B.S.Chalam Constructions, Hyderabad V. JCIT, Hyderabad

ITA 755/HYD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3256 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 05-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Source of fund; Deemed to accrue or arise in india; Initiation of penalty proceedings; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I .T.A. NO. 755/HYD/2009 A.Y. 2006-07 M/S. B.S. CHALAM CONSTRUCTIONS, HYDERABAD PAN: AAEFB9240K VS. THE JT. COMMISSIONER OF I.T. RANGE-8, HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI S. RAMA RAO RESPONDENT BY: SHRI B.V. PRASAD REDDY O R D E R PER CHANDRA POOJARI, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-III, HYDERABAD DATED 30.03.2009 FOR ASSESSME NT YEAR 2006-07. 2. THE FIRST EFFECTIVE GROUND IS WITH REGARD TO ADD ITION U/S. 68 OF INCOME-TAX ACT, 1961 IN RESPECT OF CAPITAL INTRODUC ED BY THE PARTNERS WHICH IS AS FOLLOWS: A) B.S. CHALAM - RS. 8,50,000 B) B. NAGESWAR RAO - RS. 8,00,000 C) B. JAYALAKSHMI - RS. 2,00,000 D) D. INDIRABALA - RS. 1,50,000 E) D. SOMESWAR RAO - RS. 2,00,000 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THESE CREDITS WERE REPRESENTING THE CAPITAL CONTRIBUTED BY THE PA RTNERS AND THE PARTNERS CONFIRMED THE INTRODUCTION OF CAPITAL. TH E PARTNERS EXPLAINED THE SOURCE OF FUNDS AS THEY INTRODUCED AS CAPITAL. THEY MIGHT HAVE BORROWED THE MONEY FROM FRIENDS AND RELATIVES. ACC ORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THE ASSESSEE IS NO T REQUIRED TO EXPLAIN THE SOURCE OF SOURCE. IN SPITE OF THIS, THE PARTNE RS EXPLAINED FROM WHOM I.T.A. NO. 755/HYD/09 M/S. B.S. CHALAM CONSTRUCTIONS ======================== 2 THEY BORROWED THE FUNDS AND FILED CONFIRMATION LETT ERS FROM THE PARTIES FROM WHOM THEY BORROWED. IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THEIR EXPLANATION, HE COULD HAVE MADE THE ADDITION IN THE HANDS OF RESPECTIVE PARTNERS AND NOT IN THE HANDS OF THE FIR M. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THE FIRM HAS PROVE D THE IDENTITY OF THE PARTIES, CREDITWORTHINESS OF THE CREDITORS AS WELL AS GENUINENESS OF THE TRANSACTIONS. FURTHER, HE DREW OUR ATTENTION TO TH E FINDINGS IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS U/S. 271D OF THE ACT ARE INITIATED IN THE CASE OF B.S. CHALAM, B. NAGESWAR R AO AND D. SOMESWAR RAO, PARTNERS OF THE ASSESSEE FIRM. ACCORDING TO H IM IT SUGGESTS THAT THE ASSESSING OFFICER HAS ACCEPTED THE CREDITS AS G ENUINE IN THE HANDS OF THE ASSESSEE FIRM. BEING SO THE SAME CREDIT CAN NOT BE CONSIDERED AS UNEXPLAINED IN THE HANDS OF THE ASSESSEE FIRM. FUR THER HE SUBMITTED THAT THE PARTNERS OF THE ASSESSEE FIRM HAVE BORROWE D THE AMOUNT FROM VARIOUS PERSONS LISTED IN PAPER BOOKS AND THESE PER SONS MADE ADVANCES TO THE PARTNERS FROM THE SAVINGS MADE OUT OF THE AGRICULTURAL INCOME. THE AGRICULTURISTS WHO HAVE ADVANCED MONEY TO THE PARTNERS ALSO CONFIRMED THE ADVANCES. FOR THIS PURPOSE, HE DREW OUR ATTENTION TO THE PAPER BOOK PAGES 1 TO 242. 4. THE LEARNED DR SUBMITTED THAT THE ONUS TO PROVE THE IDENTITY AND CREDITWORTHINESS OF CREDITORS AND GENUINENESS OF TH E TRANSACTIONS ENTIRELY LIE ON THE ASSESSEE. THE ASSESSEE FAILED TO PROVE THE SAME. SRI B.S. CHALAM HAS CLAIMED TO HAVE RECEIVED CASH LOANS OF RS. 8 LAKHS FROM 13 AGRICULTURISTS. WHEN THE SUMMONS WERE ISSU ED TO THEM, TWO SUMMONS RETURNED UNSERVED WHILE THE OTHER FOUR FAIL ED TO RETURN. I.T.A. NO. 755/HYD/09 M/S. B.S. CHALAM CONSTRUCTIONS ======================== 3 SIMILARLY, SRI B. NAGESWAR RAO CLAIMED TO HAVE RECE IVED CASH LOAN OF RS. 6,60,000 FROM 25 AGRICULTURISTS. OUT OF THE SU MMONS ISSUED TO THEM, FIVE RETURNED UNSERVED AND THE OTHER SEVEN AGRICULT URISTS FAILED TO ATTEND. SIMILARLY, OUT OF THE THREE AGRICULTURISTS FROM WHO M HAND LOANS WERE RECEIVED BY SRI D. SOMESWARA RAO, ONE CREDITOR DID NOT ATTEND. THESE FACTS WERE TOLD TO THE ASSESSEE WHO DID NOT TAKE AN Y MEASURE TO PRODUCE THESE PERSONS FOR EXAMINATION BEFORE THE AS SESSING OFFICER. THE ASSESSEE FAILED TO PROVE THE IDENTITY, CREDITWO RTHINESS AND GENUINENESS OF THE TRANSACTIONS IN RESPECT OF THE A GRICULTURISTS WHO EITHER FAILED TO ATTEND THE ASSESSING OFFICER IN CO MPLIANCE OF SUMMONS OR IN RESPECT OF WHOM THE SUMMONS RETURNED UNSERVED . IT IS ALSO EVIDENT FROM THE SWORN STATEMENTS OF THE AGRICULTUR ISTS RECORDED BY THE ASSESSING OFFICER THAT THEY WERE THE PERSONS OF NO MEANS. THEIR ANNUAL AGRICULTURAL INCOME OF RS. 18,000 TO 20,000 MAY NOT BE EVEN SUFFICIENT FOR THEIR DAY TO DAY LIVING. SUCH PERSONS CANNOT B E EXPECTED TO HAVE ACCUMULATED SAVINGS SO AS TO ADVANCE IT ON INTEREST FREE LOAN FOR INDEFINITE PERIOD. THE ALLEGED LOANS WERE NOT RETU RNED TILL DATE AS PER THEIR STATEMENTS. IN SOME CASES E.G., SRI R.G. SRI NIVAS RAO, SRI M. KRISHNA MURTHY NAIDU, SRI G. RAMI NAIDU, ETC., THE CREDITORS WERE CLAIMED TO HAVE RECEIVED CERTAIN AMOUNTS FROM PENSI ON, SALE OF LAND AND CHIT AMOUNTS. HOWEVER, NO DOCUMENTARY EVIDENCES WE RE PRODUCED TO SUBSTANTIATE SUCH RECEIPT. NONE OF THESE PERSONS W ERE ASSESSED TO TAX. ALL THE TRANSACTIONS WERE IN CASH. THE HAND LOANS ALLEGEDLY RECEIVED BY THE PARTNERS WERE NOT REFLECTED IN THEIR INDIVIDUAL INCOME-TAX RETURNS. SIMILARLY, THE ASSESSEE HAS NOT PRODUCED ANY EVIDEN CE TO PROVE THE I.T.A. NO. 755/HYD/09 M/S. B.S. CHALAM CONSTRUCTIONS ======================== 4 AGRICULTURAL INCOME OF SMT. B. JAYALAKSHMI AND SMT. D. INDIRABALA. THESE TWO PARTNERS WERE ALSO NOT ASSESSED TO TAX. ACCORDINGLY, THE LEARNED DR SUPPORTED THE ORDERS OF THE ASSESSING OF FICER AND THE CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDER SECTION 68 ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE FOR ANY PREVIO US YEAR AND THE ASSESSEE OFFERED NO EXPLANATION ABOUT THE NATURE AN D SOURCES THEREOF OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITE D MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR. SECTION 68 IS A CHARGING SECTION AND IT IS ALSO A DEEMING P ROVISION. UNLESS THE FOLLOWING CIRCUMSTANCES EXIST THE REVENUE CANNOT RE LY ON SECTION 68 OF THE I.T. ACT: (A) CREDIT IN THE BOOKS OF AN ASSESSEE MAINTAINED F OR ANY PREVIOUS YEAR, AND (B) THE ASSESSEE OFFERED NO EXPLANATION OR IF THE E XPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGEABLE TO TAX AS INCOME FROM OTHER SOURCES. 6. IN THE PRESENT CASE THERE IS NO DISPUTE THAT TH E ASSESSEE FIRM HAS MAINTAINED THE BOOKS OF ACCOUNT AND CREDITS ARE FOU ND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. THE ASSESSEE HAS OFFERED EXPLANATION THAT IT IS CON TRIBUTED BY THE PARTNERS. IN RETURN, PARTNERS ALSO EXPLAINED THAT T HEY HAVE CONTRIBUTED IT BY THEIR OWN SOURCES OR BY RAISING LOANS FROM FRIEN DS AND RELATIVES. FOR THIS EFFECT THEY HAVE FILED CONFIRMATION LETTERS. IN OUR OPINION WHEN THE I.T.A. NO. 755/HYD/09 M/S. B.S. CHALAM CONSTRUCTIONS ======================== 5 ASSESSEE HAS EXPLAINED THE SOURCE OF CREDIT AS CAPI TAL CONTRIBUTION BY THE PARTNERS AND THE PARTNERS CONFIRMED THE CREDITS AS A CAPITAL CONTRIBUTION, THE REVENUE AUTHORITIES ARE NOT JUSTI FIED IN HOLDING THAT THE ASSESSEE HAS NOT EXPLAINED THE SOURCES AND THE SAME IS TO BE ADDED IN THE HANDS OF THE ASSESSEE. IN CASE THE ASSESSING O FFICER DOUBTED THE GENUINENESS OF THE SOURCES, HE SHOULD HAVE CONSIDER ED THE SAME IN THE HANDS OF THE PARTNERS ONLY, U/S. 69 OF THE ACT AND NOT IN THE HANDS OF THE ASSESSEE FIRM. THIS VIEW OF OURS IS SUPPORTED BY T HE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. JAISWAL MOTOR FINANCE (141 ITR 706), SURENDRA MAHAN SETH VS. CIT (221 ITR 239) . MORE SO, IN THE PRESENT CASE THE ASSESSING OFFICER ACCEPTED THE GEN UINENESS OF THE TRANSACTIONS AND INVOKED PROVISIONS OF SECTION 271D AGAINST THE PARTNERS FOR TAKING THE LOAN IN THE FORM OF CASH AND THEREAF TER THE ASSESSING OFFICER IS DISENTITLED TO CONSIDER THE SAME AMOUNT AS UNPROVED CREDIT IN THE HANDS OF THE FIRM. HAD HE NOT INVOKED THE PROV ISIONS OF SECTION 271D AGAINST THE PARTNERS, THEN THINGS MIGHT HAVE B EEN DIFFERENT. INITIATION OF PENALTY PROCEEDINGS AGAINST THE PARTN ERS IS NOTHING BUT ACCEPTING THE SOURCES OF CREDIT IN THE HANDS OF THE PARTNERS. ONCE THE ASSESSING OFFICER ACCEPTED THE SOURCE OF CREDIT IN THE HANDS OF THE PARTNERS AS GENUINE, IT CANNOT BE POSSIBLE TO INVOK E THE PROVISIONS OF SECTION 68 IN THE HANDS OF THE FIRM. 6.1 FURTHER IN THIS CASE, THE PARTNERS EXPLAINED TH AT THEY HAVE INTRODUCED THE CAPITAL AND THEY FILED THE CONFIRMAT ION LETTERS REGARDING INVESTMENT. FURTHER, THE PARTNERS STATED THAT THEY BORROWED THE MONEY FROM FRIENDS AND RELATIVES. MORE SO, THE PARTNERS ARE INDIVIDUALLY I.T.A. NO. 755/HYD/09 M/S. B.S. CHALAM CONSTRUCTIONS ======================== 6 ASSESSED TO TAX AND GAVE DETAILS OF INCOME TAX. TH ESE FACTS CLEARLY ESTABLISH THAT THE ASSESSEE HAS BEEN ABLE TO EXPLAI N THE DEPOSITS OF CASH CREDITS IN THE ASSESSEE FIRM BY PARTNERS. IN THESE CIRCUMSTANCES, THE CREDITS CANNOT BE CONSIDERED AS UNEXPLAINED IN THE HANDS OF THE ASSESSEE FIRM. THIS VIEW OF OURS IS FORTIFIED BY T HE JUDGEMENT OF HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. METACHEM IND USTRIES, 245 ITR 160 (MP) WHEREIN IT WAS HELD THAT: ACCORDING TO S. 68 OF THE INCOME-TAX ACT, 1961, TH E FIRST BURDEN IS ON THE ASSESSEE TO SATISFACTORILY EXPLAIN THE CREDIT ENTRY IN THE BOOKS OF ACCOUNT OF THE PREVIOU S YEAR. IF THE EXPLANATION GIVEN BY THE ASSESSEE IS SATISFACTO RY, THEN THAT ENTRY WILL NOT BE CHARGED ALONG WITH THE INCOM E OF THE PREVIOUS YEAR OF THE ASSESSEE. IN CASE THE EXPLANAT ION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY OR THE SOURCE OFFERED BY THE ASSESSEE-FIRM IS NOT SATISFACTORY, T HEN IN THAT CASE, THE AMOUNT SHOULD BE TAKEN TO BE THE INCOME O F THE ASSESSEE. ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN INV ESTED BY A PARTICULAR PERSON, BE HE A PARTNER OR AN INDIV IDUAL, THEN THE RESPONSIBILITY OF THE ASSESSEE IS OVER. WH ETHER THAT PERSON IS AN INCOME-TAX PAYER OR NOT AND WHERE HE HE HAD BROUGHT THIS MONEY FROM, IS NOT THE RESPONSIBIL ITY OF THE FIRM. THE MOMENT THE FIRM GIVES A SATISFACTORY EXP LANATION AND PRODUCES THE PERSON WHO HAS DEPOSITED THE AMOUN T, THEN THE BURDEN OF THE FIRM IS DISCHARGED AND IN TH AT CASE THAT CREDIT ENTRY CANNOT BE TREATED TO BE THE INCOM E OF THE FIRM FOR THE PURPOSES OF INCOME-TAX. ON A REFERENCE WHETHER THE APPELLATE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT WHEN THERE WAS CREDIT IN THE CAPITAL ACCOUNT OF THE PARTNER IN THE BOOKS OF THE FIRM, TH E ADDITION THEREFOR COULD NOT BE MADE IN THE CASE OF THE FIRM UNDER SECTION 68 OF THE ACT BUT THE SAME HAD TO BE CONSID ERED IN THE CASE OF THE PARTNER. HELD , ON THE FACTS, THAT THERE WAS CONCURRENT FINDING O F BOTH THE COMMISSIONER OF INCOME-TAX (APPEALS) AS WELL AS THE TRIBUNAL THAT THE FIRM HAD SATISFACTORILY EXPLAINED THE THREE CREDIT ENTRIES IN THE BOOKS OF THE FIRM, THE ADDITI ON THEREFOR COULD NOT BE MADE IN THE HANDS OF THE FIRM. I.T.A. NO. 755/HYD/09 M/S. B.S. CHALAM CONSTRUCTIONS ======================== 7 6.2 FURTHER, IN OUR OPINION, IN THIS CASE THE ASSES SEE HAD BROUGHT ON RECORD COMPLETE IDENTITY OF THE INVESTORS BY PROVID ING THEIR ADDRESSES AND CONFIRMATIONS TO THE EFFECT THAT THEY HAVE CONT RIBUTED AS THEIR CAPITAL AND THEY ARE REGULARLY ASSESSED TO INCOME-TAX AND T HE ASSESSING OFFICER HAVING NOT BROUGHT ANY POSITIVE MATERIAL AND EVIDEN CE TO INDICATE THAT THE CREDITS REPRESENTED ASSESSEES UNDISCLOSED MONE Y, THE SAME CANNOT BE TREATED AS DEEMED INCOME U/S. 68 OF THE I NCOME-TAX ACT, 1961. IN OUR OPINION, THE GENUINENESS OF THE DEPOS ITS AS WELL AS THE SOURCES THEREOF ARE PROVED. THE INITIAL BURDEN CAS TED UPON THE ASSESSEE HAS BEEN DISCHARGED. THE ASSESSEE HAVING FURNISHED THE REQUISITE DETAILS TO THE ASSESSING OFFICER THE BURD EN CAST UPON THE ASSESSEE IS DISCHARGED AND HENCE THE SAME CANNOT BE TREATED AS DEEMED INCOME OF THE ASSESSEE FIRM. 7. IN THE CASE OF JAGMOHAN RAM RAM CHANDRA VS. CIT, 274 ITR 405 (ALL), THE ALLAHABAD HIGH COURT HELD THAT IT IS SETTLED THAT IF AN ENTRY OF CASH CREDITS IS FOUND IN THE BOOKS OF ACCOUNT OF A FIRM, IT IS FOR THE FIRM TO GIVE EXPLANATION REGARDING IDENTITY AND SOURCE O F SUCH DEPOSITS AND IF THE EXPLANATION IS DISBELIEVED THEN IT IS TO BE ADD ED AS AN INCOME UNDER S. 68 OF THE ACT IN THE HANDS OF THE FIRM. SIMILAR LY, IF AN ASSESSEE, WHO IS A PARTNER IN THE PARTNERSHIP FIRM, HAS MADE INVESTM ENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY HIM FOR ANY SOURCE OF INCOME AND THE EXPLANATION GIVEN BY THE PARTNER OR INDIVIDUAL REGARDING SOURCE OF DEPOSITS IS DISBELIEVED, THEN SUCH DEPOSI TS WHICH ARE INVESTED CAN BE BROUGHT TO TAX AS INCOME FROM UNDISCLOSED SO URCES UNDER S. 69 OF THE ACT. THERE IS NO QUESTION OF ANY DOUBLE TAX ATION. FULL EFFECT OF THE I.T.A. NO. 755/HYD/09 M/S. B.S. CHALAM CONSTRUCTIONS ======================== 8 DEEMING PROVISIONS AND THE PRESUMPTIONS PROVIDED UN DER SS. 68 AND 69 OF THE ACT HAS TO BE GIVEN. THE PARTNERSHIP FIRM A ND THE PARTNERS BEING TREATED AS SEPARATE ASSESSEES UNDER THE ACT, ASSESS MENT OF THE INCOME AT THE HANDS OF DIFFERENT ASSESSEES UNDER DIFFERENT PROVISIONS OF THE ACT IS PERMISSIBLE. 8. IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. (216 CTR 195) (SC), IT WAS HELD THAT IF THE SHARE APPLICATION MON EY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, W HOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO RE-OPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. BUT THE SAID AMOUNT CANNOT BE TAKEN AS UNEXPLAINED INCOME I N THE HANDS OF THE ASSESSEE. THUS IT IS SETTLED POSITION THAT IF AN E NTRY OF CASH CREDIT IS SHOWN IN THE BOOKS OF ACCOUNT OF THE FIRM IT IS FOR THE FIRM TO GIVE EXPLANATION REGARDING IDENTITY AND SOURCES OF SUCH DEPOSIT AND IF THE EXPLANATION IS DISBELIEVED THEN IT IS TO BE ADDED A S AN INCOME U/S. 68 OF THE ACT IN THE HANDS OF THE FIRM. SIMILARLY, IF AN ASSESSEE, WHO IS A PARTNER IN THE PARTNERSHIP FIRM, HAS MADE INVESTMEN TS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY HIM OR ANY SOURCE OF INCOME AND EXPLANATION GIVEN BY THE PARTNER OR INDI VIDUAL REGARDING SOURCE OF DEPOSIT IS DISBELIEVED, THEN SUCH DEPOSIT S WHICH ARE INVESTED CAN BE BROUGHT TO TAX AS INCOME FROM OTHER SOURCES U/S. 69 OF THE ACT. HOWEVER, IN THE PRESENT CASE THE ASSESSING OFFICER HAVING INITIATED THE PENALTY PROCEEDINGS U/S. 271D AGAINST THE PARTNERS IT IS CONSTRUED THAT THE ASSESSING OFFICER BELIEVED THE CREDITS AS GENUI NE AND AS SUCH INVOKING THE PROVISIONS OF SECTION 68 AGAINST THE F IRM IS NOT JUSTIFIED. I.T.A. NO. 755/HYD/09 M/S. B.S. CHALAM CONSTRUCTIONS ======================== 9 9. THE NEXT GROUND IS WITH REGARD TO DISALLOWANCE O F RS. 2 LAKHS ON ACCOUNT OF LABOUR EXPENSES. IN THE PROFIT AND LOSS A/C. THE ASSESSEE DEBITED A SUM OF RS. 1,40,93,170/- UNDER THE HEAD LABOUR CHARGES. ON VERIFICATION, IT WAS NOTICED BY THE ASSESSING OFFIC ER THAT THESE EXPENSES WERE SUPPORTED BY SELF MADE VOUCHERS AND WERE NOT V ERIFIABLE. THE EXPENSES WERE INCURRED IN CASH. THE ASSESSEE HAD N OT MAINTAINED ANY MUSTER ROLL / WAGE REGISTER TO SUBSTANTIATE THESE P AYMENTS. IT WAS FURTHER OBSERVED THAT THE LABOUR CHARGES AMOUNTED T O 37% OF THE CONTRACT RECEIPTS, WHICH WAS ON THE HIGHER SIDE. H ENCE, THE ASSESSING OFFICER MADE AN AD-HOC DISALLOWANCE OF RS. 2 LAKHS FROM THE LABOUR EXPENSES CLAIMED, THE CIT(A) ALSO CONFIRMED THE SAM E. 10. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. IN THIS CASE THE ASSESSEE DEBITED RS. 1,40,93,170 UNDER THE HEAD LA BOUR CHARGES WHICH IS SUPPORTED BY SELF-MADE VOUCHERS. BEING SO , THERE IS EVERY CHANCE OF INFLATING THE EXPENSES. THE DISALLOWANCE OF RS. 2 LAKHS IS VERY REASONABLE AND THE ASSESSEE BEFORE US ALSO NOT PLACED ANY EVIDENCE AGAINST THE FINDINGS OF THE LOWER AUTHORIT IES. ACCORDINGLY, WE CONFIRM THE DISALLOWANCE. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2011. SD/ - (G.C. GUPTA) VICE PRESIDENT SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 23 RD JUNE, 2011 TPRAO I.T.A. NO. 755/HYD/09 M/S. B.S. CHALAM CONSTRUCTIONS ======================== 10 COPY FORWARDED TO: 1. M/S. B.S. CHALAM CONSTRUCTIONS, C/O. SHRI S. RAM A RAO, ADVOCATE, FLAT NO. 103, INDIRADEVI NILAYAM, ST. NO. 7, HIMAYATNAGAR, HYDERABAD. 2. JOINT COMMISSIONER OF INCOME-TAX, RANGE-8, HYDER ABAD. 3. THE CIT(A)-III, HYDERABAD. 4. THE CIT-II, HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD