M/s. Alpha Foam Limited, Pune V. ACIT, Range-8, Pune

ITA 740/PUN/2013

• Counselvise Citation: 74024514 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 28-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S C SARANGI
• Keywords: Business expenditure; Bad and doubtful debts; Capital receipt; Revenue expenditure
• Section: 14A; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.740/PN/2013 (A.Y: 2006-07) M/S. ALPHA FOAM LIMITED J-172, MIDC, BHOSARI, PUNE 411026 PAN: AACCA4196J APPELLANT VS. ACIT, RANGE-8, PUNE RESPONDENT APPELLANT BY : SHRI NIKHIL PATHAK RESPONDENT BY : SHRI S.C. SARANGI DATE OF HEARING: 09.07.2014 DATE OF ORDER : 31.07.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-V, PUNE, DAT ED 22.01.2013 FOR A.Y. 2006-07 ON THE FOLLOWING GROUND S. 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS.30 LACS IN RESPECT OF GUARANTEE COMMISSION PAID TO THE DIRECTORS. 1.1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE GUARANTEE COMMISSION PAID TO THE TWO DIRECTORS WAS NOT INCURR ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS AND HENCE, THE SAME WAS NOT ALLOWABLE AS A BUSINESS EXPENDITURE. 1.2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE GUARANTEE COMMISSION PAID WAS NOT ALLOWABLE AS A BUSINESS EXPENDITURE BY FOLLOWING THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF M/S. UNITED BREWERIES LTD. [ITA NO. 4 OF 2009] WITHOUT APPRECIA TING 2 ITA NO.740 OF 13 M/S. ALPHA FOAM LTD. THAT THE FACTS OF THAT CASE WERE DISTINGUISHABLE AN D HENCE, NOT APPLICABLE TO THE CASE OF THE ASSESSEE COMPANY. 1.3] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING T HAT - A. THE GUARANTEE COMMISSION PAID TO THE TWO DIRECTORS WAS PAID FOR THE RISK BORNE BY THE DIRECTORS IN RESPECT OF GUARANTEE PROVIDED BY THEM TOWARDS THE LOAN RECEIVED BY THE COMPANY AND HENCE, IT WAS INCURRED WHOLLY FOR BUSINESS PURPOSE. B. THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF M/S. UNITED BREWERIES LTD. WAS DISTINGUISHABLE ON FACTS AND HENCE, NOT APPLICABLE TO THE CASE OF THE ASSESSEE. C. IN THE CASE OF UNITED BREWERIES LTD, THE PERSONAL ASSETS OF THE DIRECTOR WHO STOOD AS THE GUARANTOR TO THE COMPANY WERE QUITE MEAGER AS COMPARED TO THE GUARANTEE PROVIDED BY HIM WHICH IS NOT THE FACT IN THE CASE OF THE ASSESSEE AND HENCE, THE RATIO IN THE ABOVE CASE IS NOT APPLICABLE TO THE ASSESSEE'S CASE. D. HON'BLE ITAT, PUNE IN THE ASSESSEE'S OWN CASE FOR A.Y. 2004-05 HAD HELD THAT THE PAYMENT OF GUARANTEE COMMISSION AT 2.5% WAS REASONABLE AND HENCE, THE CASE OF THE ASSESSEE WAS COVERED BY THE ABOVE CITED DECISION FOR THE EARLIER YEAR. 2] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.16,78,922/-MADE IN RESPECT OF BA D DEBTS ON THE GROUND THAT THE ASSESSEE HAD NOT FURNISHED PROPER DETAILS IN RESPECT OF THE BAD DEBT S CLAIMED BY THE ASSESSEE AND HENCE, THE SAME WAS NOT ALLOWABLE. 2.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD FURNISHED ALL THE RELEVANT DETAILS IN THE FORM OF NAME AND AMOUNT OF PARTIES AGAINST WHOM THE BAD DEBTS WERE CLAIMED AND HENCE, THE CLAIM OF THE BAD DEBTS MADE BY THE ASSESSEE WAS ALLOWABLE. 3] THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADHO C ADDITION MADE IN RESPECT OF LABOUR CHARGES TO THE EXTENT OF RS.10 LACS ON THE GROUND THAT THE SAID 3 ITA NO.740 OF 13 M/S. ALPHA FOAM LTD. EXPENDITURE WAS NOT FULLY SUPPORTED BY DELIVERY CHALLANS AND PROPER DOCUMENTARY EVIDENCES. 13.1] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD DULY FURNISHED VARIOUS SUPPORTING DOCUMENTS INCLUDING THE DELIVERY CHALLANS IN RESPEC T OF THE EXPENDITURE OF LABOUR CHARGES AND HENCE, THE DISALLOWANCE MADE WAS NOT JUSTIFIED IN THE FACTS OF THE CASE. 3.2] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED T HAT ALL THE PAYMENTS IN RESPECT OF THE LABOUR CHARGES WERE MADE THROUGH BANK CHEQUES AND AFTER DEDUCTION OF TA X AND HENCE, THE SAME WERE GENUINELY INCURRED BY THE ASSESSEE. THEREFORE, THE SAID ADHOC DISALLOWANCE WA S NOT JUSTIFIED IN THE CASE OF THE ASSESSEE. 3.3] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESSE E SUBMITS THAT THE DISALLOWANCE MADE IS VERY HIGH AND THE SAME MAY BE REDUCED SUBSTANTIALLY. 4] THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADHOC DISALLOWANCE MADE IN RESPECT OF TRAVELLING CHARGES TO THE EXTENT OF RS.50,000/- ON THE GROUND THAT THE SA ME WERE SUPPORTED BY SELF MADE VOUCHES AND HENCE, NOT ALLOWABLE. 4.1] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE ALL THE ABOVE EXPENSES WERE INCURRED FOR THE BUSINE SS PURPOSES IN THE ROUTINE COURSE OF BUSINESS ACTIVITY AND HENCE, THE SAME WERE ALLOWABLE TO THE ASSESSEE. 5] THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDITI ON OF RS.60,750/- IN RESPECT OF EXPENDITURE TOWARDS REPAI RS TO PLANT AND MACHINERY ON THE GROUND /THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND HENCE, NOT ALLOWABLE AS REVENUE EXPENDITURE. 5.1] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED T HAT THE SAID EXPENSES WERE INCURRED BY THE ASSESSEE TOWARDS REPLACEMENT OF PARTS OF PLANT AND MACHINERY AND HENCE, THE SAME WERE ALLOWABLE AS REVENUE EXPENDITURE. 6] THE LEARNED CIT(A) ERRED IN DISALLOWING AN AMOUN T OF RS.3,17,192/- IN A RESPECT OF EXPENDITURE TOWARDS REPAIRS TO PLANT AND MACHINERY ON THE GROUND THAT T HE SAID EXPENDITURE WAS NOT SUPPORTED BY BILLS AND HENCE, NOT ALLOWABLE. 4 ITA NO.740 OF 13 M/S. ALPHA FOAM LTD. 6.1] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED T HAT THE SAID EXPENDITURE WAS GENUINELY INCURRED FOR THE PURPOSES OF BUSINESS AND HENCE, THE SAME SHOULD HAV E BEEN ALLOWED TO THE ASSESSEE. 7] WITHOUT PREJUDICE TO THE FACT THAT THE ASSESSEE HAS OFFERED THE INSURANCE COMPENSATION ON DAMAGE TO THE FACTORY BUILDING, REPAIRS TO PLANT AND MACHINERY, ELECTRICAL INSTALLATION, ETC. AS A REVENUE RECEIPT, THE ASSESSEE 'SUBMITS THAT THE LEARNED CIT(A) IN CONSONANCE WITH HIS STAND IN A.Y. 2005-06 SHOULD HAVE HELD THAT THE COMPENSATION TO THE EXTENT OF RS . 1,52,633/-WAS A CAPITAL RECEIPT AS IN THAT YEAR, HE HAD DISALLOWED THE ABOVE EXPENSES ON REPAIRS AS CAPITAL EXPENSES. 8] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 2. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE HAS NOT PRESSED THE GROUND NOS.4, 5, 6 AND 7, SO THEY ARE DISMISSED AS NOT PRESSED. 3. THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING OF P.U. FOAM, AUTOMOBILE SEAT ASSEMBLY, CHEMICAL PVC AND P. P. SHEETS, ETC. THE ASSESSING OFFICER HAS MADE FIRST ADDITION ON ACCOUNT OF DISALLOWANCE OF 30 LACS BEING GUARANTEE COMMISSION PAID TO ITS DIRECTORS FOR GIVING GUARANTEES TO THE BANKERS FOR LOANS OBTAINED BY THE ASSESSEE COMPANY, WHICH WAS UPHELD BY THE CI T(A). AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZED REPRE SENTATIVE HAS POINTED OUT THAT THIS ISSUE HAS BEEN DECIDED IN FAV OUR OF THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.1838/PN/2 012 AND ANOTHER FOR A.Y. 2005-06 BY OBSERVING AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OF FICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF TH E ASSESSEE. WE FIND IN THE IMMEDIATELY PRECEDING ASS ESSMENT YEAR, I.E. 2004-05 AN AMOUNT OF RS.10,52,000/- WAS DEBITED BY THE ASSESSEE AS GUARANTEE COMMISSION UNDER THE H EAD INTEREST AND FINANCE CHARGES PAID TO MR. RAJIV RA NKA AND MS. SUREKHA RANKA AMOUNTING TO RS.5,26,000/- EACH. THE 5 ITA NO.740 OF 13 M/S. ALPHA FOAM LTD. RATE FOR SUCH COMMISSION WAS 3.5%. THE ASSESSING O FFICER APPLYING THE PROVISIONS OF SECTION 40A(2)(B) RESTRI CTED SUCH GUARANTEE COMMISSION TO 1% AND MADE DISALLOWANCE OF RS.7,52,000/- WHICH WAS CONFIRMED BY THE LD.CIT(A). ON FURTHER APPEAL, THE TRIBUNAL ALLOWED THE ENTIRE CLA IM OF GUARANTEE COMMISSION BY DELETING THE DISALLOWANCE. WHEN THE REVENUE CHALLENGED THE ORDER OF THE TRIBUNAL, T HE HONBLE HIGH COURT VIDE ITA NO.2325/2011 ORDER DATE D 23- 04-2014 DISMISSED THE APPEAL FILED BY THE REVENUE O N THIS ISSUE BY OBSERVING AS UNDER : 3. THE NEXT ISSUE IS REGARDING DISALLOWANCE OF GUARANTEE COMMISSION PAID TO THE TWO DIRECTORS. IT IS CONTENDED BEFORE US THAT SUB-SECTION (2) OF SECTION 14A DOES NOT PROHIBIT PAYMENT OF SUCH AMOUNT TO THE DIRECTOR. ALL THAT IS REQUIRED TO BE RECORDED IS T HE SATISFACTION THAT SUCH EXPENDITURE INCURRED ON ACCO UNT OF THE PAYMENT, IS NOT EXCESSIVE OR UNREASONABLE AN D HAVING REGARD TO THE MARKET VALUE OF THE GOODS OR T HE SERVICES OR FACILITIES. IN CONSIDERING THIS CLAIM, THE TRIBUNAL FOUND THAT THE ACCOUNTANT OF THE COMPANY COMMITTED A MISTAKE IN PAYING THE COMMISSION @ 3.51% TO THE DIRECTORS AND THE ASSESSEE CONCEDED BEFORE THE TRIBUNAL THAT THIS WAS A MISTAKE AND THE COMMISSION HAS BEEN RESTRICTED NOT 1% AS CLAIMED BY THE REVENUE BUT 1.77%. THE TOTAL PAYMENT, THERE IS NOT MORE THAN RS.10,52,000/-. IN THE GIVEN FACTS A ND CIRCUMSTANCES, THE TRIBUNAL DID NOT COMMIT ANY ERRO R IN UPHOLDING THIS LIMITED PAYMENT AND PARTICULARLY WHEN IT IS NOT FOUND TO BE UNREASONABLE OR EXCESSIV E. THE PARAMETERS WHICH THIS CLAIM IS CONSIDERED ARE THUS IN TUNE WITH LAW. WE DO NOT FIND THAT THE VIE W TAKEN IS PERVERSE OR VITIATED BY ANY ERROR OF LAW APPARENT ON THE FACE OF THE RECORD RESULTING IN THI S COURTS INTERVENTION. THE APPEAL IS THEREFORE DEVO ID OF MERITS EVEN WITH REGARD TO THIS ISSUE. 4.1 SINCE THE JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE HAS ALLOWED SUCH GUARANTEE COMMISSION IN THE PRECEDING YEAR, THEREFORE, RESPECTFULLY FOLLOWING T HE SAME, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE. 4.2 SO FAR AS THE DECISION OF THE HONBLE KARNATAKA HIGH COURT RELIED ON BY THE LD.CIT(A) IS CONCERNED, WE A RE OF THE OPINION THAT IN VIEW OF THE DECISION OF THE JURISDI CTIONAL HIGH COURT IN ASSESSEES OWN CASE, THE SAME IS NOT APPLI CABLE TO THE ASSESSEE COMPANY. FURTHER, THE FACTS IN THAT C ASE ARE ALSO DISTINGUISHABLE AND NOT APPLICABLE TO THE FACT S OF THE 6 ITA NO.740 OF 13 M/S. ALPHA FOAM LTD. PRESENT CASE. IN THE CASE BEFORE HONBLE KARNATAKA HIGH COURT, MR.VIJAY MALLYA, WHOSE NET WEALTH WAS RS.70. 47 LAKHS AS ON 31-03-1990 STOOD AS A GUARANTOR FOR AN AMOUNT OF RS.115.32 CRORES. FURTHER, HE WAS A NON- RESIDENT DURING THAT YEAR AND NO PRIOR PERMISSION F ROM RBI WAS TAKEN BY HIM. FURTHER, HUGE AMOUNT OF GUARANTE E COMMISSION WAS GIVEN TO MR.VIJAY MALLYA. HOWEVER, IN THE INSTANT CASE, THE NET WEALTH OF BOTH THE DIRECTORS ARE RS.4.56 CRORES AND THEY HAVE GIVEN GUARANTEE IN RES PECT OF LOAN WORTH RS.2.05 CRORES. THEREFORE, THE FACTS IN THE CASE OF UNITED BREWERIES LTD. AS DECIDED BY HONBLE KARN ATAKA HIGH COURT ARE DIFFERENT FROM THAT OF THE INSTANT C ASE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE, W HICH IS BINDING ON US, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF GUARANTEE COMMISSION OF RS.10,52,000/-. 4. WE FIND THAT ITAT FOR A.Y. 2005-06 HAS DECIDED T HE ABOVE ISSUE BY FOLLOWING THE DECISION OF ITAT FOR A.Y. 20 04-05. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, WE DO NOT CONCUR WITH THE FINDING OF CIT(A) AND SET ASIDE THE ORDER OF CIT(A) AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADD ITION OF 30 LACS MADE IN RESPECT OF GUARANTEE COMMISSION PAID TO ITS DIRECTORS BECAUSE THE SAME WAS INCURRED WHOLLY AND EXCLUSIVEL Y FOR BUSINESS PURPOSE AND THE SAME WAS ALLOWABLE AS BUSI NESS EXPENDITURE. 5. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF BAD DEBTS AMOUNTING TO 16,78,922/- MADE ON THE GROUND THAT THE ASSESSEE HAD NOT FURNISHED PROPER DETAILS IN RESPEC T OF THE BAD DEBTS CLAIMED BY THE ASSESSEE AND HENCE, THE SAME W AS NOT ALLOWABLE, WHICH WAS CONFIRMED BY THE CIT(A). 5.1 THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUBMI TTED THAT THE DISALLOWANCE OF 16,78,922/- IN RESPECT OF BAD DEBTS WAS NOT JUSTIFIED. THE CIT(A) FAILED TO APPRECIATE THAT TH E ASSESSEE HAD FURNISHED ALL THE RELEVANT DETAILS IN THE FORM OF N AME AND AMOUNT OF PARTIES AGAINST WHOM THE BAD DEBTS WERE CLAIMED AND HENCE, 7 ITA NO.740 OF 13 M/S. ALPHA FOAM LTD. THE CLAIM OF THE BAD DEBTS MADE BY THE ASSESSEE WAS ALLOWABLE. THE LEARNED AUTHORIZED REPRESENTATIVE DREW OUR ATTE NTION TO PAGE 53 OF THE PAPER BOOK. IN THIS REGARD, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED NET DEDUCTION OF BAD DEBTS OF 16,78,922/-, WHICH WAS MOSTLY ON ACCOUNT OF SOME DIFFERENCES IN THE DEBTOR'S ACCOUNT WHICH WERE WRITTEN OFF AS WELL AS SOME RECEIVABLES. THE DETAI LS OF THE SAME WERE DULY SUBMITTED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER DESIRED THE BREAKUP OF THE BAD DEBTS BETWEE N THE DEBTS WRITTEN OFF ON ACCOUNT OF NON RECOVERY AND DEBTS WH ICH WERE WRITTEN OFF DUE TO RECONCILIATION DIFFERENCES. THE ASSESSEE DID NOT GIVE THE BIFURCATION BEFORE THE ASSESSING OFFICER B EFORE DISALLOWING THESE BAD DEBTS. THE ASSESSING OFFICER HAS FURTHER STATED THAT THE ASSESSEE HAS NOT PROVED THAT THE DE BTS HAVE BECOME BAD. IN THIS REGARD, THE STAND OF THE ASSES SEE HAS BEEN THAT THE ASSESSEE HAD CARRIED OVER THE BALANCES IN THE ACCOUNTS OF VARIOUS DEBTORS OVER THE YEARS. ON RECONCILIATI ON, THE ASSESSEE HAD WRITTEN OFF THE DIFFERENCES AND CLAIMED THE SAM E AS BAD DEBTS. SECONDLY, SOME OF THE BALANCES WHICH WERE O UTSTANDING OVER THE YEARS WERE WRITTEN OFF BY THE ASSESSEE. J UST BECAUSE, THE ASSESSEE DID NOT GIVE THE DETAILS OF BIFURCATIO N OF THE AMOUNTS FALLING IN THESE TWO CATEGORIES OF BAD DEBTS, THE A SSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE SAME. IT WAS POINTED OUT THAT THE ASSESSEE HAD GIVEN THE DETAILS OF THE BAD DEBTS CLAIMED AND IT WAS NOT A CASE THAT NO DETAILS WERE SUBMITTED BY TH E ASSESSEE. THE ASSESSING OFFICER HAS DISALLOWED THE AMOUNT ON THE GROUND THAT THE ASSESSEE DID NOT PROVE THAT THE BAD DEBTS HAD BECOME BAD. IN VIEW OF ABOVE, ORDER OF AUTHORITIES BELOW BE SET ASIDE AND CLAIM OF BAD DEBTS WRITTEN OFF BY THE ASSESSEE BE A LLOWED. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF AUTHORITIES BELOW. 8 ITA NO.740 OF 13 M/S. ALPHA FOAM LTD. 5.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE HON'BLE SUPREME COURT IN T HE CASE OF T.R.F, LTD. [(2010) 323 ITR 397 (SC] HAS HELD THAT AFTER THE AMENDMENT, THERE IS NO REQUIREMENT TO PROVE THAT TH E DEBT HAS BECOME BAD. MERE WRITE OFF IS SUFFICIENT FOR CLAIM ING BAD DEBT. SO, THERE IS NO QUESTION OF PROVING THAT BAD DEBT H AD BECOME BAD WHICH JUST DOES NOT ARISE. IN VIEW OF ABOVE DECISI ON OF HONBLE SUPREME COURT IN T.R.F. LTD. (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO ALLOW THIS CLAIM OF ASSESSEE. 6. THE NEXT ISSUE IS WITH REGARD TO ADHOC ADDITION MADE IN RESPECT OF LABOUR CHARGES TO THE EXTENT OF 10 LACS ON THE GROUND THAT THE SAID EXPENDITURE WAS NOT FULLY SUPPORTED B Y DELIVERY CHALLANS AND PROPER DOCUMENTARY EVIDENCES. IN THIS YEAR, THE ASSESSEE HAS CLAIMED TOTAL LABOUR CHARGES OF 2,08,87,009/-. THE ASSESSING OFFICER NOTED THAT IN EARLIER YEAR 20 05-06, THE LABOUR CHARGES WERE 76,26,395/-. HE NOTED THAT THERE WAS INCREASE IN TURNOVER @ 1.51% WHEREAS THE LABOUR CHA RGES HAVE INCREASED @ 2.74% COMPARED TO PREVIOUS YEAR. THE A SSESSING OFFICER HAS ALLEGED THAT THE ASSESSEE DID NOT SUBMI T THE DETAILS OF LABOUR EXPENSES AND HENCE DISALLOWED AN AMOUNT OF 20 LACS, WHICH WAS REDUCED TO 10 LACS BY THE CIT(A). THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF ASSESSEE. THE STAND OF THE ASSESSEE HAS BEEN THAT THE AUTHORITIES BELOW WERE N OT JUSTIFIED IN DISALLOWING THE LABOUR CHARGES, IN FACT THE ASSESSI NG OFFICER HAD ASKED TO PRODUCE THE LABOUR CHARGES. THE LEARNED A UTHORIZED REPRESENTATIVE FOR ASSESSEE HAS PRODUCED THE DETAIL S 7 MONTHS AND FILED AN AFFIDAVIT OF CONCERNED AUTHORIZED REPR ESENTATIVE TO THAT EFFECT. IT WAS MADE CLAIM ON BEHALF OF ASSESS EE TO THE ASSESSING OFFICER THAT SINCE THE VOLUME OF BILLS IS VERY HIGH, ALL THE BILLS COULD NOT BE PRODUCED. IN THAT CONTEXT, THERE IS A NOTING MADE BY THE ASSESSING OFFICER IN THE ORDER SHEET. H OWEVER, THE SAME WAS SUBMITTED BEFORE THE CIT(A). THE BILLS OF ASHWINI 9 ITA NO.740 OF 13 M/S. ALPHA FOAM LTD. ENTERPRISES, M/S. MACHINECRAFT, RASIKA ENTERPRISES AND ANIKET ENTERPRISES WERE FILED. ACCORDING TO WHICH, ALL PA YMENTS WERE MADE IN RESPECT OF LABOUR CHARGES DEBITED TO PROFIT & LOSS ACCOUNT ARE THROUGH BANK CHEQUES. THE ASSESSEE HAS ALSO DEDUCTED THE TDS IN RESPECT OF THE SAME. ACCORDING LY, IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT ALL THE LABOUR CHA RGES DEBITED BY THE ASSESSEE ARE GENUINE AND HENCE, THE DISALLOWANC E MADE BY THE ASSESSING OFFICER, WAS NOT JUSTIFIED. 6.1 WITHOUT PREJUDICE TO THE ABOVE, IT WAS SUBMITTE D ON BEHALF OF ASSESSEE THAT IN RESPONSE TO THE REMAND REPORT, THE ASSESSING OFFICER HAS POINTED OUT THAT THE VIOLATION OF TOTAL LABOUR CHARGES IN RESPECT OF WHICH SPECIFIC DISCREPANCY POINTED OU T BY HIM, WHICH IS AS UNDER: M/S. ASHWINI ENT ERPRISES 77,181/ - M/S. MACHINECRAFT 14,942/ - M/S. RASIKA ENTERPRISES 19,870/ - M/S. ANIKET ENTERPRISES 36,871/ - TOTAL 1,48,864/ - IN THIS REGARD, IT WAS NOTED THAT ON DETAILED VERI FICATION OF BILLS CARRIED OUT BY THE ASSESSING OFFICER DURING T HE REMAND PROCEEDINGS, THE ASSESSING OFFICER HAS POINTED OUT SPECIFIC DISCREPANCIES ONLY IN RESPECT OF LABOUR CHARGES TO THE EXTENT OF 1,48,864/-. NO DISCREPANCIES HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER IN RESPECT OF THE BILLS PERTAININ G TO THE BALANCE AMOUNT OF LABOUR CHARGES DEBITED BY THE ASSESSEE. IN VIEW OF ABOVE, WE FIND THAT THE ABOVE AMOUNT OF LABOUR CHAR GES CLAIMED BY THE ASSESSEE IS NOT SUPPORTED BY PROPER RECORDS, SO WE RESTRICT THE DISALLOWANCE TO THE EXTENT OF 1,48,864/- AS AGAINST AN ADHOC AMOUNT OF 10 LACS SUSTAINED BY THE CIT(A). THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. 10 ITA NO.740 OF 13 M/S. ALPHA FOAM LTD. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 31 ST OF JULY, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST JULY, 2014 GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A)-V, PUNE 4) THE CIT-V, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE