M/s. Laheri Cotton Industries, Bharuch V. The ACIT.,Bharuch Range, Bharuch

ITA 2258/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0273 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 05-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAMES KURIEN
• Assessee Lawyers: T P HEMANI; P B PARMAR ARS
• Keywords: Income from undisclosed sources
• Section: 142(1); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO. 2258/AHD/2013 ASST. YEAR: 2007-08 M/S LAHERI COTTON INDUSTRIES, NR. MINHAS PARK, TANKARIA ROAD, PALEJ, DIST. BHARUCH. VS. ACIT, BHARUCH RANGE, BHARUCH. APPELLANT RESPONDENT PAN AAAFL8676P APPELLANT BY SHRI T. P. HEMANI & P. B. PARMAR, ARS RESPONDENT BY SHRI JAMES KURIEN, SR. DR DATE OF HEARING: 6/10/2016 DATE OF PRONOUNCEMENT: 20/10/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE ASSESSEE FOR ASST. YEAR 2007-08 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-III, BARODA, DATED 13.06.2013 IN APPEAL NO.CAB-III/110/2012-13 PASSED AGAINST ORDER U/S 143 (3) OF THE IT ACT, 1961 (IN SHORT THE ACT) FRAMED ON 29/12/2009 B Y ACIT, BHARUCH CIRCLE, BHARUCH. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE:- ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 2 1. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE AD HOC DISALLOWANCE MADE IN RESPECT OF CANTEEN EXPENSES TO THE EXTENT OF 10% OF SUCH EXPENSES. 2. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS.8,17,630/- MADE IN RE SPECT OF DISCREPANCY IN STOCK OF DEOILED CAKES. 3. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF RS.10,15,351/- BEING 20% OF TOTAL CASH EXPENSES OF RS.50,76 ? 755/-. 4. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER S WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHER ERRED I N GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION S UBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEE N CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWE R AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTI CE AND THEREFORE DESERVES TO BE QUASHED. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234A/B/C OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD. AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE TIME OF OR BEFORE THE HEARING OF THE APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE PURCHASE AND SALE O F COTTON SEEDS AND D-OILED CAKES. RETURN OF INCOME WAS FILED ON 16 /10/2007 DECLARING TOTAL INCOME AT RS.78,46,880/- ACCOMPANIE D BY TAX AUDIT REPORT U/S 44AB OF THE ACT. THE CASE WAS SELECTED F OR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT WAS ISS UED FOLLOWED BY NOTICE U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAI RE. NECESSARY DETAILS WERE SUPPLIED AS AND WHEN CALLED FOR. SURVE Y UNDER SECTION ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 3 133A OF THE ACT WAS CARRIED OUT 28.02.2007. VOLUNTA RY DISCLOSURE OF RS.69.88 LAKHS AS UNACCOUNTED INCOME RELATED TO UNA CCOUNTED CASH OF RS.7,00,000/-, UNACCOUNTED STOCK OF RS.57,00,000 /-, ON MONEY PAID FOR PURCHASES OF PLOT RS.2,00,000/- AND UNACCO UNTED INVESTMENT IN CONSTRUCTION OF FACTORY & GODOWN OF RS.388,000/- . THE CASE WAS DISCUSSED AND INCOME WAS ASSESSED AT RS.1,00,62,004 /- AFTER MAKING FOLLOWING ADDITIONS :- 1) REMUNERATION/INTEREST PAID TO LADY PARTNERS RS.3,30,042/- 2) OUT OF CANTEEN EXPENSES RS.20,506/- 3) LATE PAYMENT OF PF RS.31,592/- 4) UNDISCLOSED STOCK RS.8,17,633/- 5) CASH EXPENSES RS.10,15,351/- 3. IN APPEAL BEFORE FIRST APPELLATE AUTHORITY ADDIT ION TOWARDS CANTEEN EXPENSES OF RS.20,506/-, UNDISCLOSED STOCK OF RS.8,17,633/- AND DISALLOWED CASH EXPENSES OF RS.10,15,351/- WERE SUSTAINED AND REMAINING WERE DELETED. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. FIRST WE TAKE UP GROUND NO.1 TOWARDS AD HOC DISALLOWANCE OF CANTEEN EXPENSES SUSTAINED BY LD. CIT(A) TO THE EXTENT OF 1 0% AS AGAINST 20% DISALLOWED BY ASSESSING OFFICER. 5. LD. AR SUBMITTED THAT CANTEEN EXPENSES ARE TOWAR DS BREAK-FAST AND TEA PROVIDED TO EMPLOYEES AND CUSTOMERS. PROPER BOOKS OF ACCOUNT ARE MAINTAINED AND FINANCIAL STATEMENTS ARE AUDITED AND ALL ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 4 EXPENSES ARE RELATED TO BUSINESS AS SUCH NO DISALLO WANCE IS CALLED FOR. 6. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US. ASSESSEE IS AGGRIEVED WITH 10% DI SALLOWANCE SUSTAINED BY LD. CIT(A) OF THE CANTEEN EXPENSES. WE OBSERVE THAT ASSESSEE IS HAVING A TURNOVER OF RS.28.87 CRORES, G .P. 2.07 CRORES AND TOTAL INCOME DECLARED RS.78.47 LACS APPROX. CAN TEEN EXPENSES ARE NORMALLY RELATED TO TEA, COFFEE WHICH SOMETIMES ARE NOT SUPPORTED BY PROPER BILLS AND VOUCHERS. LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE AT 10% AS AGAINST 20% DISALLOWED BY TH E ASSESSING OFFICER. IN ORDER TO MEET THE ENDS OF JUSTICE WE FE EL IT JUSTIFIED TO SUSTAIN 5% OF THE TOTAL CANTEEN EXPENSES. ACCORDIN GLY, THIS GROUND IS PARTLY ALLOWED. 8. NOW WE TAKE GROUND NO.2 WHEREIN LD. CIT(A) HAS C ONFIRMED THE ADDITION OF RS.8,17,630/- IN RESPECT OF DISCREPANCY IN STOCK OF D-OILED CAKES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT BOOKS STOCK OF D-OILED CAKE D URING SURVEY WAS AT 107.90 QUINTALS WHEREAS AS PER PHYSICAL VERIFICA TION IT WAS FOUND 1093 QUINTALS. IN THE VIEW OF ASSESSING OFFICER DIF FERENCE OF PHYSICAL STOCK AND BOOKS STOCK I.E. 985.10 QUINTALS (PHYSIC AL STOCK 1093 QUINTALS 107.90 QUINTALS) WAS NOT DISCLOSED DURIN G THE COURSE OF ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 5 SURVEY AND, THEREFORE, BY APPLYING THE VALUE OF RS. 830/-, PER QUINTAL ADDITION TOWARDS UNACCOUNTED STOCK AT RS.8,17,630/- WAS MADE. 9. LD. CIT(A) CONFIRMED THE ADDITION ON ACCOUNT OF UNACCOUNTED STOCK BY OBSERVING AS UNDER :- 8.4. I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSION MA.DE BY THE AR OF THE APPELLANT. THE SUBMISSIONS MADE BY THE APPELLAN T ARE FALSE AND MISLEADING. AS PER APPELLANT'S SUBMISSION CLOSING STOCK AS PER BOOKS OF ACCOUNTS AS ON THE DATE OF SURVEY WAS WORTH RS,5,05,75,5997- WHEREAS C LOSING STOCK AS PER PHYSICAL VERIFICATION WAS RS.5,62,72,190/-. ON EXAM INATION OF DOCUMENTS FILLED BY THE APPELLANT BEFORE THE UNDERSIGNED, IT IS SEEN TH AT WHILE CALCULATING THE VALUE OF STOCK AS PER BOOKS OF ACCOUNTS ON THE DATE OF SURVEY, , T HE QUANTITY OF DE-OIL CAKE HAS BEEN TAKEN AS 1093 QUINTALS BY THE APPELLANT AN D SAME HAS BEEN ACCEPTED BY THE SURVEY TEAM. IN THE PHYSICAL INVENTORY OF THE C LOSING STOCK PREPARED DURING THE COURSE OF SURVEY, THE QUANTITY OF THIS ITEM HAS BEE N AGAIN TAKEN AS 1093 QUINTALS. THUS NO DISCLOSURE DURING THE SURVEY HAS BEEN MADE ON ACCOUNT OF DISCREPANCY IN THE STOCK AS PER BOOKS AND PHYSICAL INVENTORY OF TH IS PARTICULAR ITEM. IT WAS ONLY ON ACCOUNT OF EXAMINATION OF IMPOUNDED BOOKS OF ACCOUN TS DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO DETECTED THAT THE-STOC K AS ON THE DATE OF SURVEY THIS PARTICULAR ITEM AS PER THE BOOKS OF ACCOUNTS WAS ON LY 107.9 QUINTALS. HENCE, HE ADDED THE VALUE OF DIFFERENCE IN THE STOCK AS PER B OOKS OF ACCOUNTS AND PHYSICAL INVENTORY AMOUNTING TO RS.8,17,630/- TO THE TOTAL I NCOME OF THE APPELLANT. FROM THE ASSESSMENT ORDER, IT IS ALSO SEEN THAT THE AR OF TH E APPELLANT HAD ADMITTED SUCH ADDITION AND AGREED FOR IT DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. HENCE, IT IS HELD THAT THE AO HAS RIGHTLY MADE THIS ADDITION. AC CORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. 10. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. LD. AR SUBMITTED THAT DURING THE COURSE OF ASSESSMENT P ROCEEDINGS ASSESSING OFFICER OBSERVED THAT DURING THE COURSE O F SURVEY, APPELLANT'S 'BOOKS' WERE IMPOUNDED AS PER WHICH CLO SING STOCK OF 'DE-OILED CAKE' (I.E. 'KHOR') ON THE DATE OF SURVEY WAS 107.90 QUINTAL AS AGAINST 1093 QUINTAL BEING STORK AS PER 'PHYSICA L VERIFICATION' RESULTING INTO DIFFERENCE OF 985.10 QUINTAL (I.E. 1 091 - 107.90). AO ADOPTED RATE OF RS.830/- PER QUINTAL AND MADE IMPUGNED ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 6 ADDITION OF RS.8.17.630/- (I.E. 985.10 X 830) FOR S UCH DISCREPANCY WITH A FINDING THAT SUCH STOCK WAS NOT DISCLOSED DU RING SURVEY. THE SAID ADDITION WAS CONFIRMED BY CIT(A). 10.1 LD. AR FURTHER SUBMITTED THAT BOTH AO AND CIT( A). FAILED TO APPRECIATE THAT APPELLANT HAD MADE TOTAL DISCLOSURE OF RS.69,88,000/- DURING THE COURSE OF SURVEY OUT OF WHICH RS.57,00,0 00/- WAS IN RESPECT OF 'UNACCOUNTED STOCK' (PG.2, PARA 5 OF ASS T. ORDER). SINCE VALUE OF 'STOCK AS PER BOOKS ON THE DATE OF SURVE Y WAS RS.5.05.75.599/-WHEREAS VALUE OF 'PHYSICAL STOCK O N THE SAID DATE WAS RS.5.62.72.190/- RESULTING INTO DISCREPANCY O F RS.56.56.591/-, DISCLOSURE OF RS.57.00.000/- WAS MADE ON ACCOUNT O F 'UNACCOUNTED STOCK' (PG.8 OF C1T(A)S ORDER). INVENTORY OF STOCK FOUND DURING SURVEY CONTAINING DETAILED BREAK-UP OF VALUE OF RS. 5.62.72.190/- IS PLACED ON PG.17 OF P/B PERUSAL OF WHICH MAKES IT CL EAR THAT SUCH VALUE INCLUDES RS.9,07,190/- BEING VALUE OF 1093 QU INTALS OF 'KHOR' (I.E. DE-OILED CAKE) @ RS.830/- PER QUINTAL (PI. RE FER SR. NO.5 OF SUCH INVENTORY). SINCE APPELLANT HAS ALREADY MADE DISCLO SURE OF RS.57.00.000/- IN RESPECT OF 'UNACCOUNTED STOCK' ON ACCOUNT OF DIFFERENCE IN VALUE OF STOCK AS PER BOOKS (I.E. RS. 5,05,75,599/-) AND VALUE OF PHYSICAL STOCK (I.E. RS.5,62.72.190/-) WHI CH INCLUDES, DIFFERENCE IN RESPECT OF 'DE-OILED CAKE (I.E. 'KHOR ')' AS WELL, NO SEPARATE ADDITION IS AGAIN CALLED FOR IN RESPECT OF THE VERY SAME ITEM. ACCORDINGLY, ACTION OF AO AND CIT(A) HAS RESULTED I NTO DOUBLE ADDITION IN RESPECT OF UNACCOUNTED STOCK OF KHOR WH ICH HAS NEVER BEEN THE INTENTION OF THE LEGISLATURE. CIT(A) HAS G IVEN AN INCORRECT FINDING THAT WHILE CALCULATING VALUE OF STOCK AS PER BOOKS OF A CCOUNTS ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 7 ON THE DATE OF SURVEY QUANTITY OF DE OIL CAKE HAS B EEN TAKEN AS 1093 QUINTALS AND THE SAME HAS BEEN ACCEPTED BY SURVEY T EAM. THE FACT IS THAT STOCK OF DE-OIL CAKE AS PER BOOKS ON THE DA TE OF SURVEY WAS ONLY 107.80 QUINTALS AS IS EVIDENT FROM PG.6, PARA 8 OF ASST. ORDER, FROM REMAND REPORT DATED 28.07.11 (PGS.18-21 @ 20 O F P/B) AS WELL AS FROM LAST PAGE OF STOCK REGISTER OF 'KHOR' AS PE R BOOKS WHICH SHOWS QUANTITY OF KHOR AT 107.80 QUINTALS (PI. REFE R LAST LINE' OF STOCK REGISTER ON PG.22 OF P/B). IT IS SUBMITTED THAT IN CASE STOCK OF KHOR AS PER BOOKS HAD BEEN TAKEN AT 1093 QUINTALS ON THE DA TE OF SURVEY, THEN THERE MIGHT HAVE BEEN NO DISCREPANCY ON ACCOUN T OF STOCK OF KHOR AND THE IMPUGNED ADDITION WOULDN'T HAVE BEEN M ADE AT ALL. THUS, THE SAID FINDING OF CIT(A) IS ERRONEOUS. IN LIGHT OF THE ABOVE, IMPUGNED DISALLOWANCE DESERV ES TO BE DELETED. 11. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE HAS CHALLEN GED THE ACTION OF LD. CIT(A) FOR SUSTAINING THE ADDITION OF RS. 8, 17,630/- MADE IN RESPECT OF DISCREPANCY IN RELATION TO D-OILED CAKE. FROM GOING THROUGH THE RECORDS, WE OBSERVE THAT VOLUNTARY DISCLOSURE O F RS.69.88 LACS WAS MADE DURING THE COURSE OF SURVEY U/S 133A OF TH E ACT CONDUCTED ON 28.2.2007. THIS DISCLOSURE OF RS.69.88 LACS INCL UDED RS.57 LACS TOWARDS UNACCOUNTED STOCK. ON GOING THROUGH PAGE 17 OF THE PAPER BOOK WHEREIN PHYSICAL INVENTORY SHEET OF STOCK PREP ARED ON THE DATE ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 8 OF SURVEY BY DCIT, BHARUCH IS PLACED SHOWING QUANTI TYWISE DETAILS OF PHYSICAL STOCK OF FIVE ITEMS. IN THIS SHEET AT SL. NO.5 ITEM KHOR (DE- OILED CAKE). 1094 QUINTALS IS VALUED AT RS.9,07,190 /-. FURTHER ON PAGE 22 OF THE PAPER BOOK COPY OF STOCK REGISTER FORMING PART OF THE BOOKS OF ACCOUNT RELATING TO STOCK ITEM KHOR (D-OILED C AKE) FOUND DURING THE COURSE OF SURVEY DULY INSPECTED BY INCOME-TAX I NSPECTOR IS PLACED. FROM GOING THROUGH THE SAME WE FIND THAT CL OSING STOCK ON DATE OF SURVEY OF ITEM KHOR IS SHOWN AT 107.90 QUIN TALS. ON PERUSAL OF THESE DOCUMENTS IT IS CLEAR THAT BOOKS OF THE ASSES SEE OF DE-OILED CAKE KHOR WAS 107,90 QUINTALS WHEREAS ON THE DATE O F SURVEY AND PHYSICAL STOCK TAKEN BY REVENUE AUTHORITIES WAS 109 3 QUINTALS. TO THIS EXTENT THERE IS NO DISPUTE. THE ONLY ALLEGATIO N BY ASSESSING OFFICER IS THAT UNACCOUNTED STOCK OF 985.10 QUINTAL S VALUED AT RS. 8,17,630/- HAS NOT BEEN INCLUDED IN THE VOLUNTARY D ISCLOSURE RELATING TO UNACCOUNTED STOCK OF RS.57 LACS. 13. FURTHER WE OBSERVE THAT AS PER PHYSICAL INVENTO RY SHEET PREPARED BY THE REVENUE OFFICER ON THE DATE OF SURV EY INCLUDED STOCK OF DE-OILED CAKE (KHOR) OF 1093 QUINTALS AND TOTAL VALUE OF PHYSICAL STOCK OF ASSESSEE AT RS.5,62,72,190/-, AND VALUE OF CLOSING STOCK AS PER BOOKS OF ACCOUNT ON THE DATE OF SURVEY AS PER STATEMENT ON OATH GIVEN BY ASSESSEE AT RS.5,05,75,599/-. THE DIFFERENCE OF THESE TWO ITEMS I.E. VALUE OF PHYSICAL STOCK AND VA LUE OF BOOKS STOCK COMES TO RS.56,56,591/- ROUNDED TO RS.57 LACS MATCH ES THE AMOUNT OFFERED BY THE ASSESSEE TOWARDS UNACCOUNTED STOCK A T THE TIME OF SURVEY. WE ARE, THEREFORE, OF THE VIEW THAT AS THE ALLEGED UNACCOUNTED STOCK OF RS.57,00,000/- HAS ALREADY BEE N OFFERED BY THE ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 9 ASSESSEE AS UNACCOUNTED INCOME DURING THE COURSE OF SURVEY FORMING PART OF TOTAL VOLUNTARY DISCLOSURE OF UNACC OUNTED INCOME OF RS.69,88,000/- WHICH INCLUDED SURRENDER OF RS.8,17, 630/- TOWARDS EXCESS STOCK OF 985.10 QUINTALS OF ITEM KHOR (DE-OI LED CAKE). THE IMPUGNED ADDITION OF RS.8,17,930/- HAS BEEN WRONGL Y MADE BY LD. ASSESSING OFFICER AND THEREFORE, CANNOT STAND FOR. WE DELETE THE SAME. ACCORDINGLY, THIS GROUND OF ASSESSEE IS ALLOW ED. 14. THE THIRD GROUND OF THE APPEAL RELATES TO CONFI RMATION OF DISALLOWANCE OF RS.10,15,351/- BEING 20% OF THE TOT AL CASH EXPENSES OF RS.50,76,755/- WHICH MOSTLY RELATE TO SALARY AND WAGES PAID TO CASUAL WORKERS. LD. CIT(A) HAS CONFIRMED THE DISALL OWANCE BY BRIEFLY OBSERVING AS BELOW :- 9.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSION MADE BY THE AR OF THE APPELLANT. THE AO HAS POINTED OUT SEVERAL DISCREPAN CIES IN THE VOUCHERS / BILLS MAINTAINED BY THE APPELLANT IN SUPPORT OF THESE EXP ENSES MADE IN CASH. HE HAS MENTIONED THAT ON THESE VOUCHERS NAMES OF ..THE REC IPIENT AS WELL AS RESPONSIBLE FOR MAKING THE PAYMENT WERE NOT FOUND, NARRATION AND PU RPOSE WERE NOT FOUND AND EVEN NUMBER AND DATE WERE MISSING. THE PF CONTRIBUTION F OR EMPLOYEES MADE BY THE APPELLANT IS RS.2,872/- PER MONTH WHICH SHOWS THAT THE EMPLOYEE ON PERMANENT ROLL OF THE APPELLANT HAVE BEEN PAID VERY SMALL PORTION OF SUCH CASH EXPENSES. THIS MEANS THAT MAJORITY EXPENSES ARE BEING MADE TO CASU AL WORKERS. THESE LABOURS ARE BEING ENGAGED DIRECTLY BY THE APPELLANT AND THE APP ELLANT HAS NO WHERE STATED THAT ANY RECORD ON THE BASIS OF WHICH THESE PERSONS CAN BE IDENTIFIED HAS BEEN MAINTAINED BY IT. UNDER SUCH CIRCUMSTANCES, THE DIS ALLOWANCE MADE BY THE AO ON ESTIMATE BASIS CANNOT BE FAULTED. HENCE, THIS DISAL LOWANCE IS UPHELD AND THIS GROUND OF APPEAL IS DISMISSED. 15. ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 16. LD. AR SUBMITTED THAT LD. ASSESSING OFFICER FOU ND THAT APPELLANT HAS INCURRED CASH EXPENSES OF RS.50.76.755/- OUT OF WHICH MAJORITY OF EXPENSES ARE ON ACCOUNT OF SALARY AND WAGES PAI D TO EMPLOYEES ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 10 AND CASUAL WORKERS AND VOUCHERS IN RESPECT OF THE S AME HAD CERTAIN DETECTS SUCH AS SELF-MADE VOUCHERS, NO SIGNATURE OF RECIPIENT, NO NARRATION AND PURPOSE, NO DATE ETC. AO ALSO FOUND T HAT MONTHLY PF CONTRIBUTION AMOUNTS TO RS.2.872/- AND HENCE, TOOK A VIEW THAT THE SAME HARDLY QUALIFIES SUCH SUBSTANTIAL EXPENSES. TH US AO CONCLUDED THAT CASH EXPENSES WERE INCURRED FOR PURPOSE OTHER THAN BUSINESS PURPOSE AND ACCORDINGLY. AO MADE DISALLOWANCE OF MS . 10.15.351/- BEING| 20% OF CASH EXPENSES OF RS.50.76.755/- WHICH CAME TO BE CONFIRMED BY CT1(A). BOTH AO AND CIT (A) FAILED TO APPRECIATE THAT APPELLANT IS ENGAGED IN THE BUSINESS OF PURCHASE & SALE AND GINNING OF COTTON, CRUSHING OF COTTON SEEDS AND SALE OF; DE -OILED CAKES (KHOR). APPELLANT'S BUSINESS ACTIVITY IS LABOR INTENSIVE AN D VARIOUS WORKERS ARE REQUIRED FOR LOADING/UNLOADING, GINNING, PRESSI NG, OIL WASH. ETC. TO GET SUCH WORK DONE, LOCAL LABORERS ARE CALLED FOR ON NEED BASIS. SINCE SUCH LABORERS ARC ILLITERATE AND DO NOT HAVE ANY BANK ACCOUNT, IT IS ESSENTIAL TO MAKE CASH PAYMENTS TO THEM. SUCH PA YMENTS ARE RECORDED BY VOUCHERS/REGISTER/PETTY CASH ETC. AND T HE SAME ARE DULY AUTHENTICATED BY PERSON-IN-CHARGE OF SUCH ACTIVITY. IN SUCH A SCENARIO, NO BILLS CAN BE OBTAINED FROM SUCH LABORE RS. HOWEVER, RECORDS AS SPECIFIED ABOVE HAVE BEEN DULY AUDITED W ITHOUT ANY ADVERSE REMARK BY THE AUDITOR. COPY OF TAX AUDIT RE PORT AND AUDITED ACCOUNTS ARE PLACED AT PGS.24-62 OF P/B . IT IS SUBMITTED THAT SUCH EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE APPELLANT AND LOOKING TO THE BUSINESS ACTIVI TY OF THE APPELLANT, IT IS A NECESSITY TO INCUR SUCH EXPENSES IN CASH. IT I S ALSO NOT THE CASE OF AO/CIT(A) THAT THERE IS NO NECESSITY 10 INCUR SU CH EXPENSES IN CASH. ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 11 16.1 FURTHER, AS AGAINST CASH EXPENSES OF R.S.50.76 .755/-. APPELLANT'S TURNOVER IS OF RS.21,87,23,.166/- (PGS. 39-62 @ 48 OF P/B) WHICH SHOWS THAT SUCH CASH EXPENSES AMOUNT TO HARD LY 2.32% OF TOTAL TURNOVER. IN LIGHT OF TYPICAL BUSINESS ACTIVI TY OF THE APPELLANT, SUCH MEAGER CASH EXPENSES ARE FULLY JUSTIFIED. AS R EGARDS SOME DEFECTS IN VOUCHERS MAINTAINED BY APPELLANT IN RESP ECT OF SUCH CASH EXPENSES, IT IS SUBMITTED THAT SINCE SUCH SUM HAS B EEN PAID TO LOCAL AND ILLITERATE LABORERS, IT IS QUITE DIFFICULT TO MAINTAIN FULL PROOF RECORDS. 16.2 AS REGARDS PF CONTRIBUTION OF R.S.2.872/- PER MONTH, THE SAME IS FOR EMPLOYEES WHO ARE ON PAY-ROLL OF THE APPELL ANT WHEREAS MAJORITY OF CASH EXPENSES ARE IN RESPECT OF WAGES PAID TO CASUAL WORKERS CALLED FOR ON NEED BASIS AND HENCE THERE CA N BE NO PF' CONTRIBUTION PERTAINING TO SUCH CASUAL LABORERS. NE ITHER AO NOR CIT(A) HAS COME OUT WITH ANY CONCRETE EVIDENCE TO THE EFFE CT THAT| NO WORK HAS BEEN DONE BY CASUAL LABORERS IN LIEU OF WHICH T HEY HAVE BEEN PAID CASH : OR THAT SUCH EXPENSES HAVE BEEN INCURRE D FOR PURPOSE OTHER THAN CASH. IMPUGNED ADDITION HAS BEEN MADE ME RELY ON THE BASIS OF ASSUMPTIONS AND SURMISES WHICH IS NOT TEN ABLE IN THE EYES OF LAW. IN LIGHT OF THE ABOVE, IMPUGNED ADDITION OU GHT TO HAVE BEEN DELETED IN TOTO. 16.3 ALTERNATELY, SOME TOKEN DISALLOWANCE BE CONFIR MED TO COVER-UP FOR DEFECTS IN VOUCHERS MAINTAINED IN RESPECT OF CA SH EXPENSES SO AS TO MEET THE ENDS OF JUSTICE. ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 12 17. ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE HAS CHALLEN GED THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 10,15,351/- BEING 20% OF CASH EXPENSES OF RS.50,76,755/-. WE OBSERVE THAT ASSESSEE IS HAVING TURNOVER OF RS.27.81 CRORES WHICH IS MAIN LY RELATED TO PURCHASE AND SALE OF D-OILED CAKE AND GINNING COTT ON WHICH NORMALLY INVOLVES USE OF CASUAL WORKERS AND LABOURERS FOR LO ADING AND UNLOADING PURPOSES AND PAYMENTS ARE MADE ON DAILY B ASIS IN CASH. BOOKS OF ACCOUNT ARE DULY AUDITED AND NO MAJOR DEFE CT HAS BEEN OBSERVED BY THE REVENUE AUTHORITIES. NO QUALIFICATI ON HAS BEEN MADE BY THE AUDITORS IN THE CASH EXPENSES EXCEEDING RS.2 0,000/-. FURTHER, WE ALSO FIND THAT THE IMPUGNED CASH EXPENDITURE OF RS.50,76,755/- ARE JUST 2.3% OF THE TOTAL TURNOVER. IN THE GIVEN F ACTS AND CIRCUMSTANCES OF THE CASE WHEN GROSS TURNOVER, PURC HASES AND GP ARE NOT DISPUTED IT WOULD BE UNFAIR TO MAKE AN AD H OC DISALLOWANCE TO THE EXTENT OF 20% OF THE CASH EXPENSES. HOWEVER, ON E CANNOT IGNORE THE FACT THAT PAYMENTS TO CASUAL WORKERS AND LABOUR ERS AND PETTY CASH EXPENSES ROUND THE YEAR MAY NOT BE SUPPORTED B Y PROPER DOCUMENTATION AT ALL TIMES, THEREFORE, IN ORDER TO MEET THE ENDS OF JUSTICE, WE FIND IT JUSTIFIED TO SUSTAIN THE DISALL OWANCE @ 5% OF THE TOTAL CASH EXPENSES WHICH WILL BE AT RS.2,53,838/- AS AGAINST RS.10,53,351/- SUSTAINED BY LD. CIT(A). IN THE RESU LT, THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. ITA NO. 2258/AHD/2013 ASST. YEAR 2007-08 13 19. GROUND NOS.4 & 5 ARE OF GENERAL NATURE, WHICH N EED NO ADJUDICATION. 20. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH OCTOBER, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 20/10/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 19/10/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 20/10/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 21/10/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: