the assessee was selected for scrutiny assessment and a notice u/s. 143(2) of the Act was issued and served upon him. The Ld. Assessing Officer has passed an assessment order u/s. 143(3) on 31-12-2009. He computed the income as under:-
"11. Subject to the above discussion, the total income of the assessee is as under:-
Total Income as per return of income Rs. 3,33,740/- Add:
1. discussed above in para No. 6 Rs. 3,20,079/-
2. discussed above in para No. 7 Rs. 76,111/-
3. discussed above in para No. 8 Rs. 2,05,364/-
4. discussed above in para No. 9 Rs. 11,32,422/-
5. discussed above in para No. 10 Rs. 39,857/-
Total Income Rs. 21,07,573/- i.e. Rs. 21,07,570/-
Assessed u/s. 143(3) of the Income -tax Act, 1961. Charged, interest u/s. 234A, 234B & 234C after giving credit for prepaid taxes if any after due verification. Issue, D 'Challan/accordingly."
3. On appeal, Ld. CIT(A) deleted the additions at serial no. 1,3, & 4. The Ld. First Appellate Authority deleted the 50% of the additions at serial no. 2 & 5. The revenue did not challenge that deletion at serial no. 2 & 5 in appeal before us. The revenue has challenged the deletion of Rs. 3,20,079/-, Rs. 2,05,364/- and restriction of addition at Rs. 50,000/- against Rs. 11,32,422/-. All these addition are interconnected with each other, therefore, we take all three grounds of appeal together.
4. With the assistance of Ld. representatives, we have gone through record carefully. The first amount is deletion of Rs. 3,20,079/-. It emerges I.T.A No. 1185/Ahd/2011 A.Y. 2007-08 Page No 3 ITO vs. M/s. Mayur Construction
from the record that asssessee had debited a sum of Rs. 6,20,679/-, Rs. 19,37,399/- and Rs. 6,42,716/- under the heads (a) transportation and carting expenses; (b) miscellaneous purchases and expenses; and (c) supervision charges. The Ld. Assessing Officer was not satisfied with the correctness of the details submitted by the assessee and made an adhoc disallowance at 10% of the total expenses claimed by the assessee under these three heads. In this way, he made an addition of Rs. 3,20,079/-.
5. The next challenge by the revenue is, deletion of addition of Rs. 2,05,354/-. The assessee had claimed deduction at Rs. 10,26,821/- as a salary to labour. The assessee had contended that it has been doing construction work at remote places. The labourers are illiterate and they do not have any bank account, therefore, on the site certain payments were made in cash. The assesse could not produce attendance register etc. Ld. Assessing Officer has disallowed 20% of the claim made by the assessee.
6. On appeal, Ld. CIT(A) deleted the disallowance on the ground that the labour expenses of Rs. 10,26,584/- stands included in the claim of total labour charges of Rs. 56,62,110/- which is debited to the Profit and Loss Account by the assessee.
7. Next item of challenge is that Assessing Officer has made a disallowance of Rs. 11,32,422/- which is 20% of the total labour charges debited in the Profit and Loss Account by the assessee. Ld. Commissioner restricted this disallowance to 50,000/- on the ground that all the details are duly maintained by the assessee.
I.T.A No. 1185/Ahd/2011 A.Y. 2007-08 Page No 4 ITO vs. M/s. Mayur Construction
8. We have duly considered the facts and circumstances. According to the Assessing Officer, the assessee failed to produce original bills and vouchers with confirmation of parties with regard to transportation, carting expenses as well as miscellaneous purchases and supervision charges. The Ld. First Appellate Authority was of the view that if a comparison is being made in terms of ratio to total turn-over between the expenditure incurred in this year and in the preceding year, then, the expenses have been reduced. The transportation and carting expenses are 1.7% of the turn-over in this year, whereas in the preceding year it was 12.68% of turn- over. Similarly, supervision charge has gone down to 1.76% from 2.28%. There is a slight increase in the miscellaneous purchases but according to the Ld. Commissioner, the assessee has shown details before the Assessing Officer, no personal element is involved in these expenses. The Assessing Officer could not pin point a specific instance within the details submitted by the assessee. After taking into consideration the finding of Ld. Commissioner of Income Tax (Appeals) on this issue, we do not find any error in it. As far as deletion of Rs. 10,26,821/- is concerned, the Ld. Commissioner has observed that payment is made to labourers at remote places and it is known fact that majority of them are illiterate. Adverse inference cannot be drawn on the ground that payment is made in cash. The payment has already been included in the total labour charges debited in the profit and loss account.
9. As far as disallowance of 11,32,422/- out of total labour payment debited by the assessee at Rs. 56,62,110/- is concerned, we find that this disallowance has been made on the ground that assessee failed to produce labour contractors. According to the Assessing Officer, these payments might have been made to the labourers without TDS. Thus, he I.T.A No. 1185/Ahd/2011 A.Y. 2007-08 Page No 5 ITO vs. M/s. Mayur Construction
disallowed 20% of the expenditure. Ld. Commissioner has observed that payments have made to the labour contractors and TDS has been deducted. The details have duly been maintained. Ld. Commissioner has upheld adhoc disallowance of Rs. 50,000/- in order to cover any discrepancy between the details. After taking into consideration, the reasoned order of Ld. Commissioner, we do not find any error in it. In the result, we do not find any merit in this appeal. It is dismissed.
Order pronounced in the open court on 22-05-2015
Sd/- Sd/-
(G.D. ARAWAL) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 22/05/2015 ak आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file.
By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद
This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.
Research this judgment with Miss Lucy
Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.
Try Miss Lucy free