Sri Laxmi Narayan Jain, Bolangir V. ACIT, Sambalpur

ITA 81/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3852 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Keywords: Business expenditure

Judgement Text

1 ITA NO.81/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND KULDIP SINGH JUDICIAL MEMBER ITA NO.81/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 SRI LAXMI NARAYAN JAIN, POST: TITILAGARH, BOLANGIR. VS. ACIT, CIRCLE 2(1), SAMBALPUR PAN/GIR NO. (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : NONE REVENUE BY : SHRI D.K.PRADHAN , CIT , DR DATE OF HEARING : 17 /04/ 2017 DATE OF PRONOUNCEMENT : 21 /04/ 2017 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - CUTTACK, DATED 28.11.2014 , FOR THE ASSESSMENT YEAR 2010 - 2011 . 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE LD CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.20 LAKHS BY WAY OF DISALLOWANCE OF CONTRACT EXPENSES CLAIMED IN PROFIT & LOSS ACCOUNT WHICH INCLUDES MAINLY COST OF MATERIAL CONSUMED, LABOUR CHARGES AND PAYMENT TO SUB - CONTRACTOR. 2 ITA NO.81/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 3. THE NOTICE OF HEARING WAS SENT TO THE ASSESSEE BY SPEED POST ON 24.3.2017 FIXING TH E HEARING OF THE APPEAL ON 17.4.2017. THE SAID NOTICE HAS NOT BEEN RETURNED BACK UNSERVED BY THE POSTAL AUTHORITIES. 4. WHEN THE APPEAL WAS CALLED FOR HEARING, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE AND NEITHER ANY ADJOURNMENT PETITION WAS FILED. THE BENCH WAS OF THE VIEW THAT THE APPEAL OF THE ASSESSEE CAN BE DISPOSED OF AFTER CONSIDERING THE MATERIALS AVAILABLE ON RECORD AND SUBMISSION OF THE LD D.R. THEREFORE, THE APPEAL WAS HEARD EXPARTE QUA THE ASSESSEE AND DISPOSED OF ACCORDINGLY. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DEBITED RS.9,60, 14,936/ - TOWARDS CONTRACT EXPENSES IN THE PROFIT AND LOSS ACCOUNT, WHICH INCLUDED COST OF MATERIAL CONSUMED FOR ROAD CONSTRUCTION AND THE INVOLVEMENT OF LABOUR COST. DURING THE ASSESSMENT PROCEEDINGS, THE LD A.R. OF THE ASSESSEE WAS ASKED TO FURNISH DETAI LS OF CONTRACT EXPENSES WITH PARTY LEDGER AND SUPPORTING BILLS AND VOUCHERS. LD A.R. OF THE ASSESSEE FAILED TO FURNISH SUPPORTING BILLS AND VOUCHERS RELATING TO CONTRACT EXPENSES. THEREFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE GENUINENESS OF T HE CONTRACT EXPENSES OF RS.9.60 CRORES REMAINED UNASCERTAINABLE AND UNVERIFIABLE. HENCE, HE MADE AN ESTIMATED DISALLOWANCE OF 3% OF THE CONTRACT EXPENSES OUT OF RS.9.60,14,936/ - AND ADDED RS.28,80,448/ - TO THE INCOME OF THE ASSESSEE. 3 ITA NO.81/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 6. ON APPEAL, BEFORE THE CIT(A), THE ASSESSEE SUBMITTED DETAILS OF CONTRACT EXPENSES AND CLAIMED THAT AN AMOUNT OF RS.4,56,37,201/0 WAS COST OF MATERIALS AS PER VAT RETURN. FURTHER, THERE WAS PAYMENT TO SUB - CONTRACTORS AMOUNTING TO RS.2,26,87,221/ - ON WHICH TDS WAS DEDUCTED A ND FILED TDS CERTIFICATE FOR THE SAME. IT WAS SUBMITTED THAT THE BALANCE AMOUNT OF RS.2,76,90,554/ - INCLUDED LABOUR, TRANSPORTATION AND SITE EXPENSES. THEREFORE, IT WAS ARGUED THAT ADHOC DISALLOWANCE OF 3% ON THE ENTIRE CONTRACT EXPENSES WAS NOT SUSTAINA BLE. 7. AFTER CONSIDERING THE SUBMISSION OF THE LD A.R. OF THE ASSESSEE, THE CIT(A) HELD THAT THOUGH THE ASSESSEE HAD CALCULATED THE COST OF MATERIALS AS PER THE VAT RETURN SUBMITTED BY HIM, IT WAS A FACT THAT THE ASSESSEE COULD NOT PRODUCE THE BILLS AND V OUCHERS BEFORE THE ASSESSING OFFICER. HE OBSERVED THAT CONSIDERING THE FACT THAT PART OF THE CONTRACT EXPENSES INCLUDED SUB - CONTRACT EXPENSES ALSO, DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE OF EXPENSES TO RS.20,00,000/ - IN THE ABSENCE OF BILLS AND VOUCHERS AND OTHER EVIDENCES SUBMITTED BY THE ASSESSEE.. 8. LD DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE CIT(A). 9. WE FIND THAT THE ASSESSING OFFICER AFTER OBSERVING THAT THE ASSESSEE FAILED TO FURNISH SUPPORTING BILLS AND VOUCHERS RELATING TO CONTRACT EXPENSES IN FULL, ALLOWED 97% OF THE EXPENSES OF RS.9.60 CRORES AND DISALLOWED ONLY 3% OF THE EXPENSES AMOUNTING TO RS.28,80,448/ - . 10. ON APPEAL, THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS.20 LAKHS. 4 ITA NO.81/CTK/2015 ASSESSMENT YEAR : 2010 - 2011 11. WE FIND THAT THE ASSESSING O FFICER AS WELL AS THE CIT(A) HAS NOT POINTED OUT WHICH OF THE SPECIFIC SUPPORTING BILLS AND VOUCHERS RELATING TO CONTRACT EXPENSES WERE NOT PRODUCED BY THE ASSESSEE FOR VERIFICATION. FURTHER, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS INFLATE D ITS EXPENSES IN ORDER TO SHOW LESS INCOME. THE GENUINENESS OF THE EXPENSES CLAIMED BY THE ASSESSEE IS NOT IN DOUBT. THEREFORE, IN OUR CONSIDERED VIEW, ADHOC DISALLOWANCE OUT OF THE GENUINE BUSINESS EXPENDITURE OF THE ASSESSEE CANNOT BE MADE IN LAW.. WE , THEREFORE, SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND VACATE THE DISALLOWANCE OF RS.20 LAKHS SUSTAINED BY THE CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRO NOUNCED IN THE OPEN CO URT ON 21 /04/2017 . SD/ - SD/ - (KULDIP SINGH) ( N.S SAINI) JUDICIAL MEMBER A CCOUNTANT MEMBER CUTTACK; DATED 21 /04/2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : SRI LAXMI NARAYAN JAIN, POST: TITILAGARH, BOLANGIR. 2. THE RESPONDENT :ACIT, CIRCLE 2(1), SAMBALPUR 3. THE CIT(A) CUTTACK 4. PR.CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//