K R Traders, Pune V. Income-tax Officer, Pune

ITA 1311/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4072 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 23-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Section: 40A(3); 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1311/PUN/2017 / ASSESSMENT YEAR : 2011-12 K.R. TRADERS, G3/4 CAMELLIAS, GREEN ACERS, PUNE 411048. PAN : AABFK3457G. . / APPELLANT. V/S THE INCOME TAX OFFICER, WARD 2(2), PUNE. . / RESPONDENT ASSESSEE BY : SHRI SHARAD A. VAZE. REVENUE BY : SHRI PANKAJ GARG. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 7, PUNE DATED 10.02.2017 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED AS CIVIL CONTRACTOR, ENGAGED IN CONSTRUCTION OF RESIDENTIAL AND T ECHNICAL ACCOMMODATION FOR CENTRAL GOVERNMENT. ASSESSEE ELECTRON ICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2011-12 ON 30.09.2011 DECLARING TO TAL TAXABLE / DATE OF HEARING : 19.07.2019 / DATE OF PRONOUNCEMENT: 19.08.2019 2 INCOME OF RS.12,39,480/-. THE CASE WAS SELECTED FOR SCRU TINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT V IDE ORDER DATED 25.03.2014 AND THE TOTAL INCOME WAS DETERMINED AT RS.1,83, 79,140/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO VIDE ORDER DT.10.02.2017 (IN APPEAL NO.PN/CIT(A) -7/WD- 2(2)/306/2014-15) DISMISSED THE APPEAL OF ASSESSEE. AGGRI EVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND. THE LEARNED CIT(A)-VII, PUNE HAS ERRED IN LAW AS W ELL AS IN FACTS, IN CONFIRMING THE ADDITION OF RS.41,86,961/- BEING 10% OF LABOUR CHARGES, ON AD HOC BASIS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT ASSESSEE HAD CLAIMED LABOUR CHARGES AT RS.4,18,69,611/-. ON PERUSAL, THE LABOUR BILLS CLAIMED AS EXPENSES, AO NOTICED THAT THE ENTIRE EXPENDITURE WAS INCURRED IN CASH. CONSIDERING THE FACTS T HAT THE PAYMENTS WERE IN CASH AND THE VOUCHERS WERE SELF MADE AND NOT FULLY VERIFIABLE, AO WAS OF THE VIEW THAT THE ENTIRE EXPENDITUR E IS NOT ALLOWABLE. HE ACCORDINGLY DISALLOWED 10% OF THE LABOUR EXPEN SES AND THUS MADE ADDITION OF RS.41,86,961/-. AGGRIEVED BY THE OR DER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD T HE ORDER OF AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 4. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE IS A GOVERN MENT CONTRACTOR REGISTERED WITH M.E.S. CHIEF ENGINEER, SOUTHERN C OMMAND AND IT RECEIVES CONTRACTS FROM MES FOR CONSTRUCTION OF BU ILDINGS FOR 3 CENTRAL GOVERNMENT. HE SUBMITTED THAT THE PAYMENT TO LABOURERS HAVE TO BE MADE IN CASH AND THAT THOUGH THE AO HAS GIVEN A FINDING THAT THE PAYMENTS ARE NOT COVERED U/S 40A(3) OF THE ACT BUT THE AO HAS NOT DOUBTED THE PAYMENTS AND HELD THE VOUCHERS BEING SELF MADE ARE NOT TO BE FULLY VERIFIABLE AND DISALLOWED 10% OF THE LABOUR CHARGES. HE SUBMITTED THAT IN A.Y. 2009-10 ON THE GROSS RECEIPTS OF RS.8.87 CRORES AND LABOUR CHARGES OF RS.2.46 CRORES, THE DISALLOWANCE WAS MADE TO THE EXTENT OF RS.2,50,000/- AND NOW THE DISALLOWANCE IS ON HIG HER SIDE. HE FURTHER SUBMITTED THAT IF THE REASONABLE DISALLOWANCE IS UP HELD BY THE TRIBUNAL, IT WOULD BE ACCEPTABLE TO THE ASSESSEE. LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO DISALLOWANCE OF 10% OF LABOUR CHARGES. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS A GOVERNMENT CONTRACTOR REGISTERED WITH M.E.S. AND UNDERT AKES THE WORK OF CONSTRUCTION OF RESIDENTIAL AND TECHNICAL ACCOMMOD ATION OF CENTRAL GOVERNMENT AND FOR WHICH IT HAS TO EMPLOY THE LAB OUR. WE FIND THAT THE PAYMENT OF LABOUR CHARGES HAS NOT BEEN DOUBTED BY THE AO AND FURTHER AO HAS ALSO GIVEN A FINDING THAT THE PAYMENTS AR E NOT COVERED U/S 40A(3) OF THE ACT. THE AO ONLY FOR THE REASON THAT THE VOUCHERS ARE NOT FULLY VERIFIABLE DISALLOWED 10% OF THE EXPENSES. CONSIDERIN G THE TOTALITY OF THE FACTS AND THE FACT THAT IN EARLIER YEAR I.E., IN A.Y. 2009-10 ON A TURNOVER OF RS.8.87 CRORES AND LABOUR CHARGES OF RS .2.46 CRORES, THE DISALLOWANCE WAS MADE TO THE EXTENT OF RS.2,50,000/- A ND AFTER CONSIDERING THE SUBMISSIONS OF LD.A.R., WE ARE OF THE VIEW T HAT IN THE PRESENT CASE, THE ENDS OF JUSTICE SHALL BE MET IF THE DISALLO WANCE IS RESTRICTED TO 5% OF LABOUR CHARGES. WE THEREFORE DIRECT THAT THE 4 DISALLOWANCE BE UPHELD TO THE EXTENT OF 5% OF LABOUR CHARG ES AS AGAINST 10% MADE BY THE AO. WE THUS DIRECT ACCORDINGLY. THUS, THE GROUND OF ASSESSEE IS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY AL LOWED. ORDER PRONOUNCED ON 19 TH DAY OF AUGUST, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 19 TH AUGUST, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-7, PUNE. PR. CIT-6, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.