JHANDI PRASAD HIMMATRAMKA, Jaipur V. ITO, JHUNJHUNU

ITA 974/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2123 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DR DHK
• Keywords: Business income; Depreciation; Corroborative evidences
• Section: 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 974/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 SHRI JHANDI PRASAD HIMATRAMKA P.O. CHIRAWA -333 026 CUKE VS. THE ITO WARD- 2, JHUNJHUNU LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABPH 9950 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI MANISH AGARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY :SMT. POONAM RAI, DCIT-. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13/04/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 18 /04/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-35, NEW DELHI (CAMP OFFICE AT JAIPUR), DATED 09-09-2016 FOR THE ASSESSMENT YEAR 2010-11 RAISING THEREIN FOLLOWING G ROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN UPHOLDING THE REJECTION OF BOOK S OF ACCOUNT BY AO BY INVOKING PROVISIONS OF SECTION 145 (3) OF THE I.T. ACT, 1961. APPELLANT PRAYS THE REJECTION O F BOOKS OF ACCOUNT MAY PLEASE BE HELD BAD IN LAW. ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 2 1.1 THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE TRADING ADDITION OF RS. 8,55,822/- MADE BY AO BY APPLYING G ROSS PROFIT RATE OF 1.14% INSTEAD OF 0.74% DECLARED BY A SSESSEE. APPELLANT PRAYS ADDITION SO MADE MAY PLEASE BE DELE TED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN CONFIRMING THE AD HOC DISALLOWA NCE OF RS. 67,001/- MADE BY AO OUT OF TELEPHONE AND CAR EX PENSES BEING 20% OF TOTAL EXPENSES. APPELLANT PRAYS ADDITI ON SO MADE MAY PLEASE BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN CONFIRMING THE AD HOC DISALLOWA NCE OF RS. 15,732/- OUT OF LABOUR EXPENSE BEING 10% OF TOT AL EXPENSES. 2.1 APROPOS GROUND NO. 1 AND 1.1 OF THE ASSESSEE, B RIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF SUGAR ON WHOLESALE BA SIS IN THE NAME AND STYLE OF M/S. MADHAV TRADING CO. AT CHIRAWA. THE AO ON PERUSAL OF THE BOOKS OF ACCOUNT OF THE ASSESSEE NOTICED THAT THE A SSESSEE DURING THE YEAR UNDER CONSIDERATION HAD DECLARED THE GROSS PROFIT O F RS. 16,06,125/- ON DECLARED TOTAL SALES OF RS. 21,59,60,250/- IN TRADI NG ACCOUNT BY SHOWING A GROSS PROFIT RATE OF 0.74% ONLY WHICH IS VERY LOW A S COMPARED TO LAST YEARS DECLARED GROSS PROFIT RATE @ 1.14%. THE AO ON SCRUTINY OF BOOKS OF ACCOUNT NOTICED VARIOUS DEFECTS THAT THE ASSESSE E HAD NOT MAINTAINED DAY TO DAY STOCK REGISTER AND QUANTITY-WISE DETAILS OF ITEMS. THE AO FURTHER NOTED THAT THE ASSESSEE HAD NOT FURNISHED C OMPLETE BILLS AND ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 3 VOUCHERS REGARDING PURCHASE EXPENSES IN TRADING ACC OUNT. THE AO NOTED THAT THE AUDITOR IN AUDIT REPORT HAD COMMENTED THAT NO INTERNAL VOUCHERS HAD BEEN MAINTAINED FOR CASH EXPENSES. THE AO OBSE RVED THAT IN THE ABSENCE OF THESE DEFECTS, TRADING RESULTS DECLARED BY THE ASSESSEE CANNOT BE ASCERTAINED AND TRUE GROSS PROFIT AND CLOSING ST OCK CANNOT BE DEDUCED. IN SUCH A SITUATION, THE ASSESSEE WAS OFFERED OPPOR TUNITY BY THE AO TO SHOW CAUSE AS TO WHY PROVISIONS OF SECTION 145(3) O F THE ACT MAY NOT BE INVOKED AND GROSS PROFIT @ 1.14% AS DECLARED IN LAS T YEAR MAY NOT BE APPLIED ON DECLARED TURNOVER OF RS. 21,59,60,250/ -. THE ASSESSEE SUBMITTED THE REPLY BEFORE THE AO WHO OBSERVED THE REPLY OF THE ASSESSEE AS ROUTINE REPLY AND IT HAD NO FORCE. THE AO ALSO N OTED THAT THE ASSESSEE HAD NEITHER PRODUCED THE DAY TO DAY STOCK REGISTER NOR QUANTITATIVE DETAILS OF THE COMMODITIES. IN SUCH A SITUATION, THE AO HAD INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND APPLIED THE GROSS PROFIT RATE @ 1.14% ON DECLARED TURNOVER OF RS. 21,59,60,250/ -. THE AO THUS WORKED OUT THE GROSS PROFIT AT RS. 24,61,947/- INST EAD OF RS. 16,06,125/- DECLARED BY THE ASSESSEE. THE AO THUS ADDED THE DIF FERENCE AMOUNT OF RS. 8,55,822/- TO THE TOTAL INCOME OF THE ASSESSEE. 2.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R WHO HAS CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER:- ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 4 5.10. IN THE PRESENT CASE, THE GROSS PROFIT RATE HAS FALLEN BUT JUSTIFICATION FOR THE SAME HAS NOT BEEN PROVIDED. M OREOVER, THE APPELLANT COMPANY HAS NOT MAINTAINED BILLS/ VOUCHER S STOCK REGISTER WHICH CAN SUBSTANTIATE ITS VARIOUS CLAIMS. IN THE C IRCUMSTANCES, THE AO HAS NO OPTION BUT TO ESTIMATE THE TRADING ACCOUNT. MOREOVER, THE AO HAS ESTIMATED THE G.P. OF 1.14% WHICH IS SIMILAR TO THE RATE DECLARED BY THE APPELLANT IN EARLIER YEARS. I FIND THE ACTION O F THE AO AS REASONABLE. IN VIEW OF THE ABOVE DISCUSSION, GROUND NO. 2 IS DI SMISSED. 2.3 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE AO HAS WRONGLY APPLIED THE PROVISIONS OF S ECTION 145(3) OF THE ACT AS THE ASSESSEE VIDE HIS LETTER DATED 25-07-201 1 HAD SUBMITTED THE FINAL QUANTITATIVE TALLY IN RESPECT OF THE ITEMS D EALT WITH BY HIM GIVING COMPLETE QUANTITATIVE DETAILS OF THE GOODS INVOLVED . THE LD. AR FURTHER SUBMITTED THAT AO WHILE REJECTING THE PLEA OF THE A SSESSEE HAD NEITHER POINTED OUT A SPECIFIC DISCREPANCY IN THE QUANTITAT IVE DETAILS SO SUBMITTED NOR HE HAD GIVEN ANY COMPARABLE CASE WHEREIN A HIGH ER GROSS PROFIT RATE THAN THE ASSESSEE HAD BEEN SHOWN. THE LD. AR OF TH E ASSESSEE RELIED ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE BHAWANI SILICATE INDUSTRIES , 236 TAXMAN 596. THE LD. AR OF THE ASSESSEE SUBMITTED THE GROSS PROFIT RATE CHART FOR THE LAST THREE YEARS AS UNDER:- A.Y. SALES G.P. % 2008-09 11,74,35,192.00 0.98 2009-10 14,75,80,854.00 1.14 2010-11 21,59,60,250.00 0.74 ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 5 THE LD. AR OF THE FURTHER ASSESSEE RELIED ON FOLLOW ING CASE LAWS:- 1. MALANI RAMJIVAN JAGANNATH VS.ASST. CIT (RAJ.) (2 009)316 ITR 120 2. HARIDAS PARIKH V ITO [2009] 29 SOT 13 (JODH.)(UR O) 3. ASHOK KUMAR & CO. V. ITO [2004] 2 SOT 518 (ASR.) (SMC) 4. CM. FRANCIS & CO. (P.) LTD. V. CIT [77 ITR 449] (KER) 5. ASSTT. CIT V. L.M.P. TRACTORS (P.) LTD. [2005] 1 48 TAXMAN 52 (MAG.) (AHEMDABAD) CONCLUSIVELY, THE LD. AR OF THE ASSESSEE PRAYED THA T THE LOWER AUTHORITIES HAVE WRONGLY INVOKED THE PROVISIONS OF SECTION 145( 3) OF THE ACT. HE FURTHER SUBMITTED THAT THE RESULTS DECLARED BY THE ASSESSEE MAY BE ACCEPTED AND THE TRADING ADDITION OF RS. 8,55,822/- MADE BY THE AO BY ESTIMATING THE GROSS PROFIT RATE AT 1.14% AS AGAINS T 0.74% AS DECLARED BY THE ASSESSEE MAY BE DIRECTED TO BE DELETED. 2.4 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORDS T HAT THE ASSESSEE HAD NOT MAINTAINED THE DAY TO DAY STOCK REGISTER OR QUANTIT ATIVE DETAILS OF COMMODITIES. IT IS ALSO NOTED FROM THE ASSESSMENT O RDER THAT THE AUDITOR IN THE AUDIT REPORT HAD COMMENTED THAT NO INTERNAL VOU CHERS HAD BEEN MAINTAINED FOR CASH EXPENSES. IT IS ALSO NOTED THAT THE ASSESSEE HAD NOT ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 6 FURNISHED COMPLETE BILLS AND VOUCHERS REGARDING PUR CHASES CLAIMED IN TRADING ACCOUNT. THE AO THUS INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND APPLIED THE GROSS PROFIT RATE OF 1.14% ON TOTAL TURNOVER OF RS. 21,59,60,250/- DECLARED BY THE ASSESSEE ON WHICH GR OSS PROFIT COMES TO RS. 16,06,125/-. HOWEVER, THE ASSESSEE HAD DECLARE D THE GROSS PROFIT RATE AT 0.74% ON WHICH GROSS PROFIT COMES TO RS. 16,06,1 25/-. THE AO THUS ADDED A DIFFERENCE OF RS.8,55,822/- (RS. 24,61,947 MINUS RS. 16,06,125-) WHICH IN FIRST APPEAL HAS BEEN CONFIRMED BY THE LD. CIT(A). IN APPEAL BEFORE THE TRIBUNAL, IT IS OBSERVED FROM THE FACTS AVAILABLE ON RECORDS THAT THE LOWER AUTHORITIES HAVE RIGHTLY INVOKED THE PROV ISIONS SECTION 145(3) OF THE ACT. AS REGARDS THE SUSTENANCE OF ADDITION O F RS. 8,55,822/-, IT IS NOTED THAT THE GROSS PROFIT RATE OF THE ASSESSEE FO R THE LAST THREE YEARS I.E. 2008-09-, 2009-10 AND 2010-11 ARE AT 0.98%, 1.14% A ND 0.74% RESPECTIVELY. THUS LOOKING TO THE PAST HISTORY OF T HE ASSESSEE AND ASSESSEE BEING ENGAGED IN THE TRADING OF SUGAR ON WHOLESALE BASIS, THE ADDITION IS SUSTAINED TO THE EXTENT OF RS. 2.00 LACS ONLY. THUS THE ASSESSEE WILL GET THE PARTIAL RELIEF OF RS. 6,55,822/-. 3.1 APROPOS GROUND NO. 2, BRIEF FACTS OF THE CASE A RE THAT AO DURING THE YEAR UNDER CONSIDERATION HAD OBSERVED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 34,672/- ON ACCOUNT OF TELEPHONE EXPENS ES, DEBITED A SUM OF ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 7 RS. 36,847/- ON ACCOUNT OF TRAVELING EXPENSES, CLA IMED A SUM OF RS. 1,27,025/- ON ACCOUNT OF DEPRECIATION ON TWO CARS AND MOTOR CYCLE AND CLAIMED A SUM OF RS. 1,36,459/- ON ACCOUNT OF VEHI CLE EXPENSES. THE AO OBSERVED THAT THE ASSESSEE HAD NEITHER MAINTAINED T HE CALL REGISTER IN RESPECT OF TELEPHONE NOR MAINTAINED THE LOG BOOK F OR RUNNING OF CARS. THE AO FURTHER NOTED THAT THE ASSESSEE HAD NOT FURNISHE D COMPLETE BILLS, VOUCHERS AND DOCUMENTS IN SUPPORT OF CLAIM OF THESE EXPENSES AND THUS THE USE OF TELEPHONE, CARS & MOTOR CYCLE AND VEHICL E AND TRAVELING EXPENSES EXCLUSIVELY FOR BUSINESS PURPOSES COULD NO T ASCERTAINED.. THE AO ASKED THE ASSESSEE TO SUBMIT THE COMPLETE DETAIL S / DOCUMENTS AND VOUCHERS IN RESPECT OF THESE EXPENSES BUT THE ASSE SSEE COULD NOT FURNISH COMPLETE BILL, DETAILS/ VOUCHERS/DOCUMENTS IN SUPPO RT OF THESE EXPENSES CLAIMED BY HIM IN THE PROFIT AND LOSS ACCOUNT. THE AO FURTHER OBSERVED THAT IN THE ABSENCE OF COMPLETE DETAILS/ VOUCHERS A ND CONSIDERING THE NATURE OF THESE EXPENSES, PERSONAL USAGE OF THE SAM E CANNOT BE RULED OUT AND THUS THERE ARE CHANCES OF INFLATING THE EXPENSE S BY THE ASSESSEE AND IN ORDER TO COVER UP ANY POSSIBLE LEAKAGE ON THIS ACC OUNT, HE DISALLOWED 20% OUT OF THE ABOVE EXPENSES I.E. RS. 67,001/- (20 % OF RS. 3,35,003/-, [34,672+36847+127025+136459] AND ADDED THE SAME TO THE TOTAL INCOME ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 8 OF THE ASSESSEE WHICH IN FIRST APPEAL HAS BEEN CONF IRMED BY THE LD. CIT(A) BY OBSERVING AS UNDER:- 5.11 GROUND NO.3: IS WITH RESPECT TO DISALLOWANCE OUT OF OFFICE EXPENSES, OUT OF TELEPHONE EXPENSES AND OUT OF MOTOR CAR EXPENSES. FROM THE ASSESSMENT ORDER, IT IS OBSERVED THAT THE AO HAS MADE SUCH ADHOC ADDITIONS TO COVER UP THE ELEMENT O F PERSONAL USES OF SUCH ASSETS AND FACILITIES. REGARDING THESE ADDITIO N, IT IS A COMMON BELIEF THAT IN ABSENCE OF PROPER RECORDS, THE POSSI BILITY OF INVOLVEMENT OF PERSONAL USAGE IN SUCH TYPE OF EXPENSES CANNOT B E RULED OUT. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SHRI K ANHAILAL JANGID (217 CTR 354) ALSO APPROVED THE CONCEPT OF ADHOC AD DITION ON LUMP SUM BASIS, IF THE RELEVANT DETAILS ARE NOT FOUND AV AILABLE TO SUPPORT OF THE EXPENSES CLAIMED BY THE ASSESSEE. IN VIEW OF TH E SAME, I FIND THE DISALLOWANCE WHICH IS ONLY 20% OF THESE EXPENSES AS JUSTIFIED. CONSEQUENTLY, GROUND 3 OF APPEAL IS DISMISSED. 3.2 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE PRAYED FOR DELETION OF ADHOC DISALLOWANCE OF RS. 67,001/- CONF IRMED BY THE LD. CIT(A). THE LD. AR OF THE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE BOOKS OF ACCOUNT WERE SUBMITTED BE FORE THE AO WHO HAD NOT POINTED OUT ANY SPECIFIC DEFECT AND GENERALIZED THE SAME BY DISALLOWING THE EXPENSES. THE EXPENSES WERE INCURRE D WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND UNDER THE BUSINESS EXPEDIENCY. THE LD. AR OF THE ASSESSEE FURTHER SUBM ITTED THAT THE PROPORTION OF EXPENSES TO THE TOTAL TURNOVER DECLAR ED AND ACCEPTED ALSO REVEALS THAT THE SAME ARE QUITE REASONABLE AND THER E IS NO ROOM FOR ANY PERSONAL EXPENSES BEING INCLUDED IN THE SAME FOR WH ICH HE SUBMITTED THE DETAILS AS UNDER:- ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 9 NAME OF EXPENSES AMOUNT CLAIMED % OF TURNOVER RS. 21,59,60,250 TELEPHONE EXPENSES 34,672.00 0.016% DEPRECIATION ON CAR AND MOTORCYCLE 1,27,025.00 0.05 9% TRAVELLING EXPENSES 36,847.00 0.017% VEHICLE EXPENSES 1,36,459.00 0.063% THE LD. AR OF THE ASSESSEE TO THIS EFFECT RELIED ON FOLLOWING CASE LAWS:- 1. ITO VS. TRIVENI FARMA, 35 TW 64 (JAIPUR BENCH) 2. MUKESH K SHAH VS. ITO, 92 TTJ 1060 (MUMBAI BENCH) 3. S.A. BUILDERS LTD. VS. CIT , 288 ITR 1 (SC) 4. EMPIRE JUTE CO. LTD. VS. CIT , 124 ITR 1 (SC) 3.3 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 3.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE ASSESSMEN T RECORDS THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD AS SESSEE HAD DEBITED A SUM OF RS. 34,672/- ON ACCOUNT OF TELEPHONE EXPENS ES, DEBITED A SUM OF RS. 36,847/- ON ACCOUNT OF TRAVELING EXPENSES, CLA IMED A SUM OF RS. 1,27,025/- ON ACCOUNT OF DEPRECIATION ON TWO CARS AND MOTOR CYCLE AND CLAIMED A SUM OF RS. 1,36,459/- ON ACCOUNT OF VEHI CLE EXPENSES. THE AO ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 10 FOR WANT OF COMPLETE BILLS, DETAILS/ VOUCHERS, DOCU MENTS AND CONSIDERING THE NATURE OF THESE EXPENSES DISALLOWED 20% OF THE TOTAL EXPENSES OF RS. 3,35,003/- WHICH COMES TO RS. 67,001/- AND IN FIRST APPEAL THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO. IN APPEAL BEFOR E THE TRIBUNAL, IT IS NOTED THAT SINCE THE BOOKS OF ACCOUNT OF THE ASSESS EE HAS BEEN REJECTED, THEREFORE, THE ESTIMATED ADDITION HAS BEEN MADE. IT IS ALSO NOTED THAT THE LD. AR OF THE ASSESSEE TO THIS EFFECT RELIED ON VAR IOUS CASE LAWS INCLUDING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS VS. CIT , 288 ITR 1 AND EMPIRE JUTE CO. LTD. VS. CIT,12 4 1. THEREFORE, IN VIEW OF ABOVE DECISIONS AND VARIOUS OTHERS DECISION S OF HON'BLE HIGH COURT, NO SEPARATE ADHOC DISALLOWANCE OUT OF THE EX PENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEADS TELEPHONE EXPENSES, DEPRECIATION ON CAR AND MOTORCYCLE, TRAVELING EXPENSES AND VEHIC LE EXPENSES IS NOT JUSTIFIED.. HENCE, LOOKING TO THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE, I DIRECT TO DELETE THE ADHOC DISALLOWANCE OF RS. 67,001/- CONFIRMED BY THE LD. CIT(A). THUS GROUND NO. 2 OF THE ASSESSE E IS ALLOWED. 4.1 APROPOS GROUND NO. 3, BRIEF FACTS OF THE CASE A RE THAT THE AO DURING THE YEAR UNDER CONSIDERATION HAD OBSERVED TH AT THE ASSESSEE HAD DEBITED A SUM OF RS. 1,57,324/- ON ACCOUNT OF LABO UR EXPENSE IN THE PROFIT AND LOSS ACCOUNT. THE AO REQUIRED THE ASSESS EE TO SUBMIT THE ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 11 COMPLETE DETAILS/DOCUMENTS AND VOUCHERS IN SUPPORT OF THESE EXPENSES BUT THE ASSESSEE COULD NOT FURNISH THE COMPLETE BIL L, DETAILS/VOUCHERS/ DOCUMENTS IN SUPPORT OF THESE EXPENSES CLAIMED BY H IM IN THE PROFIT AND LOSS ACCOUNT. THE AO OBSERVED THAT THERE ARE CHANCE S OF INFLATING THE EXPENSES BY THE ASSESSEE AND IN ORDER TO COVER UP A NY POSSIBLE LEAKAGE, HE DISALLOWED 10% OUT OF THE ABOVE EXPENSES I.E. RS . 15,732/- (10% OF 1,57,324/- AND ADDED THE SAME TO THE TOTAL INCOME O F THE ASSESSEE WHICH IN FIRST APPEAL HAS BEEN CONFIRMED BY THE LD. CIT(A ) BY OBSERVING AS UNDER:- 5.14. GROUND NO. 6: IS REGARDING DISALLOWANCE OF 10% LABOUR EXPENSES TO THE TUNE OF RS. 15,732/- ON THE GROUND OF LACK OF SUPPORTING VOUCHERS. SINCE SUPPORTING EVIDE NCE COULD NOT BE FURNISHED, DISALLOWANCE OF 10% APPEARS TO BE REASONABLE. GROUND NO. 6 IS DISMISSED . 4.2 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE PRAYED FOR DELETION OF ADDITION FOR WHICH THE LD. AR OF THE AS SESSEE FILED THE WRITTEN SUBMISSION. DURING THE YEAR UNDER CONSIDERATION, THE APPELLAN T HAD CLAIMED A SUM OF RS. 1,57,324/- ON ACCOUNT OF LABOUR EXPENSES IN P&L ACCOUNT. HOWEVER, THE LD. AO DISALLOWED 10% OF THE EXPENSE CLAIMED BY THE APPELLANT ALLEGING THE SAME AS INFLATED EXPENSES WITHOUT BRINGING ANY MATE RIAL ON RECORD OR POINTING OUT ANY SPECIFIC DEFECT. THE LD. CIT(A) UPHELD THE DISALLOWANCE OF 10% AS REASONABLE SINCE SUPPORTING EVIDENCES COULD NOT BE FURNISHED. IN THIS REGARD, IT IS SUBMITTED THAT THE LD. AO HAS MADE VERY GENERAL AND VAGUE OBSERVATIONS WHICH ARE NOT SUFFICIENT TO DOUBT THE GENUINENESS OF THE EXPENSES CLAIMED BY APPELLANT. IT IS SUBMITTED THAT THE APPELLANT HAS MAINTAINED COMPLETE RECORD OF THE PAYMENTS MADE TO LABOUR IN THE SHAPE OF VOUCHERS. MOST OF THE LABOUR ARE CASUAL IN NATURE A ND ARE NOT PERMANENT ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 12 EMPLOYEES OF APPELLANT AND THEREFORE TO MAINTAIN PR OPER RECORD OF THEM IS NEITHER PRACTICAL NOR REQUIRED. WHILE MAKING THE IM PUGNED ALLEGATIONS, THE LD. AO HAS FAILED TO UNDERSTAND THE GROUND REALITIES OF THE BUSINESS IN WHICH APPELLANT IS ENGAGED WHEREIN MAKING OF PAYMENTS TO LABOUR IS A USUAL FEATURE IN AS MUCH AS LABOUR IN NO CASE WILL BE WILLING TO ACCEPT PAYMENT FROM ANY MODE OTHER THAN CASH. THESE PAYMENTS ARE OF PETTY A MOUNTS AND CANNOT BE MADE THROUGH CHEQUES. IT MUST BE NOTED THAT THESE P AYMENTS HAVE NOT BEEN MADE TO ANY LABOUR CONTRACTOR BUT TO LABOUR DIRECTL Y AND THEREFORE, HAD TO BE MADE IN CASH. FURTHER, THERE CAN BE NO BILLS / VOUC HERS WITH REGARD TO THE PAYMENTS MADE TO INDIVIDUAL LABOURERS WHICH ARE ENG AGED ON DAILY BASIS. IT IS WELL UNDERSTOOD THAT LABOURERS WILL NOT ISSUE ANY B ILL FOR THE WORK DONE BY THEM AND THEREFORE, PRACTICALLY ONLY SELF MADE VOUC HERS FOR THE CASH PAYMENTS MADE TO LABOURERS ARE MAINTAINED. THEREFORE, THE AL LEGATIONS OF THE LD. AO ARE BASELESS AND DO NOT LEAD TO ANY CONCLUSION. FURTHER, IT CANNOT BE DENIED THAT THE NATURE OF WOR K UNDERTAKEN BY APPELLANT REQUIRES EXTENSIVE USE OF LABOUR, THEREFO RE, DISBURSEMENT OF A CONSIDERABLE AMOUNT AS LABOUR CHARGES IS CONSEQUENT IAL IN SUCH CIRCUMSTANCES. THUS, BASED ON ABOVE THE APPELLANT HUMBLY SUBMITS T HAT THE LABOUR EXPENSES INCURRED BY HIM ARE QUITE REASONABLE CONSI DERING THE NATURE OF BUSINESS AND THUS THE ENTIRE EXPENSES DESERVE TO BE ALLOWED AND IS BEING PRAYED ACCORDINGLY. 4.3 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 4.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE ASSESSMEN T RECORDS THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 1,57,324/-ON ACCO UNT OF LABOUR EXPENSES IN THE PROFIT AND LOSS ACCOUNT FOR WHICH THE AO REQUIRED THE ASSESSEE TO SUBMIT THE COMPLETE BILLS, DETAILS / VO UCHERS/DOCUMENTS IN SUPPORT OF THESE EXPENSES CLAIMED BY HIM. HOWEVER, FOR WANT OF COMPLETE DETAILS /BILLS/ VOUCHERS AND RECORDS ETC. THE AO MADE ADHOC DISALLOWANCE OF 10% OF TOTAL EXPENSES OF RS. 1,57,3 24/- WHICH COMES TO ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 13 RS. 15,732/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN FIRST APPEAL, THE LD. CIT(A) HAS CONFIRMED THE ACTI ON OF THE AO. IN APPEAL BEFORE ITAT, THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAD MAINTAINED COMPLETE RECORDS OF THE PAYMENTS MADE TO LABOUR IN THE SHAPE OF VOUCHERS AND MOST OF THE LABOUR ARE CASUAL IN NA TURE AND ARE NOT PERMANENT EMPLOYEE OF THE ASSESSEE AND THEREFORE, I T WAS NOT PRACTICAL FOR THE ASSESSEE TO MAINTAIN PROPER RECORDS. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THESE PAYMENTS MADE TO THE LABOUR AR E PETTY AMOUNTS AND CANNOT BE MADE THROUGH CHEQUE. THE LD. AR FURTHER S UBMITTED THAT THESE CASH PAYMENTS HAD NOT BEEN MADE TO ANY LABOUR CONTR ACTOR BUT TO LABOUR DIRECTLY WHO ARE ENGAGED ON DAILY BASIS. IT IS OBSE RVED THAT SINCE THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS BEEN REJECTED, THEREFORE, THE ESTIMATION ADDITION HAS BEEN MADE. THE LD. AR OF TH E ASSESSEE ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CA SE OF S.A. BUILDERS VS. CIT , 288 ITR 1 AND EMPIRE JUTE CO. LTD. VS. CI T,124 1. THEREFORE, IN VIEW OF ABOVE DECISIONS AND VARIOUS OTHERS DECISION S OF HON'BLE HIGH COURT, NO SEPARATE ADHOC DISALLOWANCE OUT OF THE EX PENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD LABOUR EXPE NSES IS NOT JUSTIFIED. HENCE, LOOKING TO THE PRESENT FACTS AND CIRCUMSTANC ES OF THE CASE, I DIRECT ITA NO.974/JP/2016 SHRI JHANDI PRASAD HIMMATRAMKA VS. ITO, WARD- 2 , JHUNJHUNU . 14 TO DELETE THE ADHOC DISALLOWANCE OF RS. 15,732/- CO NFIRMED BY THE LD. CIT(A). THUS GROUND NO. 3 OF THE ASSESSEE IS ALLOWE D. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/04/201 7. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18/04/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI JHANDI PRASAD HIMATRAMKA 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 2, JHUNJHUNU 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 974/JP/2016 ) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR