Vimit Construction, Ankleshwar V. The ACIT, Bharuch Circle, Bharuch

ITA 2267/AHD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5958 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 31-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANILKUMAR BHARADWAJ
• Assessee Lawyers: ANKITA MOTIWALA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CAMP AT SURAT BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO. 2267/AHD/2015 / ASSTT. YEAR: 2010-11 VIMIT CONSTRUCTION, 9, LALA COMPLEX, OPP. SARDAR COMPLEX, GIDC ESTATE, ANKLESHWAR-393002 PAN : AABFV 9695 B VS. ACIT, BHARUCH CIRCLE, BHARUCH / (APPELLANT) / (RESPONDENT) ASSESSEE BY : MS. ANKITA MOTIWALA, REVENUE BY : MR. ANILKUMAR BHARADWAJ, SR. DR / DATE OF HEARING : 24/04/2017 / DATE OF PRONOUNCEMENT: 01/05/2017 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF LD. CIT(A)-3, VADODARA DATED 25.06.2015 PASSED FOR AY 2 010-11. 2. IN THE FIRST GROUND OF APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.12,00,000/- WHICH WAS MADE BY THE ASSESSING OFFICER BY MAKING AD-HOC DISA LLOWANCE OUT OF LABOUR CHARGES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION. IT HAS FILED ITS RETURN OF INCOME ON 27.09.2010 DECLARING TOTAL INCOME OF RS.87,92,110/-. THE CASE OF THE ASSESSEE WAS ITA NO. 2267/AHD/2015 VIMIT CONSTRUCTION VS. ACIT AY : 2010-11 2 SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER S ECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. ON VERIFI CATION OF PROFIT & LOSS ACCOUNT, IT REVEALED TO THE ASSESSING OFFICER THAT THE ASSESSEE HAD DEBITED LABOUR CHARGES OF RS.96,01,462/-. HE DIRECTED THE ASSESSEE TO PRODUCE THE COPIES OF BILLS/VOUCHERS AND WAGE REGISTER. ON VER IFICATION, IT WAS SEEN THAT IN NUMBER OF CASES THE VOUCHERS ARE NOT VERIFIABLE BECAUSE THEY DID NOT CONTAIN PROPER ADDRESS. THE ASSESSING OFFICER FURT HER VERIFIED THAT IN THE WAGE REGISTER, AGAINST THE NAME OF LABOUR, THERE AR E VARIOUS DISCREPANCIES. IN ONE MONTH AT ONE PARTICULAR SITE, A LABOUR HAS P UT HIS SIGNATURE, BUT ON THE OTHER HAND ON THE NEXT SITE, HE PUT HIS THUMB I MPRESSION. ON ACCOUNT OF THESE SHORTCOMINGS, IT WAS HARBOURED BY THE ASSESSI NG OFFICER THAT THE WAGE REGISTER IS NOT RELIABLE. HE POINTED OUT THESE DIS CREPANCIES AND ATTACHED THE LIST OF SUCH DISCREPANCIES IN ANNEXURE-A WITH THE A SSESSMENT ORDER. THE LD. ASSESSING OFFICER HAS DISALLOWED THE EXPENDITURE BY 15% AND MADE AN ADDITION OF RS.14,40,220/-. 4. ON APPEAL, LD. CIT(A) HAS RESTRICTED THIS DISALL OWANCE TO RS.12,00,000/-. 5. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. BOTH THE REVENUE AUTHORITIES HAVE CONCURRED WITH REGARD TO THE FACT THAT THE DETAILS MAINTAINED BY T HE ASSESSEE IN RESPECT OF LABOUR CHARGES PAID BY IT ARE NOT SACROSANCT. THER E ARE SHORTCOMINGS IN THOSE DETAILS. THUS, IT IS QUITE OUT OF QUESTION FO R THE SECOND APPELLATE AUTHORITY TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE BILLS AND VOUCHERS ARE MAINTAINED ACCURATELY AND NO DISALLOWANCE OUGHT TO BE MADE ON THIS FRONT. IN OUR OPINION, THE ASSESSING OFFICER HAS E XAMINED THE BOOKS OF ACCOUNTS WHICH WERE PRODUCED BEFORE HIM BY THE ASSE SSEE AND HE HAS ITA NO. 2267/AHD/2015 VIMIT CONSTRUCTION VS. ACIT AY : 2010-11 3 POINTED OUT CERTAIN DEFECTS IN THE MAINTENANCE OF T HE WAGE REGISTER. THIS FINDING WAS UPHELD BY THE LD. CIT(A). THEREFORE, W E DO NOT SEE ANY REASON TO INTERFERE IN THIS FACTUAL FINDING. HOWEVER, LOO KING TO THE FACTS AND CIRCUMSTANCES AND THE NATURE OF BUSINESS, THE DISAL LOWANCE AT RS.12,00,000/- APPEARS TO BE ON THE HIGHER SIDE. THE ASSESSEE IS ENGAGED IN THE CONSTRUCTION ACTIVITY. IT HAS BEEN MAINTAINING BOO KS OF ACCOUNTS. IT HAS DISCLOSED THE PROFITS. THE GROSS PROFIT IN THIS LI NE OF BUSINESS IS NOT OF THIS MAGNITUDE THAT LABOUR EXPENSES COULD BE INFLATED BY 15%. TAKING INTO CONSIDERATION ALL THESE ASPECTS, WE RESTRICT THIS D ISALLOWANCE TO 8%. IN OTHER WORDS, THE LABOUR EXPENSES CLAIMED BY THE ASSESSEE ARE TO BE DISALLOWED BY 8%. THIS GROUND OF THE APPEAL IS PARTLY ALLOWED. 6. IN THE NEXT GROUND OF APPEAL, THE GRIEVANCE OF T HE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE MADE OUT OF MOTOR CAR EXPENSES, MOTOR CYCLE EXPENSES AND MOBILE EXPENSES. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS DEBITED FOLLOWING EXPENSES IN ITS BOOKS OF ACCOUNTS:- SR. NO. NATURE OF EXPENSES AMOUNT (RS) 1. MOBILE EXPENSES 1,12,860 2. MOTOR CAR EXPENSE 2,29,746 3. MOTOR CYCLE EXPENSE 1,16,805 4. TELEPHONE BILL EXPENSE 14,554 5 TRANSPORTATION EXPENSE 2,39,271 6 UTILITY VAN EXPENSE 2,24,179 TOTAL 9,37,415 8. THE LD. COUNSEL FOR THE ASSESSEE, WHILE TAKING US THROUGH THE DETAILS OF THESE EXPENSES, CONTENDED THAT THE MOBILE EXPEND ITURE OF RS.1,12,860/- IS RELATED TO 14 PERSONS WHICH INCLUDED TWO PERSONS NA MELY SHRI AMIT SHAH ITA NO. 2267/AHD/2015 VIMIT CONSTRUCTION VS. ACIT AY : 2010-11 4 AND SHRI VIJAY MEHTA; THEY HAVE CLAIMED THE EXPENDI TURE OF RS.10,910/- AND RS.7,335/- RESPECTIVELY. REST OF THESE EXPENDITURE S ARE RELATED TO ENGINEERS, SUPERVISORS, STORE KEEPER ETC; I.E., THEY ARE EMPLO YEES OF THE ASSESSEE. 9. SIMILARLY, FIVE MOTOR CYCLES ARE BEING PROVIDED BY THE ASSESSEE TO ITS ENGINEERS, SUPERVISORS ETC. AND ONE IN OFFICE. AN EXPENDITURE OF RS.1,16,805/- WAS INCURRED ON THESE MOTOR CYCLES AN D THERE CANNOT BE ANY ELEMENT OF PERSONAL NATURE OF THE PERSONS IN THESE EXPENSES. DETAILS OF THESE EXPENDITURES HAVE BEEN PLACED ON PAGE 57 OF THE PAP ER-BOOK. 10. THERE ARE TWO TELEPHONE CONNECTIONS IN THE OFFI CE. THEY WERE FOR OFFICE USE. THE PARTNERS WERE HAVING TWO MOTOR CAR S AND AN EXPENDITURE OF RS.2,29,746/- WAS CLAIMED. THESE WERE USED FOR THE PURPOSE OF THE BUSINESS; THEREFORE, NO DISALLOWANCE SHOULD BE MADE. 12. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE CONTENDED THAT LD. CIT(A) HAS CONSIDERED ALL THESE ASPECTS AND ONL Y THEREAFTER CONFIRMED THE DISALLOWANCE. 13. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE WAS NOT MAINTAINING COMPLETE DETAILS WITH RESPECT TO THESE EXPENDITURES VIZ. IT WAS NOT MAINT AINING ANY LOG BOOK FOR THE CARS OR FOR THE TELEPHONE USE. PRACTICALLY, IT WAS NOT POSSIBLE TO MAINTAIN A CALL RECORD REPRESENTING THE MOBILE CALLS. THUS, THE POSSIBILITY OF PERSONAL USAGE OF SOME OF THE FACILITIES CANNOT BE RULED OUT . HOWEVER, WE ARE OF THE VIEW THAT AS FAR AS THE MOTOR CYCLES AND MOBILE PHO NES PROVIDED TO THE EMPLOYEES ARE CONCERNED, THOSE WERE USED FOR THE PU RPOSES OF BUSINESS. IN ANY CASE, THOSE CANNOT BE CONSIDERED AS USED BY THE ASSESSEE OR ITS PARTNERS ITA NO. 2267/AHD/2015 VIMIT CONSTRUCTION VS. ACIT AY : 2010-11 5 FOR PERSONAL PURPOSES. IN THE HANDS OF THE ASSESSE E, THESE ARE EXPENDITURE FOR THE PURPOSE OF BUSINESS. IF ANY ELEMENT OF PER SONAL USAGE IS INVOLVED, THAT IS FOR THE EMPLOYEES. THEREFORE, CONSIDERING A LL THESE FACTS, WE DIRECT THE ASSESSING OFFICER TO MAKE AN AD-HOC DISALLOWANCE TO THE EXTENT OF 10% RELATING TO THE EXPENDITURE REPRESENTING TELEPHONE EXPENSES AMOUNTING TO RS.14,554/-, MOTOR CAR EXPENSES RS.2,29,746/- AND M OBILE EXPENSES RS.10,910/- & RS.7,335/- AS DISCUSSED ABOVE. ACCOR DINGLY, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST MAY, 2017 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 01/05/2017 *BT ! '! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. # / THE RESPONDENT. 3. & ( / CONCERNED CIT 4. ( ( ) / THE CIT(A) 5. ! & , & / DR, ITAT, 6. , / GUARD FILE. / BY ORDER, TRUE COPY / (DY./ASSTT.REGISTRAR) & , / ITAT, AHMEDABAD