M.A.K.Constructions, CHENNAI V. JCIT, Madurai

ITA 2019/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9060 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 25-09-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN IRS
• Assessee Lawyers: D ANAND
• Keywords: Period of limitation; Permanent establishment; Reasonable cause; Agreed addition; Time period of passing order
• Section: 40A(3); 56; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , #'$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 2019/MDS/2015 # % &% / ASSESSMENT YEAR : 2010-2011 M/S. M.A.K. CONSTRUCTIONS, 470B, WEST CROSS STREET, K.K. NAGAR, MADURAI 625 020. [PAN AAJFM 6392G ] VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE II, MADURAI ( / APPELLANT) ( /RESPONDENT) '( ) * / APPELLANT BY : SHRI. D. ANAND, ADVOCATE +,'( ) * /RESPONDENT BY : SHRI. P. RADHAKRISHNAN, IRS, JCIT. ! ) - / DATE OF HEARING : 01-06-2016 ./& ) - / DATE OF PRONOUNCEMENT : 30-06-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-2, MADU RAI IN ITA NO.119/2013-14, DATED 23.02.2015 FOR THE ASSESSMENT YEAR 2010-2011 ITA NO. 2019/MDS/2015. :- 2 -: PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1 961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THERE IS A DELAY OF 148 DAYS IN FILING THE APPEAL BY THE ASSESSEE. AT THE TIME OF HEARING THE LD. COUNSEL H AS FILED AN AFFIDAVIT EXPLAINING THE REASONS FOR DELAY AND THE LD. DR HAS NO SERIOUS OBJECTIONS FOR CONDONATION OF DELAY. AFTER HEARING THE SUBMISSIONS, WE ARE SATISFIED WITH SUFFICIENT AND REASONABLE CAUSE FOR FILING THE APPEAL BELATEDLY AND WE THEREFORE CONDONE THE DELAY AND ADMIT THE APPEAL FOR ADJUDICATION. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 2.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -2, MADURAI ERRED IN LAW IN DISALLOWING A SUM OF RS.19 ,09,420/- BY INVOKING SECTION 40A(3) OF THE INCOME TAX ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -2 ERRED IN LAW IN NOT CONSIDERING THE BUSINESS EXPEDI ENCY AND OTHER FACTORS INCLUDING EXTENT OF BANKING FACILITY BEFORE INVOKING SECTION 40A(3) OF THE INCOME TAX ACT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2 OUGHT TO HAVE SEEN THAT THE APPELLANT HAS DISCHARGE D HIS PRIMARY ONUS BOTH DURING THE ASSESSMENT PROCEEDINGS AND FIRST APPELLATE PROCEEDINGS TO DEMONSTRATE THE FACT THAT THE CASH PAYMENTS MADE BY THE APPELLANT FALL UNDER RULE 6DD 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2 ERRED IN LAW IN DISALLOWING A SUM OF RS.5,13,267/- UNDER THE EXPENSES FOR TEA, COFFEE, FREIGHT CHARGES AND DIESE L EXPENDITURE ARE NOT SUPPORTED BY VOUCHERS. 6. THE LEARNED ASSESSING OFFICER AS WELL AS THE FIRST APPELLATE AUTHORITV FAILED TO APPRECIATE THAT THE APPELLANT I S A CIVIL CONTRACTOR LAYING ROADS AND CONSTRUCTING BRIDGES IN REMOTE AREA AND THAT IT IS PRACTICALLY IMPOSSIBLE FOR THE APPELLANT TO PROVIDE VOUCHERS FOR EXPENSES INCURRED TOWARDS TEA, COFFEE, ITA NO. 2019/MDS/2015. :- 3 -: FREIGHT CHARGES AND DIESEL EXPENDITURE 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2 ERRED IN LAW IN DISALLOWING EXPENSES OF RS.13,OO,O OO/- INCURRED BY THE APPELLANT ON ACCOUNT OF LABOUR CHAR GES, JELLY PURCHASE, SAND PURCHASE AND GRAVEL PURCHASE UNDER T HE PRETEXT THAT THE VOUCHERS ARE SELF-MADE AND ARE INC APABLE OF INDEPENDENT VERIFICATION. 8. THE LEARNED FIRST APPELLATE AUTHORITY ERRED IN LAW IN DRAWING ANALOGY BETWEEN THE APPELLANTS CASE TO THE CASE OF THE CONTRACTOR WHO DECLARES INCOME ON PRESUMPTIVE BASIS TO JUSTIFY THE DISALLOWANCE OF EXPENSES OF RS.13,00,00 0/- INCURRED BY THE APPELLANT ON ACCOUNT OF LABOUR CHAR GES, JELLY PURCHASE, SAND PURCHASE AND GRAVEL PURCHASE. 4. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONTRACT WORKS AND CARRYING ON WORKS IN RURAL AND REMOTE AREAS IN LAYI NG ROADS, CONSTRUCTING BRIDGES AND CULVERTS AND E-FILED RETUR N OF INCOME ON 22.09.2010 WITH TOTAL INCOME OF <34,05,746/- AND TH E RETURN WAS PROCESSED U/S.143(1) OF THE ACT AND SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) WAS IS SUED. IN COMPLIANCE TO NOTICE, THE LD. AUTHORISED REPRESENTATIVE OF ASS ESSEE APPEARED FROM TIME TO TIME AND PRODUCED BOOKS OF ACCOUNT, BANK ST ATEMENTS, BILLS AND VOUCHERS. THE LD. ASSESSING OFFICER VERIFIED AC COUNTS, BILLS, VOUCHERS AND FOUND THAT ASSESSEE HAS CLAIMED EXPEND ITURE OF <19,09,420/- UNDER VARIOUS HEADS WERE CASH EXCEEDI NG <20,000/- WASPAID FOR EACH OCCASION AND THE LD. ASSESSING OF FICER ISSUED LETTER TO THE ASSESSEE ON VIOLATION OF PROVISIONS OF SEC. 40(A)(3) OF THE ACT AS ITA NO. 2019/MDS/2015. :- 4 -: CASH EXPENDITURE INCURRED WAS MORE THAN <20,000/- O N VARIOUS DATES REFERRED AT PAGE 2 & 3 OF THE ORDER. THE LD. AUTHO RISED REPRESENTATIVE OF THE ASSESSEE FILED SUBMISSIONS THAT THESE CASH P AYMENTS PERTAINING TO CIVIL CONTRACT WORKS IN RURAL AREAS AND DEPENDEN T ON LORRY BROKERS FOR SUPPLY OF SAND AND JELLY AND LOCAL SUPPLIERS AL WAYS INSIST FOR CASH PAYMENTS. DUE TO TIME FRAME, THE ASSESSEE IS BOUND TO COMPLETE THE RURAL WORKS WITHIN LIMITATION PERIOD AND IT IS A CO MMON PRACTICE TO MAKE CASH PAYMENTS AS THERE ARE NO ADEQUATE BANKING FACILITIES AVAILABLE IN REMOTE VILLAGES. THE LD. ASSESSING OF FICER ACCEPTED THE NATURE OF THE WORK OF THE ASSESSEE BUT ALLEGED THAT THE ASSESSEE FIRM BEING REGULAR CONTRACTOR AND THERE IS NO NECESSITY TO MAKE CASH PAYMENT ON VARIOUS OCCASIONS AND DISALLOWED THE CL AIM. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE COMM ISSIONER OF INCOME TAX (APPEALS). 4.1 IN THE APPELLATE PROCEEDINGS, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE ORDER OF THE LD. ASSESSING OFFICER. AGGRIEVED BY THE COMMISSIONER OF INCOME T AX (APPEALS) ORDER, THE ASSESSEE ASSAILED AN APPEAL BEFORE TRIBU NAL. 4.2 BEFORE US, THE LD. AUTHORISED REPRESENTATIVE SUBMIT TED THAT THE LD. CIT(A) ERRED IN CONFIRMING THE FINDINGS OF THE LD. ASSESSING OFFICER AND FAILURE TO CONSIDER THE FACTORS OF BANK ING FACILITIES AND CASH ITA NO. 2019/MDS/2015. :- 5 -: PAYMENTS FALL WITHIN EXCEPTION OF RULE 6DD OF THE ACT AND PRAYED THAT THE DISALLOWANCE ARE NOT WARRANTED AS THE LOCAL CON TRACTOR ALWAYS INSIST FOR CASH PAYMENTS. FURTHER MOST OF THE VENDORS ARE ILLITERATE AND FARMERS WHO DO NOT HAVE BANK ACCOUNT AND ASSESSEE F IRM PURCHASE JELLY AND SAND FROM HAWKERS, FARMERS WHO ARE IN THE HABIT OF SUPPLYING AND SELLING THE PRODUCTS AT THE WORK SITE OF THE AS SESSEE AND MOVING FROM PLACE TO PLACE AND DOES NOT HAVE ANY PERMANENT PLACE OF BUSINESS AND DEAL ONLY ON CASH BASIS. FOR TRANSACT IONS OF SUPPLY AND UNDERTAKING OF WORKS IN REMOTE VILLAGE IS DIFFICUL T TASK, FURTHER EDUCATING THE SUPPLIERS FOR OPENING OF BANK ACCOUNT AND MAKE BANK PAYMENTS IS HIGHLY IMPRACTICAL. CONSIDERING TIME AN D PLACE OF WORKS CONDUCTED IN RURAL AREAS AND FURTHER TRANSACTIONS T AKE PLACE DURING ODD HOURS WITH LORRY BROKERS AND VENDORS AND IT IS A RE GULAR PHENOMENON HAS TO BE FACED BY THE ASSESSEE FIRM AND DUE TO BUS INESS EXIGENCIES AND THE CASH PAYMENT TRANSACTIONS ARE UNAVOIDABLE A ND SOME TRANSACTIONS ALSO TAKE PLACE ON PUBLIC HOLIDAY, SAT URDAY AND SUNDAY. THE ASSESSEE FIRM HAS BEEN MAINTAINING BANK BALANCE AT THE TIME OF INCURRING EXPENDITURE AS PER BOOKS OF ACCOUNT BUT B ECAUSE THE RECIPIENT HAWKERS, VENDORS DOES NOT HAVE BANK ACCOU NTS AND QUESTION OF ISSUING OF CHEQUES DOES NOT ARISE, APART FROM TIME LIMIT OF WORK STIPULATED AND PRAYED FOR ALLOWING THE GROUND. ITA NO. 2019/MDS/2015. :- 6 -: 4.3 CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND VEHEMENTLY OPPOSED THE GROUNDS. 4.4 WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD. THE CONTENTION OF THE LD. AUTHORISED REPRE SENTATIVE THAT THE ASSESSEE HAS TO COMPULSORY MAKE CASH PAYMENTS DUE T O BUSINESS EXIGENCIES AND MAXIMUM TRANSACTIONS ARE ENTERED WITH FARMERS, HAWKERS AND LORRY BROKERS FOR SUPPLY OF JELLY AND S AND IN THE REMOTE AREAS WHO ARE ILLITERATE PEOPLE. FURTHER, THE CO MMERCIAL TRANSACTIONS WITH BANK IS NOT APPRECIATED BY ABOVE SUPPLIERS AN D INSIST CASH IMMEDIATELY AND SHALL MOVE FROM PLACE TO PLACE. THE ASSESSEE HAS CONSIDERED BUSINESS EXIGENCIES AND SUCH CASH PAYMEN TS WERE TO BE MADE IN A PECULIAR SITUATIONS AND WERE MANDARTIORY INSIST CASH. WE PERUSED THE PROVISIONS OF SEC. 40A(3) OF THE ACT R EAD AS:- WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPE CT OF WHICH A PAYMENT OF AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. AND RULE 6DD AND EXCEPTION UNDER INCOME TAX RULE S ITA NO. 2019/MDS/2015. :- 7 -: NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECTION 40 A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3A) OF SECTION 40A WH ERE A PAYMENT 59 OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OT HERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES IN THE CASES AND CIRCUMSTANC ES SPECIFIED HEREUNDER, NAMELY : (A)WHERE THE PAYMENT IS MADE TO ( I ) THE RESERVE BANK OF INDIA OR ANY BANKING COMPANY AS DEFINED IN CLAUSE ( C ) OF SECTION 5 OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); ( II ) THE STATE BANK OF INDIA OR ANY SUBSIDIARY BANK AS DEFINED IN SECTIO N 2 OF THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT , 1959 (38 OF 1959); ( III ) ANY CO-OPERATIVE BANK OR LAND MORTGAGE BANK; ( IV ) ANY PRIMARY AGRICULTURAL CREDIT SOCIETY OR ANY PRIM ARY CREDIT SOCIETY AS DEFINED UNDER SECTION 56 OF THE BANKING REGULAT ION ACT, 1949 (10 OF 1949); ( V ) THE LIFE INSURANCE CORPORATION OF INDIA ESTABLISHED UNDER SECTION 3 OF THE LIFE INSURANCE CORPORATION ACT, 1956 (31 OF 1956); (B) WHERE THE PAYMENT IS MADE TO THE GOVERNMENT AND, UN DER THE RULES FRAMED BY IT, SUCH PAYMENT IS REQUIRED TO BE MADE I N LEGAL TENDER; (C) WHERE THE PAYMENT IS MADE BY ( I ) ANY LETTER OF CREDIT ARRANGEMENTS THROUGH A BANK; ( II ) A MAIL OR TELEGRAPHIC TRANSFER THROUGH A BANK; ( III ) A BOOK ADJUSTMENT FROM ANY ACCOUNT IN A BANK TO ANY OTHER ACCOUNT IN THAT OR ANY OTHER BANK; ( IV ) A BILL OF EXCHANGE MADE PAYABLE ONLY TO A BANK; ( V ) THE USE OF ELECTRONIC CLEARING SYSTEM THROUGH A BAN K ACCOUNT; ( VI ) A CREDIT CARD; ( VII ) A DEBIT CARD. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE AND CLAUSE ( G ), THE TERM BANK MEANS ANY BANK, BANKING COMPANY OR SOCIETY R EFERRED TO IN SUB- CLAUSES ( I ) TO ( IV ) OF CLAUSE ( A ) AND INCLUDES ANY BANK [NOT BEING A BANKING COMPANY 65 AS DEFINED IN CLAUSE ( C ) OF SECTION 5 OF THE BANKING REGULATION ACT, 1949 (10 OF 1949)], WHETHER INCORPORATED OR NO T, WHICH IS ESTABLISHED OUTSIDE INDIA; ( D ) WHERE THE PAYMENT IS MADE BY WAY OF ADJUSTMENT AGAI NST THE AMOUNT OF ANY LIABILITY INCURRED BY THE PAYEE FO R ANY GOODS SUPPLIED OR SERVICES RENDERED BY THE ASSESSEE TO SUCH PAYEE; 6 ( E ) WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF ( I ) AGRICULTURAL OR FOREST PRODUCE; OR ( II ) THE PRODUCE OF ANIMAL HUSBANDRY (INCLUDING LIVESTOC K, MEAT, HIDES AND SKINS) OR DAIRY OR POULTRY FARMING; OR ITA NO. 2019/MDS/2015. :- 8 -: ( III ) FISH OR FISH PRODUCTS 68 ; OR ( IV ) THE PRODUCTS OF HORTICULTURE OR APICULTURE, TO THE CULTIVATOR, GROWER OR PRODUCER OF SUCH ARTIC LES, PRODUCE OR PRODUCTS; ( F ) WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF THE P RODUCTS MANUFACTURED OR PROCESSED WITHOUT THE AID OF POWER IN A COTTAGE INDUSTRY, TO THE PRODUCER OF SUCH PRODUCTS; 69 ( G ) WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WH O ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR VOCATION , IN ANY SUCH VILLAGE OR TOWN; ( H ) WHERE ANY PAYMENT IS MADE TO AN EMPLOYEE OF T HE ASSESSEE OR THE HEIR OF ANY SUCH EMPLOYEE, ON OR IN CONNECTION WITH THE RET IREMENT, RETRENCHMENT, RESIGNATION, DISCHARGE OR DEATH OF SUCH EMPLOYEE, O N ACCOUNT OF GRATUITY, RETRENCHMENT COMPENSATION OR SIMILAR TERMINAL BENEF IT AND THE AGGREGATE OF SUCH S UMS PAYABLE TO THE EMPLOYEE OR HIS HEIR DOES NOT EX CEED FIFTY THOUSAND RUPEES; ( I ) WHERE THE PAYMENT IS MADE BY AN ASSESSEE BY WAY OF SALARY TO HIS EMPLOYEE AFTER DEDUCTING THE INCOME- TAX FROM SALARY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 192 OF THE ACT, AND WHEN SUCH EMPLOYEE ( I ) IS TEMPORARILY POSTED FOR A CONTINUOUS PERIOD OF FI FTEEN DAYS OR MORE IN A PLACE OTHER THAN HIS NORMAL PLACE OF DUTY OR ON A SHIP; AND ( II ) DOES NOT MAINTAIN ANY ACCOUNT IN ANY BANK AT SUCH P LACE OR SHIP; 70 ( J ) WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE; ( K ) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGEN T 71 WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHAL F OF SUCH PERSON; ( L ) WHERE THE PAYMENT IS MADE BY AN AUTHORISED DEALER O R A MONEY CHANGER AGAINST PURCHASE OF FOREIGN CURRENCY OR TRAVELLERS CHEQUES IN TH E NORMAL COURSE OF HIS BUSINESS. THE PAYMENTS TO THE HAWKERS AND VENDORS BY CASH BY THE ASSESSEE FIRM OTHER THAN ACCOUNT PAYEE CHEQUES WAS NEVER DOU BTED BY THE REVENUE. THE ASSESSEE FIRM IS FOLLOWING PREVAILING BUSINESS PRACTICE FROM EARLIER YEARS. FURTHER, PROVISIONS OF SEC. 40A (3) OF THE ACT MUST NOT BE READ IN ISOLATION OR EXCLUSION OF RULE 6DD OF INCOME TAX RULES, 1962. THE SECTION MUST BE READ ALONGWITH RULE AND ON READING ITA NO. 2019/MDS/2015. :- 9 -: TOGETHER, IT IS VERY CLEAR THAT PROVISIONS ARE NOT INTENDED TO RESTRICT THE BUSINESS ACTIVITIES. THE LD. ASSESSING OFFICER CAN NOT RESTRICT THE BUSINESS OF THE ASSESSEE FIRM ON APPLICATION OF THE RULE 6DD, FURTHER PROVISIONS OF SEC. 40A(3) OF THE ACT EMPOWERS THE L D. ASSESSING OFFICER TO DISALLOW DEDUCTION CLAIMED AS EXPENDITURE WERE P AYMENTS ARE NOT BY ACCOUNT PAYEE CHEQUE/DRAFT. THE LD. ASSESSING O FFICER SHOULD ANALYSIS THE PAYMENTS EITHER BY CROSSED CHEQUE OR BANK DRAFT AND ASCERTAIN WHETHER THE PAYMENTS ARE GENUINE CONSIDER ING BUSINESS EXPEDIENCY, GENUINENESS AND BONAFIDE PECULIAR TRA NSACTIONS OF THE BUSINESS. THE ASSESSEE FIRM MAKES CASH PAYMENTS I N THE CIRCUMSTANCES AS PER THE INTENTION OF THE VENDORS/ SUPPLIER WHO TRANSACT ON CASH BASIS AND NO CREDIT FACILITY IS AVAILABLE IN THE REMOTE VILLAGES. SO, CONSIDERING THE APPARENT FACTS AND NA TURE OF BUSINESS OF THE ASSESSEE BEING LAYING OF ROADS, BUILDING BRIDGE S AND CULVERTS IN THE REMOTE VILLAGE AND PURCHASE OF SAND, JELLY FROM THE LOCAL VENDORS AND LORRY BROKERS WHO ARE ILLITERATE AND DOES NOT H AVE PERMANENT PLACE OF BUSINESS AND ALSO VENDORS AND HAWKERS DELIVER T HE SAND, JELLY AT THE WORKING SITES OF ASSESSEE DURING ODD HOURS IN R EMOTE AREAS AND WE SUPPORT OUR OPINION WITH THE DECISION OF ANUPAM TELE SERVICES VS. ITO 366 ITR 122 (GUJ) AND WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND DELETE THE ADDITION MADE ITA NO. 2019/MDS/2015. :- 10 -: BY THE LD. ASSESSING OFFICER ON THIS GROUND. THIS GROUND OF THE ASSESSEE IS ALLOWED. 5 THE SECOND GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE BY THE LD. ASSESSING OFFICER <5,13, 267/- BEING EXPENSES FOR TEA, COFFEE, FREIGHT CHARGES AND DIESE L EXPENDITURE NOT SUPPORTED BY VOUCHERS AND CONFIRMED BY THE LD. ASSE SSING OFFICER. 5.1 THE LD. ASSESSING OFFICER FOUND THAT THE ASSESSEE FIRM HAS INCURRED EXPENDITURE IN THE NATURE OF TEA, COFFEE, FREIGHT CHARGES AND DIESEL AND COULD NOT PRODUCE ANY SUPPORTING EVIDENC E. IT WAS SUBMITTED THAT EXPENSES ARE INCURRED IN THE NATURE OF LABOUR WELFARE AND FUEL EXPENSES INCURRED AT WORKING SITE IN REMOT E AREAS. DUE TO MOISTURE AND DUST THE VOUCHERS ARE TORN AND WORN OU T. THE LD. ASSESSING OFFICER HAVING NOT SATISFIED WITH THE EXP LANATION MADE DISALLOWANCE. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS) 5.2 IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE EXPLAINED THAT WORKING SYSTEM OF TH E BUSINESS ON LAYING OF ROADS AND CULVERT IN THE REMOTE AREAS AND THESE EXPENSES ARE COMPULSORY INCURRED ON LABOUR AND TAKES THE CHARACT ERISTIC OF WELFARE MEASURES. ON COMPARING WITH THE TURNOVER OF THE CO NTRACTS WERE CONTRACT RECEIPT BEING 15.16 CRORES, THE DISPUTED EXPENDITURE IS VERY ITA NO. 2019/MDS/2015. :- 11 -: NEGLIGIBLE WHICH WORK OUT TO 0.33%. THE LD. COMMISS IONER OF INCOME TAX (APPEALS) HAS CONSIDERED THE SUBMISSIONS BUT D UE TO AGREED ADDITION BY THE ASSESSEE, NON AVAILABILITY OF EVIDE NCE AND OVERLOOKED THE WORKING CONDITIONS OF THE LABOUR AT WORK SITE H AS CONFIRMED THE ADDITION. AGGRIEVED BY THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER, THE ASSESSEE ASSAILED AN APPEAL BEFORE TRIBU NAL. 5.3 BEFORE US, THE LD. AUTHORISED REPRESENTATIVE EXPRES SED THAT THIS EXPENDITURE IS NECESSARY TO CO-ORDINATE WITH T HE LABOUR. PROVIDING COFFEE AND TEA DURING DAY AND NIGHT DURING WORK OF LAYING OF ROADS AND CULVERTS IN THE VILLAGES AND THERE ARE NO PROPE R FOOD FACILITIES AND FURTHER SOME TIME WORK IN FOREST AREA AND SUCH EXPE NDITURE IS GENERALLY INCURRED TO UPKEEP THE LABOUR AND PRAYED FOR ALLOWING THE GROUND. 5.4 CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND VEHEMENTLY OPPOSED THE GROUNDS. 5.5 WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD. THE FACT THAT NATURE OF EXPENDITURE BEING TEA, COFFEE, FREIGHT CHARGES AND DIESEL EXPENDITURE, THE ASSESSEE HAS CL AIMED THESE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITA NO. 2019/MDS/2015. :- 12 -: ACTIVITIES OF THE BUSINESS AND THE FINDINGS OF THE LD. ASSESSING OFFICER THEY ARE NOT SUPPORTED WITH VOUCHERS AND DOUBTED T HE GENUINENESS AND DISBELIEVED THE TRANSACTIONS. THE LD.CIT(A) HAS CONFIRMED THE FINDINGS OF THE LD. ASSESSING OFFICER. CONSIDERING THE APPARENT FACTS AND MATERIAL, WE ARE OF THE OPINION THAT THE CONSEN T CANNOT BE A REASONS FOR SUSTAINING THE ADDITION IN EXCEPTIONAL CIRCUMSTANCES OF THE WORKING CONDITIONS OF THE FIRM AND THE NATURE OF EX PENDITURE INCURRED. FURTHER THEIR SHALL NOT BE LAXITY ON THE PART OF TH E ASSESSEE FIRM IN MAINTENANCE OF VOUCHERS FOR DUE COMPLIANCE OF INCO ME TAX PROVISIONS. WE FOUND THAT IT WOULD BE REASONABLE T O RESTRICT THE DISALLOWANCE TO 50% DUE TO EXTERNAL CIRCUMSTANCES O F WORKS AND WE DIRECT THE LD. ASSESSING OFFICER TO RESTRICT THE DI SALLOWANCE OF SAID EXPENSES TO 50% ONLY AND THE GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 6 THE LAST GROUND RAISED BY THE ASSESSEE IS THAT LD. ASSESSING OFFICER HAS DISALLOWED EXPENSES OF <13,00,000/- ON ACCOUNT OF LABOUR CHARGES, JELLY PURCHASE, SAND PURCHASE AND GRAVEL P URCHASE AND VOUCHERS ARE SELF MADE COULD NOT BE VERIFIED. 6.1 THE LD. ASSESSING OFFICER FOUND THAT THE ASSESSEE FIRM HAS PRODUCED SELF MADE VOUCHERS IN RESPECT OF MAJOR EXP ENDITURE CLAIMED IN PROFIT AND LOSS ACCOUNT AND THE EXPENDITURE PER TAINING TO PAYMENTS ITA NO. 2019/MDS/2015. :- 13 -: TO LOCAL VENDORS AND LORRY BROKERS WHO ARE SUPPLY ING SAND AND JELLY AND NOT PROVIDING ANY BILL OR VOUCHER. THEREFORE, THE ASSESSEE FIRM HAS SELFMADE VOUCHERS AND FILED IN THE ASSESSMENT, WHICH THE LD., ASSESSING OFFICER CONSIDERED AS DOUBTFUL AND HAVING NOT ACCEPTED. THE LD. ASSESSING OFFICER MADE DISALLOWANCE. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INC OME TAX (APPEALS). 6.2 IN THE APPELLATE PROCEEDINGS, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE DISALLOWANCE ON ACCOUNT OF SELF MADE VOUCHERS WORKED OUT TO 0.85% OF CONTRACT RECEI PTS BEING SMALL FRACTION AND THE ASSESSEE FIRM WHOLLY DEPENDS ON LO RRY BROKERS, HAWKERS AND DOES NOT ISSUE BILLS OR VOUCHERS. THE ASSESSEE IN OWN INTEREST MAINTAIN THE ACCOUNTS BY PROVIDING INTERNA L VOUCHERS TO CUT DOWN ANY FRAUDENTIALL ACTIVITIES. THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) HOWEVER CONFIRMED THE ORDER OF THE LD. AS SESSING OFFICER. AGGRIEVED BY THE ORDER, THE ASSESSEE ASSAILED AN AP PEAL BEFORE TRIBUNAL. 6.3 BEFORE US, THE LD. AUTHORISED REPRESENTATIVE EXPRE SSED THAT THESE EXPENDITURE IS NECESSARY TO CARRY OUT THE WO RKS AT REMOTE AREAS. THE AMOUNT PAID ON ACCOUNT OF LABOUR CHARGES , JELLY PURCHASE, ITA NO. 2019/MDS/2015. :- 14 -: SAND PURCHASE AND GRAVEL PURCHASE FOR LAYING OF ROA D AND CULVERT IN THE VILLAGES AND THERE ARE NO PROPER FACILITIES AND SOME TIME WORK IN FOREST AREA AND NO SEPARATE BILLS ARE ISSUED BY THE VENDOR. HENCE, INTERNAL VOUCHERS ARE PREPARED TO MAKE THE PAYMENT S TO VENDOR AND PRAYED FOR ALLOWING THE APPEAL. 6.4 CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND VEHEMENTLY OPPOSED THE GROUNDS. 6.5 WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD. THE FACT THAT LABOUR CHARGES, JELLY PURCHAS E, SAND PURCHASE AND GRAVEL PURCHASE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE. SINCE, THE VOUCHERS ARE SELF MADE THE LD. ASSESSING OFFICER HAS DOUBTED THE TRANSACTIONS AND MADE DISALLOWANCE. TH E LD.CIT(A) HAS CONFIRMED THE FINDINGS OF THE LD. ASSESSING OFFICER . CONSIDERING THE FACTS AND NATURE OF EXPENDITURE AND THE LAXITY ON T HE PART OF THE ASSESSEE FIRM ON NON MAINTENANCE OF RECORD AND COM PLIANCE OF INCOME TAX PROVISIONS, WE FOUND IT REASONABLE TO R ESTRICT THE DISALLOWANCE AT 50% DUE TO BUSINESS ACTIVITIES AT R EMOTE AREAS AS DISCUSSED. WE DIRECT THE LD. ASSESSING OFFICER TO R ESTRICT THE ITA NO. 2019/MDS/2015. :- 15 -: DISALLOWANCE TO 50% ONLY AND THE GROUND OF THE ASSE SSEE IS PARTLY ALLOWED. 7 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED ORDER PRONOUNCED ON THURSDAY, THE 30TH DAY OF JUNE, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ' ) (G. PAVAN KUMAR) / JUDICIAL MEMBER / CHENNAI 1 / DATED:30.06.2016 KV 2 ) +#-34 54&- / COPY TO: 1 . '( / APPELLANT 3. ! 6- () / CIT(A) 5. 4 9: +#-# / DR 2. +,'( / RESPONDENT 4. ! 6- / CIT 6. :;% < / GF