Yog Bhan Consultants and Contractors Pvt Ltd., Hyderabad V. DCIT, Hyderabad

ITA 91/HYD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3070 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 19-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NOS.91/HYD/2010 ASSESSMENT YEAR 2006-07 YOG BHAN CONSULTANTS & CONTRACTORS (P) LTD., HYDERABAD (PAN AAA CY 0770E) VS. DCIT, CIRCLE 3 (3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MOHD. AFZAL RESPONDENT BY: SHRI K.V.N. CHARYA, DR O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE CIT(A) IV, HYDERABAD DATED 30.10. 2009 AND PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE RAISED IN ITS GROUND THAT THE CIT(A) ERR ED IN CONFIRMING THE ADDITION OF RS.20,94,624/- IN SPITE OF PRODUCING EVIDENCE IN RESPECT OF EXPENDITURE INCURRED/CLAIMED. 3. BRIEF FACTS OF THE ISSUES ARE THAT THE ASSESSEE COMPANY IS MAINLY ENGAGED IN THE BUSINESS OF DESIGN, ENGINEERING, MANUFACTURE AND SUPPLY OF STONE CRUSHING AND SCREENING PLANT, CEMENT MANUF ACTURING MACHINERY ETC. IT TAKES UP ALL TYPES OF FABRICATION WOR K, ERECTION AND COMMISSIONING, CRUSHING OF AGGREGATES WITH RELATED MATER IALS, HANDLING SYSTEMS WITH SPARES ETC. THE ASSESSING OFFICER OBSERVED THAT ON A ITA NO.91 /HYD/2010 YOG BHAN CONSULTANTS, HYDERABAD 2 TURNOVER OF RS.7.94 CRORES IT HAD DECLARED A NET INCOME OF RS.11,40,580/- ONLY WHICH CAME TO AS LOW AS 1.65%. ON A SCRUTINY OF BOOKS OF ACCOUNTS AND VOUCHERS, HE OBSERVED THAT THE STATE MENT OF SALARIES AND WAGES WHICH WAS PREPARED BY TAKING INTO CONSI DERATION ALL THE PAYMENTS MADE AT DIFFERENT SITES CONTAINED SEVERAL DEFICIENCIES. THE STATEMENT CONSISTED OF THE NAMES AND ADDRESSES AND DESI GNATION OF THE EMPLOYEE ONLY WHEREAS THE SPECIFIC DUTY RENDERED BY THE EMPLOYEE AND THE NATURE OF DUTIES HAD NOT BEEN MENTIONED. TH E ASSESSEE FURTHER DID NOT FURNISH THE NAMES AND ADDRESSES OF THE PERSONS TO WHOM THE WAGES WERE PAID. THE ASSESSEE ALSO COULD NOT PRODUCE THE V OUCHERS TO SUPPORT THE EXPENDITURE AND ONLY A STATEMENT WAS FURNI SHED WHEREUPON SIGNATURES HAD BEEN OBTAINED. THE ASSESSING OFFICER ALSO FOUND THAT THE VOUCHERS, THE LF NO. AND THE DATES OF PAYMENT, NATURE OF WORK DONE ETC WERE UNVERIFIABLE. THE BASIS OF CALCULATION OF AMOUNTS PAID HAD NOT BEEN PRODUCED NOR THE VOUCHERS WERE FOUND IN SUPPORT. ACCORDINGLY, HE CONCLUDED THAT THE STATEMENT PRODUCED WAS A SELF SERVING STATEMENT ONLY WHICH DID NOT DISCLOSE THE TRUE STATE OF ACCOUNTS WH ERE FROM THE CORRECT INCOME COULD BE ASCERTAINED. HE OBSERVED THAT ACCORD ING TO THE ACCOUNTING STANDARD, EVERY VOUCHER SHOULD CONTAIN THE NA TURE OF PAYMENT. IN VIEW OF THE ABOVE FINDINGS REGARDING DE FECTS AS ALSO THE FINDING THAT THE EXPENDITURE WAS NOT FULLY SUPPORTED BY VOUCHERS 10% OF THE TOTAL EXPENDITURE WAS DISALLOWED AND AN ADDITION OF RS.20,94,269/- WAS MADE. ON APPEAL, CIT(A) SUSTAINED THE ADDITION. A GAINST THIS ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ASSESSEE BEFORE THE LOWER AUTH ORITIES PRODUCED MONTH WISE SALARY AND A WAGE STATEMENT WHICH CONTAINS NAM ES AND DESIGNATION OF THE EMPLOYEES ALONG WITH THE WAGES PAID AND ALSO BEARS SIGNATURE/THUMP IMPRESSION OF THE RECIPIENTS. THE ASSE SSEE HAS NOT ITA NO.91 /HYD/2010 YOG BHAN CONSULTANTS, HYDERABAD 3 PRODUCED THE RELEVANT VOUCHERS FOR THE PAYMENT OF THA T EXPENDITURE. BEING SO, THE LOWER AUTHORITIES HAD DISALLOWED 10% OF SUCH EXPENDITURE. IN OUR OPINION, WHEN THE EXPENDITURE IS NOT SUPPORTED BY PROPER VOUCHERS, THE LOWER AUTHORITIES WITHIN THEIR POWER TO DISALLOW CERTAIN PORTION OF THE EXPENDITURE ON THE REASON THAT THE COR RECTNESS OF THE EXPENDITURE CANNOT BE VERIFIED. THERE IS EVERY CHAN CE OF INFLATING THE EXPENDITURE BY THE ASSESSEE. TO PLUG THESE LOOPHOLES, LU MP SUM DISALLOWANCE WAS MADE. THIS IS SUPPORTED BY THE JUDGEME NT OF DELHI HIGH COURT IN THE CASE OF GOODYEAR INDIA VS. CIT (246 ITR 116) (DEL.) AND THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF AMRITLAL & CO. (P) LTD. VS. CIT (108 ITR 719) (BOM). BEING SO, IN PRINCIPLE, WE ARE AGREEING WITH THE REASON FOR MAKING THE ADDITION. HO WEVER, THE ASSESSEE BEING A SUB CONTRACTOR AND THE PERCENTAGE OF PROFI T IS VERY LOW, MAKING DISALLOWANCE AT RS.20,94,269/- WILL RESULT IN H IGH RATE OF PROFIT. AS SUCH, WE ARE INCLINED TO SUSTAIN THE ADDITION AT 5% O N SUCH EXPENSES INSTEAD OF 10% AS DETERMINED BY THE LOWER AUTHORITIES. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 5. THE NEXT GROUND IN ASSESSEES APPEAL IS THAT THE CI T(A) ERRED IN CONFIRMING THE ADDITION OF RS.1,64,315/- WHI CH WAS MADE WITHOUT DISCUSSING ANY THING IN THE ASSESSMENT ORDER. THE ASSESSEE HAS NOT PRESSED THIS GROUND BEFORE US. HENCE THIS GROUND IS DISMISSED AS NOT PRESSED. 6. THE NEXT GROUND IN ASSESSEES APPEAL IS THAT THE CIT (A) ERRED IN CONFORMING THE ADDITION OF RS.12,166/- WHICH WAS MADE WITHOUT DISCUSSING ANYTHING IN THE ASSESSMENT ORDER. THIS BEING A POOJA EXPENSES CANNOT BE SAID THAT IT WAS INCURRED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THERE IS NO COMMERCIAL EXPENDE NCY TO INCUR ITA NO.91 /HYD/2010 YOG BHAN CONSULTANTS, HYDERABAD 4 THIS EXPENDITURE. ACCORDINGLY, DISALLOWANCE IS JUSTIFIED. THIS GROUND OF THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 23.7.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 23 RD JULY, 2010 COPY FORWARDED TO: 1. MOHD AFZAL, ADVOCATE, 11-5-465, FLAT NO.402, SHER SONS RESIDENCY, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD 2. CIT(A) IV, HYDERABAD 3. CIT(A) HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP