Adhoc disallowance of labour charges on estimated basis without any contrary material on record is unjustified
1. Assessment was completed u/s 143(3) making following major additions -
a. Difference in Gross Receipts - Rs. 37,12,662/-
b. Disallowance of Labour payments - Rs. 15,52,560/-
2. Books of accounts were rejected u/s 145(3) of the Act
3. Assessee moved to CIT(A) who partly allowed the appeal thereby restricted the difference in GP to the extent of Rs.9,68,951/- and deleted the balance amount. Further, the ld.CIT(A) upheld the disallowance of labour payments of Rs.11,50,254/- and deleted the disallowance of labour payments of Rs.15,52,560/- and confirmed the addition(s) of Rs.5,000/- and Rs.20,000/- made on account of adhoc disallowance of expenditure
4. Revenue and Assessee both moved to Tribunal against the order of CIT(A)
5. Tribunal dismissed Revenue's appeal and partly allowed assessee's appeal for statistical purpose
1. Difference in Gross Receipts : During the assessment proceedings, the AO admittedly not called for the veracity of the letter of M/s.Ankur Textiles, however, on the basis of conjectures & surmises, submitted the remand report. Therefore, the Revenue has also not placed any contrary material suggesting that the letter of M/s.Ankur Textiles is fake and over the contents of the same are contrary to the material available on record. In the absence of such finding by the AO, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue’s appeal is rejected.
2. Disallowance of Labour Payments : The AO had made disallowance of labour payments on the basis of estimation to the extent of 20% of the expenditure. The AO has not given any basis on which he has based his finding to disallow at 20% of the expenditure on estimate basis. In our considered view, if the payment is bogus, it would be 100%. The ld.CIT(A) has given his finding on the fact that the PAN furnished during the appellate proceedings was found to be correct. Under these facts, we do not see any reason to interfere with the order of the ld.CIT(A) since the Revenue has not placed any contrary material on record. Thus, ground No.2 of Revenue’s appeal is rejected.
3. Additional Evidences under Rule 46A : We find that the AO has noted that assessee furnished some contra entries. Therefore, it is not the case where the assessee had not taken a stand before the AO and relied upon the evidences. Under these facts, we do not see any merit into the ground raised by the Revenue and the same is rejected
Cases referred to
NISAR BIRI SIKKA NO.1 vs. CIT High Court of Allahabad, Lucknow Bench. 174 TAXMAN 51 (ALL)