Dy. CIT Cir Satara., Satara V. Shri Sambhaji N Patil, Satara

ITA 818/PUN/2012

• Counselvise Citation: 81824514 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 24-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Corroborative evidences
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 818/PN/2012 (ASSESSMENT YEAR 2007-08) DCIT, SATARA CIRCLE, MANJUNATH MANOR, OPP: SCIENCE COLLEGE, SADAR BAZAAR, SATARA. .. APPELLANT VS. SAMBHAJI NIVRUTTI PATIL, SAI CONSTRUCTION COMPANY, 28/29, PRATAPGANJ PETH, SATARA PAN NO. AKJPP 4904F .. RESPONDENT APPELLANT BY : SHRI SHAILJA RAI RESPONDENT BY : NONE DATE OF HEARING : 27-06-2013 DATE OF PRONOUNCEMENT : 28-06-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 31-03-2011 OF THE CIT(A)-III, PUNE RELATING T O ASSESSMENT YEAR 2007-08. 2. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHAL F OF THE ASSESSEE. THEREFORE, THIS CASE IS BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRE SENTATIVE. 3. GROUNDS OF APPEAL NO. 1, 6 AND 7 BY THE REVENUE BEING GENERAL IN NATURE ARE DISMISSED. 2 4. GROUNDS OF APPEAL NO.2 BY THE REVENUE READS AS U NDER : THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN RESTRICTING THE DISALLOWANCE OF THE E XPENDITURE CLAIMED BY THE ASSESSEE UNDER THE HEAD 'LABOUR CHAR GES' AT 10% OF THE EXPENDITURE (I.E. 10% OF RS.84,12,453 BEING RS.8,41,245) WITHOUT GIVING ANY SPECIFIC REASONING OR BASIS FOR RESTRICTING THE DISALLOWANCE AT 10% INSTEAD OF SUSTAINING THE DISAL LOWANCE MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DA TED 14/12/2009, AT RS.42,06,226 (BEING 50% OF RS. 84,12 ,453) 4.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.84,12,453/- UNDER THE HEAD LABOUR CHARGES. THE ASSESSING OFFICER NOTED THAT ALL THE PAYMENTS W ERE MADE IN CASH SUPPORTED BY SELF MADE VOUCHERS AND THE ASSESSEE WA S NOT IN A POSITION TO GIVE THE DETAILS RELATING TO PERSONS TO WHOM SUC H PAYMENTS ARE CLAIMED TO HAVE BEEN MADE. THE ASSESSING OFFICER T HEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY 50% OF THE SAID EXPEN DITURE SHOULD NOT BE DISALLOWED. REJECTING THE VARIOUS EXPLANATIONS GIV EN BY THE ASSESSEE AND OBSERVING THAT DURING A.Y. 2005-06 AN AMOUNT OF RS. 48,76,445/- WAS DISALLOWED U/S.40(A)(IA) OUT OF THE TOTAL CLAIM OF LABOUR CHARGES OF RS.74,96,605/- AND CONSIDERING THE FACT THAT THE AS SESSEE, TO OVERCOME THE PROVISIONS OF SECTION 40(A)(IA), HAS ALLOCATED LESS THAN RS.50,000/- TO EACH LABOURER/PERSON THE ASSESSING OFFICER DISALLOW ED 50% OF THE LABOUR EXPENSES CLAIMED BY THE ASSESSEE. THUS HE MADE ADD ITION OF RS.42,06,226/-. 4.2 IN APPEAL THE LD. CIT(A) RESTRICTED SUCH DISALL OWANCE TO RS.8,41,245/- BY HOLDING AS UNDER : 3 3.3. THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF THE CASE AND THE MATERIAL PLACED ON RECORD. THE APPELLANT IS AN IRRI GATION CONTRACTOR AND THE NATURE OF WORK EXECUTED BY THE APPELLANT DU RING THE YEAR, INTER ALIA, WAS IRRIGATION WORKS. THE ASSESSING OFF ICER HAS ALSO NOT DOUBTED THE GENUINENESS OF THE WORK CARRIED OUT BY THE APPELLANT. THE NATURE OF WORK EXECUTED BY THE APPELLANT IS SUC H THAT WORKS HAD TO BE CARRIED OUT AT REMOTE SITES. THE LABOR ENGAGE D BY THE APPELLANT AT THE SITES ARE TEMPORARY WORKERS AND UNORGANIZED AND UNLESS PAYMENTS ARE MADE IN CASH, THEY WOULD NOT BE AVAILA BLE FOR THE WORK. FURTHER, CONSIDERING THE NATURE OF WORK CARRI ED OUT, LOCATION OF THE WORK SITE AND THE PERSONS ENGAGED FOR THE WO RK, SELF MADE VOUCHERS COULD BE THE ONLY EVIDENCE IN SUPPORT OF T HE PAYMENTS THAT WERE MADE TO LABOR. PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE AT 50% OF TOTAL EXPENSES ON ADHOC BASIS WITHOUT HIGHLIGHTING ANY DE FECT IN THE SUPPORTING EVIDENCE THAT HAS BEEN PRODUCED BEFORE H IM AND ALSO WITHOUT POINTING OUT ANY INSTANCES WHERE THE EXPEND ITURE, ACCORDING TO HIM, IS UNSUPPORTED. MO SPECIFIC DEFECT HAD BEEN POINTED OUT OTHER THAN MAKING GENERAL STATEMENTS AS TO THE AUTH ENTICITY OF THE VOUCHERS. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT THE EXPENDITURE INCURRED ON ACCOUNT OF LABOR PAYMENTS I S EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE CONTRACT RECEIPTS DECLARED BY THE APPELLANT IN THIS YEAR OR THERE IS DISPROPORTIONATE INCREASE AS COMPARED TO THE EXPENSES CLAIMED UNDER THIS HEAD IN THE EARLIER YEARS. THE BOOKS OF ACCOUNTS OF THE APPELLANT FIRM WERE ALSO SUBJECTED TO AUDIT U/S.44AB OF THE ACT AND IT IS NO TICED FROM THE AUDIT REPORT PLACED ON RECORD, NO DISCREPANCIES IN THIS REGARD HAVE BEEN POINTED OUT BY THE AUDITORS. MERELY BECAUSE DI SALLOWANCE WAS MADE IN THE LAST YEAR UNDER SEC. 40(A)(IA), WHICH C OMES TO ABOUT 65% OF THE SAID EXPENSES CLAIMED IN THAT YEAR, DISA LLOWANCE AT 50% CANNOT BE MADE IN THIS YEAR ALSO ON ADHOC BASIS WIT HOUT PINPOINTING ANY SPECIFIC DEFAULT IN DEDUCTING TAX AT SOURCE UND ER SEC. 194C IN THIS YEAR. THE DISALLOWANCE WAS MADE IN THE LAST YE AR FOR VIOLATION OF TDS PROVISIONS AND NOT ON THE GROUND THAT THE EX PENDITURE WAS NOT GENUINE OR INFLATED. IN THESE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THE ADHOC DISALLOWANCE MADE AT 50% OF THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE. AT THE S AME TIME, IT IS A FACT THAT MOST OF THE VOUCHERS FOR THE EXPENSES ARE SELF-MADE VOUCHERS AND THE PAYMENTS WERE MADE IN CASH, WHICH ARE NOT AMENABLE TO INDEPENDENT VERIFICATION. IN SUCH A SI TUATION, IT WOULD MEET THE ENDS OF JUSTICE, IF THE DISALLOWANCE IS RE STRICTED TO 10 PER CENT OF THE EXPENDITURE, WHICH WORKS OUT TO RS.8,41 ,245/- , I.E. 10% OF RS.84,12,453/-. ACCORDINGLY, AS AGAINST THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.42,06,226/-, DISALLO WANCE TO THE EXTENT OF RS.8,41,245/- IS SUSTAINED. THE APPELLAT E GETS CONSEQUENTIAL RELIEF OF RS.33,64,981/-. 4.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 4 4.4 WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY TH E LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). THE FINDINGS GIVEN BY THE LD.CIT(A) THAT THE BOOKS OF ACCOUNTS WERE AUDITED AND THE AUDITORS HAV E NOT POINTED OUT ANY DEFECTS COULD NOT BE CONTROVERTED BY THE LD. DE PARTMENTAL REPRESENTATIVE. THE OBSERVATIONS OF THE LD.CIT(A) THAT THE ASSESSEE UNDERTAKES IRRIGATION CONTRACT WORK AND THE WORKS H AVE BEEN CARRIED OUT AT REMOTE SITES BY ENGAGING UNORGANISED TEMPORARY W ORKERS ALSO COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESE NTATIVE. UNDER THESE CIRCUMSTANCES PAYMENTS MADE BY CASH CANNOT BE RULED OUT. FURTHER, MERELY BECAUSE CERTAIN DISALLOWANCES WERE MADE IN THE PRECEDING YEAR ON ACCOUNT OF VIOLATION OF PROVISION S OF SECTION 40(A)(IA) CANNOT BE A GROUND TO DISALLOW 50% OF THE LABOUR EX PENSES ON ADHOC BASIS DURING THIS YEAR. CONSIDERING THE TOTALITY O F THE FACTS OF THE CASE AND CONSIDERING THAT THE DISALLOWANCE OF 10% OF THE TOTAL LABOUR EXPENSES AS AGAINST 50% DISALLOWED BY THE ASSESSING OFFICER IS JUST AND REASONABLE UNDER THE FACTS AND CIRCUMSTANCE OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDIN GLY, WE UPHOLD THE SAME. GROUND RAISED BY THE REVENUE IS, THEREFORE, DISMISSED. 5. GROUNDS OF APPEAL NO.3 BY THE REVENUE READS AS U NDER : THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN RESTRICTING THE DISALLOWANCE OF THE E XPENDITURE CLAIMED BY THE ASSESSEE UNDER THE HEAD 'MACHINERY R ENT' AT 10% OF THE EXPENDITURE (I.E. 10% OF RS. 53,486 BEING RS . 5,348) WITHOUT GIVING ANY SPECIFIC REASONING OR BASIS FOR RESTRICT ING THE DISALLOWANCE AT 10% INSTEAD OF SUSTAINING THE DISAL LOWANCE OF THE ENTIRE AMOUNT AS MADE BY THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER DATED 14/12/2009, [I.E. RS.5,08,686 AS REDUCE D BY THE AMOUNT OF RS.4,55,200 WHICH IS SUBSEQUENTLY DISALLO WED BY THE CIT (APPEALS) AS PER PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT]. 5 5.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE HAS DEBITED AN AMOUNT OF RS.92,37,879/- TOWARDS MACHINERY RENT AND OTHER CHARGES.. THE AO NOTED THAT OUT OF THE ABOVE AMOUNT ASSESSEE HAS DEDUCTED TDS @1% ON RS,25,63,880/- AND NO TDS HAS BEEN MADE OUT OF THE REMAINING AMOUNT ON RS.66,73,999/-. OUT OF THE AMOUNT OF RS. 25,63,880/-, THE AO NOTED THAT THE ASSESSEE HAS PAID CASH PAYMENTS TO T HE FOLLOWING PERSONS : S.NO. NAME AMOUNT 1 BHALERAO SUDERSHAN 20,000 2 BARGE PANDARINATH 10,000 3 CHAVAN DEEPAK 1,86,200 4 HULWANE B.V. 23,486 5 JANKAR A.B. 1,26,700 6 KHURADE AD 1,42,300 7 KHURADE KA 30,000 TOTAL 5,38,686 5.2 THE AO ASKED THE ASSESSEE TO PROVE THE IDENTITY OF THE PERSONS AND THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE COULD PRODUCE ONLY KHURADE K.A. TO WHOM AN AMOUNT OF RS.30,000/- HAS B EEN PAID AND STATED THAT THEY ARE TRYING TO BRING THE OTHER PERS ONS FOR HIS VERIFICATION. REJECTING THE SUBMISSIONS MADE BY THE ASSESSEE THE AO DISALLOWED AN AMOUNT OF RS.5,08,686/- OUT OF THE CASH PAYMENT OF RS.5,38,686/-. 5.3 IN APPEAL THE LD. CIT(A) SUSTAINED AN AMOUNT O F RS.5,348/- OUT OF THE DISALLOWANCE OF RS.5,03,338/- BY HOLDING AS UNDER : 4.3 THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR TH E APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF THE CASE AND THE MATERIAL PLACED ON RECORD. THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE GROUND THAT PERSONS TO WHO M PAYMENT TO THE EXTENT OF RS.5,08,686/- WAS MADE, WERE NOT PROD UCED FOR IDENTIFICATION. THE CONTENTION OF THE APPELLANT IS THAT THE PERSONS TO WHOM PAYMENTS WERE MADE WERE TEMPORARY WORKERS A ND NOT PERMANENTLY ENGAGED BY THE APPELLANT AND ONCE THE C ONTRACT WORK WAS OVER, THERE WAS HARDLY ANY CONTACT WITH THEM AN D THE PRESENT 6 WHEREABOUTS OF SUCH PERSONS WERE NOT AVAILABLE WITH THE APPELLANT AND THEREFORE, PRODUCING SUCH PERSONS WAS PRACTICALLY DIFFICULT. THERE IS SOME FORCE IN THE CONTENTION OF THE APPELLANT. EVEN THOUGH THE APPELLANT WAS NOT ABLE TO PRODUCE T HE PERSONS INVOLVED FOR PERSONAL VERIFICATION BY THE ASSESSING OFFICER, THE ASSESSING OFFICER HAS NOT DISPUTED THE GENUINENESS OF THE WORKS CARRIED OUT BY THE APPELLANT. AS POINTED OUT BY THE APPELLANT, THE PERSONS CONCERNED ARE TEMPORARY WORKERS AND NOT PER MANENTLY ENGAGED BY THE APPELLANT AND ONCE THE CONTRACT WORK IS OVER, THERE WOULD BE HARDLY ANY CONTACT WITH THEM AND THE REFORE, PRODUCING SUCH PERSONS FOR IDENTIFICATION IS NOT AN EASY TASK. HENCE, DISALLOWANCE OF THE ENTIRE EXPENDITURE ON TH E GROUND THAT THE PERSONS COULD NOT BE PRODUCED, IS NOT JUSTIFIAB LE. HOWEVER, IN THE CASE OF SHRI CHAVAN DEEPAK (RS.1,86,200), JANKA R A. B. (RS.L,26,700/-) AND KHURADE AD (RS.1,42,300/-) THE PAYMENTS WERE LIABLE FOR TDS UNDER SEC. 194-I AS THE AGGREGA TE OF PAYMENTS MADE TO THE SAID PERSONS DURING THE YEAR E XCEEDED RS. 1,20,000/-. BUT, ADMITTEDLY THE APPELLANT DEDUCTED TAX AT SOURCE AT LOWER RATE OF 1% AS AGAINST APPLICABLE RATE OF 15% FROM THE PAYMENTS MADE TO THE SAID PERSONS. ACCORDINGLY, THE PAYMENTS MADE TO THESE PERSONS ARE EXCLUDED FROM THE DISALLO WANCE MADE ON THE GROUND OF GENUINENESS OF THE EXPENDITURE AND DEALT WITH SEPARATELY HEREINAFTER UNDER THE PROVISIONS OF SEC. 40(A)(IA). FOR THE REMAINING PAYMENTS OF RS.53,486/- I.E. IN THE C ASE OF BHALERAO SUDERSHAN (RS.20,000), BARGE: PANDARINATH (RS.10,00 0/-) AND HULWANE B V (RS.23,486), IT IS A FACT THAT THE SUPP ORTING EVIDENCE MAINTAINED BY THE APPELLANT IS IN THE FORM OF SELF MADE VOUCHERS AND THE PAYMENTS TO THESE PERSONS WERE MADE IN CASH , WHICH ARE NOT AMENABLE TO INDEPENDENT VERIFICATION. IN SUCH C IRCUMSTANCES, IT WOULD MEET THE ENDS OF JUSTICE, IF THE DISALLOWA NCE IS RESTRICTED TO 10 PER CENT OF THE EXPENDITURE CLAIMED OF RS.53, 486/-, WHICH WORKS OUT TO RS.5,348/-. ACCORDINGLY, OUT OF THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. RS.5,08,686/- DISAL LOWANCE TO THE EXTENT OF RS.5,348/- IS SUSTAINED. THE APPELLANT GE TS CONSEQUENTIAL RELIEF OF RS.5,03,338/- (RS.5,08,686 - 5,348) IN TH IS REGARD. 5.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 5.5 WE HAVE CONSIDERED THE ARGUMENTS MADE BY THE LD . DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THE LD.CIT(A) HAD OBSERVED THAT THE ASSESSEE H AS DEDUCTED TAX @1% IN THE CASE OF CHAVAN DEEPAK, JANKAR AB, KHURAD E AD FOR WHICH PAYMENTS MADE TO THESE PERSONS SHOULD BE EXCLUDED F ROM THE DISALLOWANCE MADE ON THE GROUND OF GENUINENESS OF T HE EXPENDITURE. SO 7 FAR AS THE REMAINING PAYMENT IS CONCERNED TOTALING TO RS.53,486/- THE LD.CIT(A) HAD DISALLOWED 10% OF SUCH EXPENSES AS AG AINST THE ENTIRE AMOUNT DISALLOWED BY THE AO WHICH IN OUR OPINION IS JUST AND REASONABLE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. WE, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND TH E GROUND RAISED BY THE REVENUE IS DISMISSED. 6. GROUND OF APPEAL NO.4 BY THE REVENUE READS AS UN DER : THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN RESTRICTING THE DISALLOWANCE OUT OF ' CASH PAYMENTS WITHOUT DETAILS' AT 10% OF THE EXPENDITURE (I.E., 1 0% OF RS.28,10,079 BEING RS.2,81,000) PURELY ON ADHOC BAS IS AND WITHOUT GIVING ANY SPECIFIC REASONING OR BASIS FOR RESTRICTING THE DISALLOWANCE AT 10% INSTEAD OF SUSTAINING THE DISAL LOWANCE MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DA TED 14/12/2009, AT RS.14,05,040/- (BEING 50% OF RS. 28,10,079) 6.1 FACTS IN BRIEF ARE THAT OUT OF THE MACHINERY RE NT PAID TOTALING TO RS.66,73,999/- ON WHICH NO TDS HAS BEEN MADE. THE AO NOTED THAT AN AMOUNT OF RS.28,10,079/- HAS BEEN PAID IN CASH WITH OUT ANY DETAILS OF THE PERSONS TO WHOM SUCH PAYMENTS HAVE BEEN MADE. ONLY SELF MADE VOUCHERS WERE PRODUCED BEFORE THE AO. HE, THEREFOR E, DISALLOWED AN AMOUNT OF RS.14,05,040/- BEING 50% OF SUCH EXPENSES . 6.2 IN APPEAL THE LD.CIT(A) SUSTAINED AN AMOUNT OF RS.2,81,000/- OUT OF DISALLOWANCE OF RS.14,50,040/- BY OBSERVING AS U NDER : 5.3 THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR TH E APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF THE CASE AND THE MATERIAL PLACED ON RECORD. THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER IS ON TWO ACCOUNTS. THE FIRST PA RT RELATES TO PAYMENTS TO THE EXTENT OF RS.28,10,079/- WHICH, ACC ORDING TO THE ASSESSING OFFICER, WERE CLAIMED ON THE BASIS OF SEL F MADE VOUCHERS AND 50% OF THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER. AS ALREADY MENTIONED HEREINABOVE, THE APPELLANT IS AN IRRIGATION 8 CONTRACTOR AND THE NATURE OF WORK EXECUTED BY THE A PPELLANT DURING THE YEAR WAS IRRIGATION WORKS. THE ASSESSING OFFICE R HAS ALSO NOT DOUBTED THE GENUINENESS OF THE WORK CARRIED OUT BY THE APPELLANT. THE FACT THAT THE APPELLANT CARRIES OUT HIS WORK AT REMOTE VILLAGES USING TEMPORARY LABOR WHO OFTEN LEAVES THE SITE ONC E THE WORK IS OVER AND MANY A TIME REMAIN UNTRACEABLE, CANNOT BE LOST SIGHT OF AND THEREFORE, THE ONLY SUPPORTING EVIDENCE THAT TH E APPELLANT COULD HAVE MAINTAINED IS THE SELF MADE VOUCHERS. TAKING T HIS ASPECT INTO ACCOUNT AND ALSO AS LONG AS THE ASSESSING OFFICER D ID NOT DISPUTE THE VERY GENUINENESS OF THE WORKS CARRIED OUT, EXPE NDITURE INCURRED, EVEN IF BASED ON SELF MADE VOUCHERS, CANNOT BE SAID TO BE NOT GENUINE TO THE EXTENT OF 50 PERCENT OF THE TOTAL EX PENSES. PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFIC ER HAS MADE THE DISALLOWANCE AT 50% OF TOTAL EXPENSES ON ADHOC BASI S WITHOUT HIGHLIGHTING ANY DEFECT IN- THE SUPPORTING EVIDENCE THAT HAS BEEN PRODUCED BEFORE HIM AND ALSO WITHOUT POINTING OUT A NY INSTANCES WHERE THE EXPENDITURE, ACCORDING TO HIM, IS UNSUPPO RTED. AS ALREADY OBSERVED IN THE CONTEXT OF LABOR PAYMENTS H EREINABOVE, NO SPECIFIC DEFECT HAD BEEN POINTED OUT OTHER THAN MAK ING GENERAL STATEMENTS AS TO THE AUTHENTICITY OF THE VOUCHERS. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT THE EXPENDITURE INCURRED ON ACCOUNT OF MACHINERY CHARGES IS EXCESSIVE OR UNREAS ONABLE HAVING REGARD TO THE CONTRACT RECEIPTS DECLARED BY THE APP ELLANT IN THIS YEAR OR THERE IS DISPROPORTIONATE INCREASE AS COMPA RED TO THE EXPENSES CLAIMED UNDER THIS HEAD IN THE EARLIER YEA RS. FURTHER, THE BOOKS OF ACCOUNTS OF THE APPELLANT FIRM WERE ALSO S UBJECTED TO AUDIT U/S.44AB OF THE ACT AND IT IS NOTICED FROM THE AUDI T REPORT PLACED ON RECORD, NO DISCREPANCIES IN THIS REGARD HAVE BEEN P OINTED OUT BY THE AUDITORS. UNDER THE CIRCUMSTANCE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER @ 50% IS HELD TO BE EXCESSIVE OR UNREASONABLE. AT THE SAME TIME, CONSIDERING THE FACT THAT MOST OF THE VOUCHERS FOR THE EXPENSES ARE SELF-MADE VOUCHERS AND THE PAYMENT S WERE MADE IN CASH, WHICH ARE NOT AMENABLE TO INDEPENDENT VERI FICATION, IT WOULD MEET THE ENDS OF JUSTICE, IF THE DISALLOWANCE IS RESTRICTED TO 10 PER CENT OF THE EXPENDITURE CLAIMED OF RS.28,10,079 /-, WHICH WORKS OUT TO RS.2,81,000/-. ACCORDINGLY, OUT OF THE DISA LLOWANCE MADE BY THE ASSESSING OFFICER OF RS.14,05,040/- DISALLOWANC E TO THE EXTENT OF RS.2,81,000/- IS SUSTAINED. 6.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 6.4 AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATI VE AND ON PERUSAL OF THE ORDERS OF THE AO AND THE CIT(A) WE FIND NO I NFIRMITY IN THE ORDER OF THE CIT(A). AS MENTIONED EARLIER THE ASSESSEE U NDERTAKES IRRIGATION WORK AT REMOTE PLACES USING TEMPORARY LABOURERS. T HEREFORE, UNDER THE FACTS AND CIRCUMSTANCES DISALLOWANCE OF 50% OF THE EXPENSES IS HIGHLY 9 EXCESSIVE AND ARBITRARY. FURTHER, THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND NO DISCREPANCIES WERE POINTED OUT BY THE AUDITO RS. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE RES TRICTED TO 10% OF THE TOTAL EXPENDITURE BY THE CIT(A) IN OUR OPINION IS J UST AND REASONABLE. WE, THEREFORE, FIND NO INFIRMITY IN THE SAME AND TH E GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 7. GROUNDS OF APPEAL NO.5 BY THE REVENUE READS AS U NDER : THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN RESTRICTING THE OTHER DISALLOWANCE OU T OF 'CASH PAYMENTS WITHOUT DETAILS' TO THE EXTENT OF RS.55,00 0 ONLY, PURELY ON ADHOC BASIS AND WITHOUT GIVING ANY SPECIFIC REAS ONING OR BASIS FOR RESTRICTING THE DISALLOWANCE AT 10% INSTEAD OF SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THE A SSESSMENT ORDER DATED 14/12/2009, AT RS. 1,00,000/-. 7.1 FACTS OF THE CASE, IN BRIEF ARE THAT PAYMENTS A MOUNTING TO RS.50,000/- EACH SHOWN TO HAVE BEEN PAID TO SHRI CH AVAN K. SHANKAR AND SHRI CHAVAN MAYUR KISAN, AGGREGATING TO RS.1,00 ,000/- IN CASH WERE SUPPORTED BY SELF MADE VOUCHERS. THE ASSESSEE WAS CALLED UPON BY THE AO TO PRODUCE THESE PARTIES TO ESTABLISH THE GE NUINENESS OF THE PAYMENTS. TAKING THE SAME PLEA AS WAS TAKEN IN CASE OF LABOR PAYMENTS, THE ASSESSEE SOUGHT TO JUSTIFY THE CASH PAYMENTS AN D SELF MADE VOUCHERS AS THE SUPPORTING EVIDENCE. HOWEVER, THE ASSESSING OFFICER DID NOT FIND THESE JUSTIFICATIONS CONVINCING AND DISALLOWED 50% OF THE EXPENDITURE CLAIMED AMOUNTING TO RS. 1,00,000/-. 7.2 IN APPEAL THE LD.CIT(A) RESTRICTED THE DISALLOW ANCE TO RS.55,000/- BY OBSERVING AS UNDER : 10 5.3.1 THE OTHER COMPONENT OF THE DISALLOWANCE PERT AINS TO CASH PAYMENTS MADE TO TWO PERSONS, NAMELY, SHRI CHAVAN K . SHANKAR AND SHRI CHAVAN MAYUR KISAN, AGGREGATING TO RS.1,00 ,000/- WHOM THE APPELLANT HAD FAILED TO PRODUCE BEFORE THE ASSE SSING OFFICER. THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFF ICER ON THE GROUND THAT PERSONS TO WHOM PAYMENT TO THE EXTENT O F RS.1,00,000/- WAS MADE, WERE NOT PRODUCED FOR IDENTIFICATION. THE CONTENTION OF THE APPELLANT IS THAT THE PERSONS TO WHOM PAYMENTS WERE MADE WERE NOT PERMANENTLY ENGAGED BY THE APPELLANT AND ONCE T HE CONTRACT WORK WAS OVER, THERE WAS HARDLY ANY CONTACT WITH TH EM AND THE PRESENT WHEREABOUTS OF SUCH PERSONS WERE NOT AVAILA BLE WITH THE APPELLANT AND THEREFORE, PRODUCING SUCH PERSONS WAS PRACTICALLY DIFFICULT. THERE IS SOME FORCE IN THE CONTENTION OF THE APPELLANT. EVEN THOUGH THE APPELLANT WAS NOT ABLE TO PRODUCE T HE PERSONS INVOLVED FOR PERSONAL VERIFICATION BY THE ASSESSING OFFICER, THE ASSESSING OFFICER HAS NOT DISPUTED THE GENUINENESS OF THE WORKS CARRIED OUT BY THE APPELLANT. AS POINTED OUT BY THE APPELLANT, THE PERSONS CONCERNED ARE NOT PERMANENTLY ENGAGED BY TH E APPELLANT AND ONCE THE CONTRACT WORK IS OVER, THERE WOULD BE HARDLY ANY CONTACT WITH THEM AND THEREFORE, PRODUCING SUCH PER SONS FOR IDENTIFICATION WAS NOT AN EASY TASK. HENCE, DISALLO WANCE OF THE ENTIRE EXPENDITURE ON THE GROUND THAT THE PERSONS C OULD NOT BE PRODUCED, IS NOT JUSTIFIABLE. HOWEVER, IN THE CASE OF SHRI CHAVAN MAYUR KISAN, THE PAYMENTS WERE LIABLE FOR TDS UNDER SEC. 194-1 AS THE AGGREGATE OF PAYMENTS OF RS.1,20,376/- MADE TO THE SAID PERSON DURING THE YEAR EXCEEDED RS.1,20,000/-. BUT, ADMITT EDLY THE APPELLANT FAILED TO DEDUCT TAX AT SOURCE FROM THE P AYMENTS MADE TO THE SAID PERSON. IN VIEW OF THE PROVISIONS OF SEC. 40(A)(IA), THE DISALLOWANCE OF RS.50,000/- MADE BY THE A.O. IS CON FIRMED THOUGH ON A DIFFERENT GROUND. THE BALANCE AMOUNT OF RS.70, 376/- FORMS PART OF THE DISALLOWANCE OF RS.6,15,105/- MADE BY T HE ASSESSING OFFICER UNDER SEC.40(A)(IA), WHICH IS NOT CONTESTED BY THE APPELLANT IN THE PRESENT APPEAL. FOR THE OTHER PAYMENT OF RS .50,000/- MADE TO SHRI CHAVAN K. SHANKAR, IT IS A FACT THAT THE SU PPORTING EVIDENCE MAINTAINED BY THE APPELLANT IS IN THE FORM OF SELF MADE VOUCHERS AND THE PAYMENTS TO THIS PERSONS WAS MADE IN CASH, WHICH IS NOT AMENABLE TO INDEPENDENT VERIFICATION. IN SUCH CIRC UMSTANCES, IT WOULD MEET THE ENDS OF JUSTICE, IF THE DISALLOWANCE IS RESTRICTED TO 10 PER CENT OF THE EXPENDITURE CLAIMED OF RS.50,000/-, WHICH WORKS OUT TO RS.5,000/-. ACCORDINGLY, OUT OF THE DISALLOWANC E MADE BY THE ASSESSING OFFICER AT RS.1,00,000/- ON THIS GROUND, DISALLOWANCE TO THE EXTENT OF RS.55,000/- (50,000 +5000) IS SUSTAIN ED. 7.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 7.4 AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATI VE AND ON PERUSAL OF THE ORDERS OF THE AO AND THE CIT(A) WE FIND NO I NFIRMITY IN THE ORDER 11 OF THE CIT(A) SUSTAINING RS.55,000/- OUT OF DISALLO WANCE OF RS. 1 LAKH MADE BY THE AO. THE LD. DEPARTMENTAL REPRESENTATIV E COULD NOT CONTROVERT THE FACTUAL FINDINGS AND REASONING GIVEN BY THE LD. CIT(A). WE THEREFORE UPHOLD THE ORDER OF THE LD.CIT(A) AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF JUNE 2013 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA ) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE DATED: 28 TH JUNE 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-III, PUNE 4 CIT-III, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE