SURESH HIMMATLAL OZA , PUNE V. DEPUYY COMMISSIONER OF INCOME TAX , CIRCLE -6, PUNE

ITA 487/PUN/2020

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 8864 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-09-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 04-08-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.487/PUN/2020 िनधाᭅरण वषᭅ / Assessment Year: 2013-14 Suresh Himmatlal Oza, 326, Rasta Peth, Pune- 411011. PAN : AAFPO5026M Vs. DCIT, Circle-6, Pune. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 4, Pune [‘the CIT(A)’] dated 26.03.2020 for the assessment year 2013-14. 2. Briefly, the facts of the case are that the appellant is an individual engaged in the business of manufacturing and sale of Agarbattis and other type of incense sticks. The return of income for the assessment year 2013-14 was filed on 30.09.2013 declaring total income of Rs.1,43,38,340/-. Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Circle-6, Pune (‘the Assessing Officer’) vide order dated Assessee by : Shri K. Srinivasan Revenue by : Shri M. G. Jasnani Date of hearing : 14.09.2022 Date of pronouncement : 07.11.2022 ITA No.487/PUN/2020 2 05.02.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.1,90,86,301/- after making several disallowances. 3. Being aggrieved by the order of assessment, an appeal was filed before the ld. CIT(A), who vide impugned order sustained the addition of Rs.5,25,000/- in respect of incentive wages payable to labour of Rs.9,75,000/-. Similarly, the ld. CIT(A) also confirmed the disallowance made by the Assessing Officer out of labour contract and commission payment of Rs.1,13,29,399/-. Similarly, the CIT(A) also sustained the addition @ 5% of labour contract and commission payment of Rs.5,66,469/- made to the relates parties invoking the provisions of section 40A(2)(b) of the Act. 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. We heard the rival submissions and perused the material on record. We find that there is no material on record brought by the Assessing Officer to prove that the liability had ceased to exist. In fact, the material on record clearly indicates that the provision made during the year under consideration was discharged in the subsequent period. The genuineness of the expenditure was not doubted by the Assessing Officer. Therefore, the ratio of the decision of the Hon’ble Supreme Court in the case of CIT vs. Sugauli Sugar Works (P.) Ltd., 236 ITR 518 (SC) is squarely ITA No.487/PUN/2020 3 applicable to the facts of the present case. Accordingly, we direct the Assessing Officer to delete the addition of Rs.5,25,000/- towards incentive wages payable to labour u/s 41(1) of the Act. Thus, the ground of appeal no.1 filed by the assessee stands allowed. 6. Ground of appeal no.2 challenges the addition made on ad-hoc basis at the rate of 5% on account of labour contract and commission payment of Rs.1,13,29,399/- invoking the provisions of section 40A(2)(b) of the Act. 7. We have carefully perused the assessment order and also the ld. CIT(A)’s order. The Assessing Officer before invoking the provisions of section 40A(2)(b) should discharge the onus lies upon him to bring on record and demonstrate, as to what is the fair market value of the expenditure incurred as held by the Hon’ble Supreme Court in the case of Upper India Publishing House P. Ltd. vs. CIT, 117 ITR 569 (SC), wherein, the Hon’ble Supreme Court held that no addition u/s 40A(2)(b) can be made by the Assessing Officer without bringing material on record as well as fair market value of the services and this position was accepted by the CBDT vide Circular No.6-P dated 06.07.1968. In the present case, the Assessing Officer had not discharged this onus and therefore, the addition made by the Assessing Officer, cannot be sustained in the eyes of law. Therefore, we direct the Assessing Officer to delete the ITA No.487/PUN/2020 4 ad-hoc disallowance made u/s 40A(2)(b) of the Act. Thus, the ground of appeal no.2 filed by the assessee stands allowed. 8. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 07 th day of November, 2022. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 07 th November, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-4, Pune. 4. The Pr. CIT-3, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.