Assistant Commissioner of Income-tax, V. Shri Chandrakant Maruti Nalawade, Sangli

ITA 782/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0963 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 16-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Section: 143(3)

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.572/PN/2014 ASSESSMENT YEAR : 2010-11 SHRI CHANDRAKANT MARUTI NALAWADE, ROHINI, A/P LINGNOOR, TAL MIRAJ, DIST.- SANGLI, PAN : AALPN4420E . APPELLANT VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE 2, SANGLI. . RESPONDENT ITA NO.782/PN/2014 ASSESSMENT YEAR : 2010-11 THE JOINT COMMISSIONER OF INCOME TAX, RANGE 2, SANGLI. . APPELLANT VS. SHRI CHANDRAKANT MARUTI NALAWADE, ROHINI, A/P LINGNOOR, TAL MIRAJ, DIST.- SANGLI, PAN : AALPN4420E . RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE DEPARTMENT BY : SHRI B. C. MALAKAR / DATE OF HEARING : 14.10.2015 / DATE OF PRONOUNCEMENT: 30.10.2015 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REV ENUE ARE AGAINST THE ORDER OF CIT(A), KOLHAPUR, DATED 18.02.2014 RELATIN G TO ASSESSMENT YEAR 2010-11 PASSED UNDER SECTION 143(3) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT). 2 ITA NO.572/PN/2014 ITA NO.782/PN/2014 2. THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.572/PN/2014 HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED CIT(A), KOLHAPUR ERRED IN LAW AND O N FACTS IN PARTIALLY CONFIRMING AD HOC LUMP SUM ADDITION OF MATERIAL PUR CHASES OF RS.3,00,000/- WITHOUT CONSIDERING ACTUAL FACTS OF THE CASE. HE ERRED IN NOT APPRECIATING THE FACTS OF PRESENCE OF THIRD PARTY BILLS AND CROSSED A/C PAYEE CHEQUE PAYMENTS IN MOST OF THE EVIDENCES PRODUCED ON RECORD. 2. THE LEARNED CIT(A), KOLHAPUR ERRED IN LAW AND ON FACTS IN PARTIALLY CONFIRMING AD HOC LUMP SUM ADDITION OF LABOUR CHARG ES OF RS.10,00,000/- WITHOUT CONSIDERING ACTUAL FACTS OF THE CASE. 3. THE LEARNED CIT(A), KOLHAPUR ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF 10% OF TRAVELLING AND OTHER EXPENSE S RS.1,01,352/-, POSTAGE, TELEPHONE AND COURIER EXPENSES OF RS.2,91,059/-, RE PAIRS AND MAINTENANCE RS.4,66,371/- AND DISALLOWING RS.85,780/- BY TREATI NG THE SAME AS IF IT IS INCURRED FOR PERSONAL AND NON BUSINESS PURPOSE WITHOUT CONSIDERI NG ACTUAL FACTS AND TRUE NATURE OF EXPENSES. 4. THE APPELLANT CRAVES TO ADD/ MODIFY/ ALTER/ DELE TE ALL/ ANY OF THE GROUNDS OF APPEAL. 4. THE REVENUE IN ITA NO.782/PN/2014 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN RESTR ICTING THE DISALLOWANCE MADE BY THE AO OUT OF MATERIAL PURCHASES IN CASH, THEREB Y GIVING RELIEF TO THE ASSESSEE TO THE TUNE OF RS.2,61,525/-. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN RESTR ICTING THE DISALLOWANCE MADE BY THE AO OUT OF LABOUR CHARGES, THEREBY GIVING REL IEF TO THE ASSESSEE TO THE TUNE OF RS.7,11,580/-. (3) THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), KOLHAPUR BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTOR ED. (4) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 5. THE RELEVANT FACTS PERTAINING TO THE ISSUES INVO LVED ARE BRIEFLY NARRATED AS FOLLOWS. THE ASSESSEE IS ENGAGED IN THE BUSINES S AS A ROAD CONTRACTOR. FOR THE RELEVANT ASSESSMENT YEAR 2010-11, THE ASSES SEE FILED RETURN OF INCOME 3 ITA NO.572/PN/2014 ITA NO.782/PN/2014 DECLARING TOTAL INCOME OF RS.1,70,75,370/-. IN THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSEE FILED THE DETAILS OF RETUR N AND PRODUCED BOOKS OF ACCOUNTS FOR VERIFICATION. ON PERUSAL OF THE DETAI LS AND BOOKS OF ACCOUNTS FILED BY THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THA T THE ASSESSEE HAS MADE MATERIAL PURCHASES OF THE VARIOUS ITEMS IN CASH AND DEBITED THE SAME IN THE PURCHASE ACCOUNT SUMMARY, AS UNDER :- (I) MATERIAL PURCHASE 4% MS : RS. 71,03,925/- (II) MATERIAL PURCHASE (EXEMPT) : RS. 41,26,592 /- : RS.1,12,30,517/- 6. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE PURCHASES HAVE BEEN MADE IN CASH TOWARDS PURCHASE OF CEMENT, SAND, MURU M, STONE, BRICKS, ETC.. THESES MATERIAL PURCHASES HAVE BEEN SUPPORTED BY BI LLS AND VOUCHERS, OUT OF WHICH, SOME OF THE BILLS ARE SUPPORTED BY SELF-MADE VOUCHERS AND SOME OF THE VOUCHERS ARE NOT FULLY VERIFIABLE. THE ASSESSING O FFICER OBSERVED THAT THE ASSESSEE DID NOT DENY THE FACTS THAT SOME OF THE BI LLS AND VOUCHERS ARE NOT FULLY VERIFIABLE. THEREFORE, TO COVER-UP THE POSSIBLE OM ISSIONS AND COMMISSIONS 5% OUT OF THE ABOVE MATERIAL PURCHASES IN CASH OF RS.1 ,12,30,517/- WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE DISALLOWANCE WORKED OUT AT 5% OF RS.5,61,525/-. 7. ON THE SIMILAR FOOTING, THE ASSESSING OFFICER OB SERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.1,71,15,807/- AS LABOUR CHARGES. HE OBSERVED THAT SOME OF THE BILLS TOWARDS LABOUR CHARGES ARE SUPPOR TED BY SELF-MADE VOUCHERS AND SOME OF THE VOUCHERS ARE NOT FULLY VERIFIABLE. HE, FURTHER, OBSERVED THAT ASSESSEE DID NOT DENY THE FACTS THAT SOME OF THE BI LLS AND VOUCHERS ARE NOT FULLY VERIFIABLE. HENCE, THE ASSESSING OFFICER PROCEEDED TO MAKE ESTIMATED DISALLOWANCE OF 10% OUT OF THE LABOUR CHARGES TO CO VER-UP THE POSSIBLE OMISSIONS AND COMMISSIONS, THE DISALLOWANCE WAS QUA NTIFIED AT RS.17,11,580/-. 4 ITA NO.572/PN/2014 ITA NO.782/PN/2014 8. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASS ESSEE HAS DEBITED FOLLOWING EXPENSES IN THE TRADING, PROFIT & LOSS AC COUNT, AS UNDER :- (I) TRAVELLING & OTHER EXPENSES .. RS.1,01,352/- (II) POSTAGE, TELEPHONE & COURIER .. RS.2,91,059/ - (III) REPAIRS & MAINTENANCE .. RS.4,66,371/- TOTAL .. RS.8,58,782/- IN THIS CONTEXT, THE ASSESSING OFFICER OBSERVED THA T NO TELEPHONE CALL REGISTER HAS BEEN MAINTAINED AND THEREFORE USE OF TELEPHONE FOR PERSONAL PURPOSES CANNOT BE RULED OUT. HE FURTHER OBSERVED THAT THES E EXPENSES ARE SUPPORTED BY SELF-MADE VOUCHERS WHICH ARE NOT FULLY VERIFIABLE T O PROVE ITS BUSINESS NEXUS. IN THE LIGHT OF AFORESAID OBSERVATIONS, HE PROCEEDE D TO DISALLOW 10% OF THESE EXPENSES WHICH WORKED OUT TO RS.8,58,782/- HOLDING THE SAME TO HAVE BEEN INCURRED BY THE ASSESSEE FOR PERSONAL AND NON-BUSIN ESS PURPOSES. 9. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORI TY. 10. BEFORE THE CIT(A), THE ASSESSEE, INTER-ALIA , SUBMITTED THAT HE IS ENGAGED IN THE BUSINESS OF CONTRACTING FOR LAST 26 YEARS. THE ASSESSEE MAINLY UNDERTAKES ROAD WORK AND CIVIL CONSTRUCTION WORKS F ROM VARIOUS GOVERNMENT DEPARTMENTS. THE ROAD SITES ARE SPREAD ACROSS THE REGION IN MAHARASHTRA AND KARNATAKA STATE. SINCE, THE WORK IS CARRIED OUT AT SEVERAL LOCATIONS, THERE IS A DIFFERENCE IN SOIL BELTS, PROBLEMS OF AVAILABILITY OF REQUIRED MATERIALS, LABOURERS, ETC.. THE ASSESSEE IS REQUIRED TO PURCH ASE SAND, MURUM, STONE, BRICKS, ETC.. IN SOME OF THE HILLY, RURAL AND LONE LY AREAS PURCHASES ARE MADE IN CASH AND ARE SUPPORTED BY SELF-MADE VOUCHERS. THE TOTAL AMOUNT OF MATERIAL PURCHASES INCURRED BY THE ASSESSEE WHICH ARE CONSID ERED BY THE ASSESSING OFFICER FOR DISALLOWANCE ARE RS.1,12,30,517/- (MATE RIAL PURCHASES 4% MS RS.71,03,925/- AND MATERIAL PURCHASES EXEMPT RS.41, 26,592/-). OUT OF THIS MATERIAL PURCHASES OF 4% MS ARE THE PURCHASES MADE WITHIN MAHARASHTRA STATE SUPPORTED BY PARTY BILLS ON WHICH 4% OF MVAT SET-OF F IS TAKEN BY THE 5 ITA NO.572/PN/2014 ITA NO.782/PN/2014 ASSESSEE. THE MATERIAL PURCHASES ARE SUPPORTED BY BILLS EXCEPT FOR A VERY MEAGER COMPONENT. THEREFORE, WITHOUT CONSIDERING T HE NATURE OF BUSINESS, ESTIMATED DISALLOWANCE OF 5% HAS BEEN RESORTED. 11. AS REGARDS THE LABOUR CHARGES INCURRED, THE ASS ESSEE CONTENDED BEFORE THE CIT(A) THAT ALL THE SUPPORTING VOUCHERS, BILLS, ETC. HAVE BEEN DULY VERIFIED BY THE ASSESSING OFFICER. IN SOME OF THE RURAL AND LONELY AREAS, CASUAL LABOURERS ARE HIRED TO CARRY OUT THE WORK. AS SUCH , SOME OF THE BILLS ARE SUPPORTED BY THE SELF-MADE VOUCHERS. THE ASSESSING OFFICER OUGHT TO HAVE NOT RESORTED ESTIMATED DISALLOWANCE OF 10% OF THE TOTAL LABOUR CHARGES. IT WAS PLEADED THAT NO DISALLOWANCE IS CALLED FOR. 12. THE ASSESSEE NEXT CONTENDED THAT VARIOUS EXPENS ES SUCH AS TRAVELLING AND OTHER EXPENSES, POSTAGE, TELEPHONE AND COURIER EXPENSES, REPAIRS AND MAINTENANCE, ETC. ARE INCURRED BY THE ASSESSEE IN T HE ORDINARY COURSE OF BUSINESS. THEREFORE, THERE IS NO JUSTIFICATION FOR RESORTING TO ESTIMATED DISALLOWANCE OF 10% ON SUCH EXPENSES. 13. THE CIT(A) OBSERVED THAT ALL IMPUGNED MATERIAL PURCHASES WERE MADE IN CASH. PURCHASES WERE IN RESPECT OF CEMENT, SAND , MURUM, STONE, BRICKS, ETC., SOME OF THE PURCHASES WERE OBSERVED TO BE SUPPORTED BY SELF-MADE VOUCHERS AND SOME OF THE VOUCHERS ARE NOT VERIFIABLE. IN TH E LIGHT OF THESE FACTS, THE CIT(A) OBSERVED THAT SOME DISALLOWANCE IS CALLED FO R. HOWEVER, HE RESTRICTED THE DISALLOWANCE TO A LUMP SUM AMOUNT OF RS.3,00,00 0/- OUT OF TOTAL DISALLOWANCE OF RS.5,61,525/- MADE BY THE ASSESSING OFFICER. 14. IN RESPECT OF DISALLOWANCE OF LABOUR CHARGES OF RS.17,11,580/-, THE CIT(A) OBSERVED THAT THESE EXPENSES ARE SUPPORTED B Y SELF-MADE VOUCHERS WHICH ARE NOT FULLY VERIFIABLE. HE NOTED THAT SINC E ENTIRE EXPENDITURE IS NOT FULLY VERIFIABLE, SOME ADDITION IS CALLED FOR. KEE PING IN MIND THE CONTENTION OF THE ASSESSEE THAT THE CONSTRUCTION SITES ARE RURAL AND LONELY AREAS WHERE CASUAL LABOURERS ARE HIRED TO CARRY OUT THE WORK AND HAVIN G REGARD TO THE FACT THAT THE 6 ITA NO.572/PN/2014 ITA NO.782/PN/2014 ASSESSEE HAS PRODUCED RELEVANT RECORDS, BILLS AND V OUCHERS, ETC., HE RESTRICTED THE DISALLOWANCE OF RS.10,00,000/- OUT OF TOTAL DIS ALLOWANCE OF RS.17,11,580/- MADE BY THE ASSESSING OFFICER. 15. AS REGARDS TO 10% DISALLOWANCE QUANTIFIED AT RS .85,780/- OUT OF TRAVELLING, POSTAGE, TELEPHONE, COURIER AND REPAIRS AND MAINTENANCE, THE CIT(A) OBSERVED THAT THE CONTENTION OF THE ASSESSEE THAT T RAVELLING AND OTHER EXPENSES INCLUDING EMPLOYEES TRAVELLING TO VARIOUS SITE, LO CAL TRAVELLING RELATED TO BUSINESS ETC. POSTAGE, TELEPHONE AND COURIER EXPENS ES RELATED TO BUSINESS IS NOT FULLY SUPPORTABLE FROM DOCUMENTS AND REGISTER AS ME NTIONED BY THE ASSESSING OFFICER. HE, THEREFORE, SUSTAINED THE DISALLOWANCE OF 10% OF THESE EXPENSES AS PROPER. 16. AGGRIEVED BY THE ORDER OF THE CIT(A), BOTH, THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL AND CROSS-APPEAL RESPECTIVELY BEFORE US. 17. THE LD. AUTHORIZED REPRESENTATIVE ON BEHALF OF THE ASSESSEE ADVERTED OUR ATTENTION TO WRITTEN SUBMISSIONS MADE BEFORE TH E CIT(A) DATED 13.08.2013. HE SUBMITTED THAT MATERIAL PURCHASES QUA THE TOTAL CONTRACT RECEIPTS IS ONLY FOR 14.45% THIS YEAR AS COMPARED TO 27.40% LAST YEAR. LIKEWISE, LABOUR CHARGES THIS YEAR STANDS AT 6.50% OF THE CONTRACT RECEIPTS AS COMPARED TO 11.51% IN THE PRECEEDING YEAR. HE, THEREFORE, SUBMITTED THAT THE MATERIAL CONSUMPTION RATIO AND LABOUR CHARGES PAID HAVE COMPARATIVELY REDUCED AS COMPARED TO EARLIER YEARS. FURTHER, NET PROFIT RATIO (6.55%) IS EVER I NCREASING AS COMPARED TO THE EARLIER YEARS. THE TABULAR STATEMENT WAS FILED SHO WING COMPARATIVE ANALYSIS AS APPEARING AT PAGE 52 OF THE PAPER BOOK TO DEMONSTRA TE THE ABOVE POINT. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURT HER SUBMITTED THAT OUT OF MATERIAL PURCHASE 4% MS OF RS.71,03,925/- THE PURCH ASE COMPONENT IN CASH STAND AT MEAGER OF RS.52,557/- ONLY. 18. AS REGARDS THE MATERIAL PURCHASE (EXEMPT) RS.41 ,26,591/- TOWARDS KHADI, SAND, NOMINAL HARDWARE AND WOOD PURCHASE, ET C.. THE PURCHASE 7 ITA NO.572/PN/2014 ITA NO.782/PN/2014 COMPONENT IN CASH IS ONLY TO THE EXTENT OF RS.2,73, 731/- OUT OF WHICH BILLS FOR RS.97,340/- IS AVAILABLE ON RECORD AND ARE NOT IN T HE NATURE OF SELF-MADE VOUCHERS. THUS, SELF-MADE VOUCHERS ARE ONLY TO RS. 1,76,391/-. 19. IN RESPECT OF DISALLOWANCE OF LABOUR CHARGES, T HE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ASSAILED THE ACTION OF THE REVENUE AND ADVERTED OUR ATTENTION TO THE TABULAR STATEMENT AS APPEARING IN PAGE NO.56 OF THE PAPER BOOK PRESENTED BEFORE THE CIT(A) TO SHOW THAT THE L ABOUR CHARGES IN TERMS OF PERCENTAGE OF THE TOTAL CONTRACT IS SUBSTANTIALLY L OWER QUA THE EARLIER YEARS. HE REITERATED THAT THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF EXECUTING ROAD CONTRACTS, CANAL AND IRRIGATION WORKS EVEN IN FAR-F LUNG AREAS. ALL THE RECEIPTS OF THE ASSESSEE ARE FROM THE GOVERNMENT. VARIOUS T ENDERS ARE RECEIVED AND ACCORDINGLY WORK IS CARRIED OUT BY THE ASSESSEE. W HENEVER TENDERS ARE RECEIVED, A TENDER DOCUMENT IS GENERATED GIVING ALL THE DETAILS OF NATURE OF CONTRACT, CONTRACT AMOUNT, RESPONSIBILITIES AND DUT IES OF THE CONTRACTOR, TECHNICAL DETAILS, WORK AND SITE LOCATION AND VARIO US COMPONENTS INVOLVED IN THE CONTRACT. LOCATIONS OF SITES ARE FAR AWAY FROM THE CITIES WHEREIN FACILITIES SUCH AS TELEPHONE, PETROL AND DIESEL PUMPS, RAILWAY STATIONS ARE 5 TO 10 KMS. AWAY FROM THE WORK PLACES. SUCH DETAILS HAVE ALSO BEEN MENTIONED IN THE TENDER DOCUMENTS BY THE CHIEF ENGINEER OF THE GOVER NMENT DEPARTMENTS. DUE TO THIS, TEMPORARY SITE OFFICES ARE BUILT FOR THE S UPERVISORS TO MANAGE THE DAY TO DAY ACTIVITIES. IT IS PRACTICALLY DIFFICULT TO PRE PARE THE INDIVIDUAL VOUCHER FOR EACH LABOUR PAYMENT. THUS, ONLY ONE VOUCHER IS PRE PARED IN THE NAME OF THE PERSON WHO RECEIVES THE MONEY. THE PAYMENTS ARE MA DE TO CASUAL LABOURERS, WHO ARE NOT REGULAR EMPLOYEES OF THE ASSESSEE AND A RE WORKING WITH THE ASSESSEE ON DAILY WAGE BASIS. THEREFORE, HAVING RE GARD TO THE NATURE OF BUSINESS OF THE ASSESSEE, THE LD. AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE PLEADED THAT ESTIMATED DISALLOWANCE OUT OF LABOUR C HARGES ARE NOT IN SYNC WITH THE GROUND REALITIES AND THEREFORE SHOULD BE REVERS ED IN TOTO . 20. AS REGARDS THE DISALLOWANCE OF RS.85,780/- OUT OF VARIOUS EXPENSES, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBM ITTED THAT THE DISALLOWANCE 8 ITA NO.572/PN/2014 ITA NO.782/PN/2014 ARE ARBITRARY AND WITHOUT ANY REASONABLE BASIS. ON A CONCILIATORY NOTE, IT WAS PLEADED THAT OUT OF TELEPHONE EXPENSES, HE SUBMITTE D THAT THE PERSONAL COMPONENT OF TELEPHONE EXPENSES CAN AT BEST BE ESTI MATED AT RS.12,000/-. AS REGARDS THE VEHICLE REPAIRS AND MAINTENANCE, HE SUB MITTED THAT EXPENDITURE ARE NOT IN THE NATURE OF PERSONAL NATURE OR INCURRED FO R NON-BUSINESS PURPOSES. THE MOTOR VEHICLES COMPRISES SEVERAL TYPES SUCH AS TRAC TORS, TROLLEYS, DUMPER, JCVS, TRIPPER, ETC. WHICH CAN NEVER BE USED FOR THE PURPOSES OTHER THAN BUSINESS. IT CAN BE SEEN FROM THE FIXED ASSETS SUM MARY THAT THE ASSESSEE HAD 49 DIFFERENT VEHICLES OUT OF WHICH ONLY 5 ARE THE F OUR WHEELER CARS AND REST ARE THE BUSINESS PURPOSE VEHICLES ONLY. THUS, ON PROPO RTIONATE BASIS, COST OF REPAIRS ATTRIBUTABLE TO CAR WORKS OUT TO A MEAGER A MOUNT OF RS.30,967/- ONLY OUT OF RS.4,66,371/- WHICH CONSIDERED FOR DISALLOWA NCE. 21. TO CONCLUDE, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLEADED THAT THE ESTIMATED DISALLOWANCES RESORTED TO BY THE ASSESSING OFFICER AND PARTIAL CONFIRMED BY THE CIT(A) ARE WITHOUT ADDRESS ING THE GROUND REALITIES AND NATURE OF BUSINESS OF THE ASSESSEE. 22. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICE R AND SUBMITTED THAT THE CIT(A) HAS GIVEN THE PARTIAL RELIEF IN AN ARBITRARY AND WHIMSICAL MANNER WITHOUT ASSIGNING ANY COGENT REASON THEREOF. HE, T HEREFORE, SUBMITTED THAT THE ORDER OF THE CIT(A) SHOULD BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. ON PERUSAL OF FACTS NOTED ABOVE, IT IS CLEAR THAT THE ASSESSEE IS ENGAG ED AS A ROAD CONTRACTOR IN THE STATE OF MAHARASHTRA AND KARNATAKA. WE ALSO TAKE N OTE OF THE SUBMISSIONS THAT THE CONTRACT HAS BEEN OBTAINED FROM THE GOVERNMENT AGENCIES. IT IS ALSO APPEARING FROM SUBMISSIONS OF THE ASSESSEE THAT THE CASH COMPONENT IN RESPECT OF MATERIAL PURCHASES ARE VERY NEGLIGIBLE. SOME PU RCHASES AS PER SELF-MADE VOUCHERS CANNOT BE SEEN TO BE EXCESSIVE IN ANY MANN ER HAVING REGARD TO THE 9 ITA NO.572/PN/2014 ITA NO.782/PN/2014 NATURE OF BUSINESS THE ASSESSEE IS ENGAGED IN. THE REFORE, WE DO NOT FIND ANY SUBSTANCE WHATSOEVER IN RESORTING TO ANY KIND OF ES TIMATED DISALLOWANCE IN RESPECT OF MATERIAL PURCHASES. THE DISALLOWANCE OF RS.3,00,000/- SUSTAINED BY THE CIT(A) OUT OF DISALLOWANCE OF RS.5,61,525/- MAD E BY THE ASSESSING OFFICER IS THEREFORE DIRECTED TO BE DELETED. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE ON TH IS ISSUE IS ALLOWED AND CROSS-APPEAL OF THE REVENUE ON THIS GROUND IS DISMI SSED. 25. IN RESPECT OF DISALLOWANCE OF LABOUR CHARGES, W E FIND OURSELVES IN COMPLETE AGREEMENT WITH THE SUBMISSIONS OF THE ASSE SSEE AS NOTED IN PARA 20 OF THIS ORDER. WE ALSO FIND THAT THE LABOUR CHARGES I N PERCENTAGE TERMS HAVE COME DOWN DURING THE YEAR AND NET PROFIT RATIO HAS IMPRO VED. HAVING REGARD TO THE NATURE OF BUSINESS, WE DO NOT FIND ANY EXTRAVAGANT CIRCUMSTANCES TO FROWN UPON THE EXPENDITURE INCURRED BY THE ASSESSEE. THU S, THE ESTIMATED AND AD HOC DISALLOWANCE OF RS.10,00,000/- SUSTAINED BY THE CIT (A) OUT OF ESTIMATED TOTAL DISALLOWANCE OF RS.17,11,580/- MADE BY THE ASSESSIN G OFFICER DESERVES TO BE DELETED. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE ON TH IS GROUND IS ALLOWED AND CROSS-APPEAL OF THE REVENUE ON THIS ISSUE IS DISMIS SED. 27. IN RESPECT OF DISALLOWANCE OF 10% BEING RS.85,7 80/- OUT OF TRAVELLING, POSTAGE, TELEPHONE, COURIER AND REPAIRS AND MAINTEN ANCE, ETC. WE FIND THAT THE ASSESSEE HAS GIVEN AN OBJECTIVE ANALYSIS OF THE FAC TS BEFORE THE CIT(A) AS PER WRITTEN SUBMISSIONS FILED. WE FIND THAT THE ASSESS EE HAS COMPUTED THE COMPONENT OF REPAIRS AND MAINTENANCE TOWARDS CAR AT RS.30,967/- ONLY OUT OF RS.4,66,371/- OUT OF WHICH SOME DISALLOWANCE MAY BE ESTIMATED TOWARDS PERSONAL USER. THE ASSESSEE ALSO OBSERVED THAT MAX IMUM PERSONAL USER OUT OF TELEPHONE CAN BE ESTIMATED AT RS.12,000/- PER ANNUM WHICH IS @ RS.1,000/- PER MONTH. ON CAREFUL CONSIDERATION OF THE FACTUAL ANALYSIS AND SUBMISSIONS OF THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS SUFFICI ENTLY DEMONSTRATED THAT THE 10 ITA NO.572/PN/2014 ITA NO.782/PN/2014 EXPENSES HAVE BEEN INCURRED FOR THE PURPOSES OF BUS INESS ONLY. HOWEVER, PERSONAL USER OF TELEPHONE AND CAR CANNOT BE RULED OUT. WE FEEL THAT PERSONAL USER OUT OF TELEPHONE CAN BE FAIRLY ESTIMATED @ RS. 1,000/- PER MONTH BY WHICH DISALLOWANCE WILL BE WORKED OUT AT RS.12,000/-. LI KEWISE, 20% OF THE REPAIRS AND MAINTENANCE OF CAR WHICH WORKS OUT TO RS.6,192/ - IS ALSO TO BE DISALLOWED TOWARDS PERSONAL USER ON ESTIMATED BASIS. 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE ON TH IS GROUND IS PARTLY ALLOWED AND CROSS-APPEAL OF THE REVENUE ON THIS ISSUE IS AL SO PARTLY ALLOWED. 29. RESULTANTLY, THE APPEAL OF THE ASSESSEE AS WELL AS THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF OCTOBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 30 TH OCTOBER, 2015. & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , //TRUE COPY// ! '# / SR. PRIVATE SECRETARY $ %& %'' , / ITAT, PUNE