Shree Guru Raghavendra Cotton Ginning & pressing Factory , Bellary V. The Assistant Commissioner of Income Tax Circle-1 , Bellary

ITA 1984/BANG/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3421 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 11-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 201; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 198 4 /BANG/201 8 ASSESSMENT YEAR : 20 1 5 - 1 6 M/S. SREE GURU RAGHAVENDRA COTTON GINNING & PRESSING FACTORY, PLOT NO. 6, WARD NO. 10, RUPANGUDI ROAD, BELLARY 583 101. PAN: AADFS8978C VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 1, BELLARY. APPELLANT RESPONDENT APPELLANT BY : SHRI B.S. BALACHANDRAN, ADVOCATE RESPONDENT BY : SHRI R.N. SIDDAPPAJI, ADDL. CIT (DR) DATE OF HEARING : 19 .0 2 .2019 DATE OF PRONOUNCEMENT : 20 .0 2 .2019 O R D E R PER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 30.03.2018 PASSED BY LD. CIT(A), GULBARGA FOR THE ASSESSMENT Y EAR 2015-16. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF CIT(A) IN GRANTING ONLY PARTIAL RELIEF IN RESPECT OF ADDITION MADE BY THE AO OUT OF LABOUR CHARGES. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF PURCHASE OF KAPPAS, GINNING THE KAPPAS AND PRESSING IT INTO COTTON LINT S. IT IS ALSO TRADES IN COTTON LINTS AND COTTON SEEDS. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS C LAIMED A SUM OF RS. 72.53 LAKHS AS HAMALI CHARGES (LABOUR CHARGES). ON VERIFICATION OF THE SUPPORTING BILLS / VOUCHERS/INVOICES, THE AO OBSERV ED THAT THE PAYMENTS HAVE BEEN MADE IN CASH AND FURTHER THESE EXPENSES A RE SUPPORTED BY SELF ITA NO. 1984/BANG/2018 PAGE 2 OF 3 MADE VOUCHERS. THE SAID VOUCHERS DID NOT CONTAIN T HE FULL ADDRESS OF PAYEES. HENCE THE AO TOOK THE VIEW THAT THE POSSIB ILITY OF INFLATION OF EXPENDITURE UNDER THE ABOVE HEAD CANNOT BE RULED OU T. ACCORDINGLY. IN ORDER TO TAKE CARE OF POSSIBLE REVENUE LEAKAGES, TH E AO DISALLOWED 50% OF THE EXPENSES, WHICH AMOUNTED TO RS. 36.26 LAKHS. I N THE APPELLATE PROCEEDINGS THE LD. CIT(A) RESTRICTED THE EXPENDITU RE CLAIMED AS LABOUR CHARGES TO 25% OF THE RETURNED INCOME OF THE ASSESS EE. THE SAME WORKED OUT TO RS. 51.16 LAKHS. ACCORDINGLY THE LD. CIT(A) SUSTAINED DISALLOWANCE TO THE TUNE OF RS. 21.37 LAKHS AS AGAINST THE DISAL LOWANCE OF RS. 36.26 LAKHS MADE BY THE AO. STILL AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. THE LD. AR OF ASSESSEE SUBMITTED THAT THE ASSESS ING OFFICER HAS MADE THIS DISALLOWANCE WITHOUT REJECTING THE BOOKS OF ACCOUNT S AND HENCE THE SAME IS LIABLE TO BE DELETED. HE FURTHER SUBMITTED THAT, I N THE PRECEDING ASSESSMENT YEARS VIZ. ASSESSMENT YEARS 2013-14 AND 2014-15, TH E ASSESSING OFFICER HAS MADE DISALLOWANCE OUT OF HAMALI (LABOUR) CHARGE S ON ADHOC BASIS AND THE DISALLOWANCE SO MADE WORKED OUT TO 4.9% AND 6% OF THE EXPENDITURE RESPECTIVELY. ACCORDINGLY THE LD. AR SUBMITTED THAT THE DISALLOWANCE SUSTAINED BY LD. CIT(A) IS VERY MUCH ON THE HIGHER SIDE. 4. ON THE CONTRARY, THE LD. DR STRONGLY SUPPORTED T HE ORDER PASSED BY LD. CIT(A). HE SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE EXPENSES THROUGH SELF MADE VOUCHERS WHICH ARE NOT SUSCEPTIBLE TO VER IFICATION AND FURTHER, THESE EXPENSES HAVE BEEN INCURRED BY WAY OF CASH. 5. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE R ECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE INITIAL RESPONSIBI LITY TO PROVE THE EXPENDITURE CLAIMED BY THE ASSESSEE IS PLACED ON THE SHOULDER O F THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE HAS INCURRED HAMALI (LAB OUR) CHARGES AND THEY ARE SUPPORTED BY SELF MADE VOUCHERS ONLY. THE ASSE SSING OFFICER HAS POINTED OUT THAT THE ADDRESS OF THE PAYEES IS NOT A VAILABLE ON THE VOUCHERS, MEANING THEREBY, THERE IS MERIT IN THIS SUBMISSION OF LD. DR THAT THESE ITA NO. 1984/BANG/2018 PAGE 3 OF 3 EXPENSES ARE NOT SUSCEPTIBLE FOR VERIFICATION. WE NOTICED THAT IN THE PAST ALSO THE ASSESSING OFFICER HAS MADE DISALLOWANCE OU T OF THESE EXPENSES. WE HAVE NOTICED THAT ADHOC DISALLOWANCE SO MADE WOR KED OUT TO 4.9% AND 6% RESPECTIVELY IN ASSESSMENT YEARS 2013-14 AND 201 4-15. IN THE INSTANT CASE, THE LD. CIT(A) HAS SUSTAINED DISALLOWANCE TO THE EXTENT OF RS. 21.37 LAKHS, WHICH WORKED OUT TO 29.44%. WHEN COMPARED W ITH THE DISALLOWANCE MADE IN THE EARLIER YEARS, THE DISALLOWANCE SUSTAIN ED BY LD. CIT(A) IS VERY MUCH ON THE HIGHER SIDE. SINCE THE SUPPORTING VOUC HERS SUFFER FROM CERTAIN DEFECTS, IN OUR VIEW, DISALLOWANCE OUT OF HAMALI(LA BOUR) CHARGES IS CALLED FOR. ACCORDINGLY, BY CONSIDERING THE QUANTUM OF DISALLOW ANCE MADE IN THE EARLIER YEARS, WE ARE OF THE VIEW THAT THIS ISSUE WOULD MEE T THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED TO 7.5% OF THE HAMALI (L ABOUR) EXPENDITURE CLAIMED BY THE ASSESSEE. ACCORDINGLY, WE MODIFY THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO SUST AIN THE DISALLOWANCE TO THE EXTENT OF 7.5% OF THE HAMALI CHARGES CLAIMED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF FEBRUARY, 2019. SD/- SD/- (N.V. VASUDEVAN) (B.R. BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 20 TH FEBRUARY, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGAL ORE.