Mukund Jaishankar Dhariya, Pune V. Asstt.CIT,Cir.3, Pune, Pune

ITA 516/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9755 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: S A GUNDECHA
• Keywords: Rejection of books of accounts

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 516/PN/2011 (ASSESSMENT YEAR 2006-07) MUKUND JAISHANKAR DHARIYA, PLOT NO. 43, INDU NIVAS, SHIVAJI NAGAR HOUSING SOCIETY, SHIVAJI NAGAR, PUNE 411 005. .. APPELLANT PAN NO. AAPDD 8665F VS. ACIT, CIRCLE-3, PUNE. .. RESPONDENT ASSESSEE BY : SRI S.A.GUNDECHA DEPARTMENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 08-08-2012 DATE OF PRONOUNCEMENT : 09-08-2012 ORDER PER R.K. PANDA, AM : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 11-02- 2011 OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IN THE GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS. 7,25,645/- OUT OF THE DISALLOWANCE OF RS. 14,51,290/- MADE BY THE AO ON ACCOUNT OF VARIOUS EX PENSES. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF EXECUTING CIVIL CONTRACTS. DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE AO NOTED THAT THE AUDITORS IN FORM NO. 3CD HAVE MENTIO NED THAT EXPENSES ON ACCOUNT OF LABOUR CHARGES, EXCAVATION CHARGES, BLASTING CHA RGES, JUNGLE CUTTING, CENTRING CHARGES ETC. HAVE BEEN MADE ON SELF SUPPORTED VOUCH ERS. THE DETAILS OF SUCH EXPENSES AS NOTED BY THE AO IN THE ASSESSMENT ORDER ARE AS UNDER : 2 LABOUR CHARGES : RS. 37,09,378/- EXCAVATION : RS. 18,29,582/- BLASTING CHARGES : RS. 17,17,490/- -------------------------------- TOTAL RS. 72,56,530/- -------------------------------- HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WH Y 20% OF SUCH EXPENSES SHOULD NOT BE DISALLOWED. THE ASSESSEE SUBMITTED THE COMM ENTS OF THE AUDITORS WHICH IS AS UNDER : AS PER OUR TELEPHONIC TALK I GIVE THE EXPLANATION TO THE ABOVE REFERRED NOTE. FOR THIS PURPOSE I REPRODUCE THE SAID NOTE AS FOLLOWS : IN CASE OF EXPENDITURE DEBITED TO PROFIT & LOSS A/C . UNDER THE ACCOUNT HEAD LABOUR CHARGES EXCAVATION CHARGES & BLASTING CHARGE S, JUNGLE CUTTING CHARGES, CENTRING CHARGES, PAYMENT HAS BEEN MADE ON SELF SU PPORTED VOUCHERS. IN THIS REGARD WE HAD DETAILED DISCUSSION AT THE TI ME OF FINALISATION OF AUDIT REPORT. THE NOTE GIVEN IN AUDIT REPORT MEANS THESE LABOUR PAYMENTS ARE MADE ON PAYMENT VOUCHERS MADE AT THE SITE DULY SIGNED BY TH E RESPECTIVE LABOUR FOR THE RECEIPT OF MONEY. THE WORKING OF LABOUR CHARGES IS MADE FROM THE RELATED REGISTER/RECORD MAINTAINED BY THE SITE ENGINEER/SUP ERVISOR FROM TIME TO TIME. THERE ARE NO BILLS FROM THE LABOUR/LABOUR CONTRACTO R & THE PAYMENTS ARE MADE AS PER THE RECORD MAINTAINED AT SITE & PAYMENT VOUCHER . IT IS MENTIONED AS SELF SUPPORTED VOUCHERS. WE HOPE THIS NOTE IS SELF EXPLANATORY. THIS IS THE COMMON PRACTICE ON THE PART OF ASSESSEE & ON THE PART OF AUDITOR IN SUCH SITUATION & THERE IS NO DISCLOSURE OF SUSPICIOUS ON THE TRANSACTION. 3.1 HOWEVER THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE AND DISALLOWED AN AMOUNT OF RS. 14,51,290/ - BEING 20% OF THE ABOVE EXPENDITURE ON THE GROUND THAT THE AUDITOR HAS SPEC IFICALLY MENTIONED THAT THE EXPENSES ARE NOT HAVING EXTERNAL SUPPORTING EVIDENC ES OTHER THAN SELF MADE VOUCHERS. 4. IN APPEAL THE LEARNED CIT(A) RESTRICTED SUCH DIS ALLOWANCE TO 10% OF THE EXPENSES AND THUS SUSTAINED AN AMOUNT OF RS. 7,25,6 45/-. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFOR E US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE IS ENGAGED IN CONSTRUCTION OF EARTHERN DAMS IN THE REMOTE PART S OF THE STATE OF MAHARASTRA. HE 3 SUBMITTED THAT IT IS PRACTICALLY NOT POSSIBLE TO GE T PRINTED VOUCHERS FROM THE LABOURERS ENGAGED IN THE SITE. SINCE THE AO HAS NO T REJECTED THE BOOKS OF ACCOUNTS, THEREFORE, NO DISALLOWANCE IS CALLED FOR. REFERRING TO THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. PRAGATI FASHIONS AND THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF AYUSHAKTI AYURVED PVT. LTD. VS. ACIT REPORTED IN 37 SOT 313 HE SUBMIT TED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE TRIBUNAL HAS DELETED ADHOC DI SALLOWANCE ON ACCOUNT OF SELF MADE VOUCHERS. 6. THE LEARNED DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE CIT(A) HAS ALREADY GIVEN 50% REL IEF TO THE ASSESSEE WHICH IS JUST AND PROPER UNDER THE FACTS AND CIRCUMSTANCES O F THE CASE. SHE ACCORDINGLY SUBMITTED THAT ORDER OF THE CIT(A) BE UPHELD. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE AUDITORS IN THEIR R EPORT IN FORM NO. 3CD HAVE OBSERVED THAT PAYMENT FOR EXPENDITURE DEBITED TO P& L ACCOUNT UNDER THE ACCOUNT HEAD LABOUR CHARGES, EXCAVATION CHARGES AND BLASTIN G CHARGES, JUNGLE CUTTING CHARGES, CENTRING CHARGES ETC. HAS BEEN MADE ON SEL F SUPPORTED VOUCHERS. SUBSEQUENTLY DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE AUDITORS HAVE ALSO GIVEN CLARIFICATION WHICH HAS ALREADY BEEN EXTRACTE D AT PARA 3 OF THIS ORDER. WE FIND FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT BECAUSE OF THE NATURE OF THE WORK CARRIED OUT BY THE ASSESSEE IN THE REMOTE PART OF THE STATE WHERE THE ASSESSEE IS ENGAGED IN CONSTRUCTION ACTIV ITIES COMPLETE VOUCHERS FOR 4 LABOUR PAYMENTS CANNOT BE MAINTAINED. FURTHER THE B OOK RESULTS HAVE ALSO NOT BEEN REJECTED BY THE AO. 8. WE FIND THE AHMEDABAD BENCH OF THE TRIBUNAL IN T HE CASE OF PRAGATI FASHIONS (SUPRA) HAS HELD THAT WHERE THE VOUCHERS I N RESPECT OF EXPENSES ON CONVEYANCE, AUTO FAIR, TEA-COFFEE, COLD DRINK, WATE R EXPENSES ETC. CONTAINED THE DETAILS AS TO THE PERSONS IN RECEIPT OF AMOUNT AND PURPOSES FOR WHICH THE EXPENSES ARE INCURRED, DISALLOWANCE OUT OF SUCH EXPENSES CAN NOT BE MADE ON THE GROUND THAT SUCH VOUCHERS WERE SELF GENERATED SINCE NO PUCCA BI LL FOR SUCH EXPENSES IS POSSIBLE. SIMILARLY THE MUMBAI BENCH OF THE TRIBUN AL IN THE CASE OF AYUSHAKTI AYURVED PVT. LTD. (SUPRA) HAS HELD THAT WHEN THE AS SESSEE FURNISHED COMPLETE DETAILS, ADHOC DISALLOWANCE CANNOT BE MADE BY AO AN D THEREFORE, ADDITIONS SUSTAINED BY CIT(A) IN RESPECT OF THE ITEMS OF EXPE NDITURE, NAMELY, CONVEYANCE EXPENSES, TELEPHONE AND POSTAGE EXPENSES, AND LOCAL AND FOREIGN TRAVEL EXPENSES HAD TO BE DELETED. 9. SINCE IN THE INSTANT CASE IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS NOT GIVEN THE FULL DETAILS OF THE RECIPIENTS OF THE LAB OUR CHARGES AND CONSIDERING THE FACT THAT THE ASSESSEE IS DOING THE CONTRACT WORK IN THE REMOTE PART OF THE STATE, THEREFORE, MERELY BECAUSE THE PAYMENTS HAVE BEEN MA DE THROUGH SELF MADE VOUCHERS THE SAME IN OUR OPINION CANNOT BE A GROUND FOR MAKING ADHOC DISALLOWANCE. IN THIS VIEW OF THE MATTER WE ARE OF THE CONSIDERED OPINION THAT NO DISALLOWANCE UNDER THE FACTS AND CIRCUMSTANCES OF T HE CASE IS CALLED FOR. WE ACCORDINGLY SET-ASIDE THE ORDER OF THE CIT(A) AND A LLOW THE GROUNDS RAISED BY THE ASSESSEE. 5 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 9 TH DAY OF AUGUST 2012 SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 9 TH AUGUST 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, PUNE 4. THE D.R, A PUNE BENCH 5. 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