Salim Jeevankhan Bhati, Mumbai vs Department Of Income Tax

सर्वश्री आय.सी.शभमव, रेखम सदस्म एवुं श्री संजम गगव, न्ममयमक सदस्म BEFORE SHRI R.C.SHARMA, AM & SHRI SANJAY GARG, JM आमकय अऩीर सं./ITA No.6486/Mum/2013 ( नििाारण वषा / Assessment Year :2009-10) ITO 25(3)(4), Mumbai Vs. Shree Salim Jeevankhan Bhati, 1103, Paramount CHGS, Sahakar Road, Banidvali Village, Jogeshwari (W ), Mumbai -

400102 स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AAKPB 5730 C (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent)

Cross Objection No.273/Mum/2014 ( नििाारण वषा / Assessment Year :2009-10) Shree Salim Jeevankhan Vs. ITO 25(3)(4), Mumbai Bhati, 1103, Paramount CHGS, Sahakar Road, Banidvali Village, Jogeshwari (W ), Mumbai -

400102 स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AAKPB 5730 C (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent)

यमजस्र् की ओर से /Revenue by : Shri Neil Philip यनधमवरयती की ओर से /Assessee by : Shri Anuj Kisnadwala सुनर्मई की तमयीख / Date of Hearing : 25/03/2015 घोषणम की तमयीख/Date of Pronouncement 08/05/2015

आदे श / O R D E R

PER R.C.SHARMA (A.M):

The revenue has filed appeal and the assessee has filed cross

objection against the order of CIT(A), dated 1-8-2013 for the assessment

year 2009-10 in the matter of order passed u/s.144 of the I.T.Act 2 ITA No.6486/13 & CO No.273/14

2. The revenue in its appeal has taken following grounds :-

1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing to reduce the disallowance out of wages charges to 5% instead of 50%made by the AO although no proper record for payment of wages is maintained by the assessee."

2. The appellant prays that the order of the Ld.CIT(A) on the above ground be set aside and that of the AO be restored."

3. In Cross objection the assessee has taken the following grounds :-

"1. The learned CIT(A) has erred in ~law and on facts in confirming disallowance of Rs. 12,73,333/- (being 5% of total expenditure of Rs. 2,54,66,660/-) out of disallowance of Rs. 1,27,33,330/- (being 50% of total expenditure of Rs. 2,54,66,660/-) made by the Assessing Officer on account of wages paid to the workers at the construction site. The learned CIT(A) ought to have deleted the entire disallowance.

2. The learned CIT(A) has erred in law and on facts in confirming disallowance of Rs. 1,26,358/- (being 10% of transport expenditure of Rs. 12,63,581/-) out of disallowance of Rs. 8,07,054/- (being 50% of total expenditure of Rs. 16,14,108/-) made by the Assessing Officer on account of transport charges paid by the assessee. The learned CIT(A) ought to have deleted the entire disallowance.

3. The learned CIT(A) has erred in law and on facts in confirming disallowance of Rs. 22,677/- (being 10% of total expenditure of Rs. 2,26,777/-) out of disallowance ofRs.1,13,3881- (being 50% of total expenditure of Rs. 2,26,777/-) made by the Assessing Officer on account of conveyance expenses paid by the assessee. The learned CIT(A) ought to have deleted the entire disallowance."

4 Rival contentions have been heard and record perused. Facts in

brief are that the assessee is an individual and filed his return of income

on 30-9-2009 declaring total income of Rs.5,57,660/-. In the assessment

framed u/s.143(3), the AO stated that as no evidences were filed by the

assessee in support of the genuineness of the expenses claimed of

Rs.2,73,07,545/- in the profit and loss account, accordingly 50% of the

same amounting to Rs.1,36,53,772/- was disallowed and added to the

total income of the assessee. In the remand proceeding, the AO was

directed to verify the expenses claimed by the assessee on account of 3 ITA No.6486/13 & CO No.273/14 salaries and wages, conveyance expenses and other expenses.

However, the details furnished by the assessee in respect to transport

charges are verified and in this connection, the AO stated that if the

argument of assessee is assumed to be correct the provisions of TDS are

not applicable as these payments are below the limit prescribed in the

provisions of Section 194C of the Act. However, during the course of

remand proceedings on verification of the vouchers produced, the AO

found that some of these vouchers were either not properly vouched or

did not contain the signature of the recipients.

5. By the impugned order the CIT(A) sustained disallowance of 5%

expenses after considering the remand report and the rejoinder filed by

the assessee with respect to the same. The precise observation of the

CIT(A) was as under:-

"I have considered the stand of the A.O. as well as the submissions of the appellant.

6a. As regards payment of wages of Rs.2,54,66,660/-, there is no dispute that work has actually been carried out by the appellant and that a wage register has been maintained. However, it is also a fact that the appellant could not furnish primary records,i.e. daily attendance cards. The profit ratios of the appellant for the last three years have also been studied and it is found that in fact the GP ratio in the relevant year is higher than the earlier two years. However, considering the fact that the record maintenance of wages is not verifiable to the last point and considering that some leakages would be possible, an addition of 5% of the wages paid i.e. 12,73,333/- is upheld and the appellant gets a relief of Rs.1,23,80,439/-. 6b. In the case of other expenses of Rs.16,14,108/- out of which the large part of the expenditure incurred is on account of transport charges amounting to Rs.12,63,581/-, since the appellant has himself agreed to an addition of 10% of the said charges as submitted by the AO, the same addition is upheld to the extent of Rs.1,26,358/-. 6c. In the conveyance expenses of Rs.2,26,777/- also since the appellant has not been able to fully substantiate and vouch the expenses, he has on its own agreed to 10% of the above conveyance expenses and, therefore, addition of Rs.2,26,777/- is upheld."

4 ITA No.6486/13 & CO No.273/14 6. Against the above order of CIT(A), revenue is in appeal before us

and assessee has also filed cross objection with respect to the addition

sustained by the CIT(A).

7. We have considered rival contentions and carefully gone through

the orders of the authorities below and found that in respect of wages

expenditure debited by the assessee there is no dispute that work has

actually been carried out for which proper wages register was maintained.

By considering the GP rate for the last three years the CIT(A) found that

G.P. rate of the year under consideration is higher than the G.P. rate of

earlier two years. Hence, CIT(A) has sustained disallowance of 5%, which

appears to be quite reasonable. Since the assessee did not produce

primary records in the form of daily attendance register, we do not find

any infirmity in the order of CIT(A) in sustaining the disallowance of 5%.

8. With regard to disallowance of transport expenses, the assessee

himself agreed for retaining the disallowance of 10% of the said charges.

We do not find any infirmity in the order of CIT(A) for sustaining the same.

9. With regard to conveyance expenses, the AO on adhoc basis has

disallowed 10%. Keeping in view nature of assessee's business vis-à-vis

totality of facts and circumstances of the case, we direct for upholding

disallowance on account of conveyance expenses. We direct accordingly.

10. In the result, appeal of the revenue as well as cross objection of the

assessee are dismissed.

5 ITA No.6486/13 & CO No.273/14

Order pronounced in the open court on this 08/05/2015.

Sd/- Sd/- (संजम गगव) (आय.सी.शभमव) (SANJAY GARG) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनमंक Dated 08/05/2015 प्र.कु.मभ/pkm, यन.स/ PS

आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :

1. अऩीरमथी / The Appellant

2. प्रत्मथी / The Respondent.

3. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai.

4. आमकय आमुक्त / CIT आदे शािसार/ BY ORDER,

5. वर्बमगीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai

6. गमर्व पमईर / Guard file.

उप/सहायक पुंजीकार सत्ममवऩत प्रयत //True Copy// (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भुंफई / ITAT, Mumbai