2012 (8) TMI 1070 - AT - Income Tax

Summary

Issues involved: Appeal against assessment order u/s 143(3) of the Income Tax Act, 1961, alleged unlawful upholding of disallowances on Labour Charges and Office Expenses by the Commissioner of Income Tax (Appeals) Jalpaiguri for the assessment year 2008-09.

Issue 1 - Assessment Order Contrary to Instruction No. 241/23/70:
The appellant contended that the assessment order was passed in violation of Instruction No. 241/23/70, which mandates passing orders within 14 working days from the last date of hearing. The appellant argued that the order was passed beyond this period, rendering it unlawful. However, the Senior DR argued that the delay in passing the order did not invalidate the actions of the Assessing Officer (AO).

Issue 2 - Disallowance on Labour Charges:
The AO disallowed Rs. 1,01,754 of expenses claimed under "Labour Charges" based on a suspicion of revenue leakage. The appellant provided supporting documents such as Labour Attendance Register and Wages Account to substantiate the expenses. The Tribunal found the disallowance arbitrary and lacking a valid basis, as the appellant's records were vouched and verifiable. The Tribunal held that the ad hoc disallowance of 5% was unjustified and ordered the disallowance to be deleted.

Issue 3 - Disallowance on Office Expenses:
A disallowance of Rs. 4,438 on "Office Expenses" was made by the AO, claiming the expenses seemed excessive. The Tribunal noted that no specific reasoning or basis was provided for this disallowance, and the appellant had maintained proper records to support the expenses. The Tribunal found the disallowance to be arbitrary and unsupported by evidence, leading to the deletion of the disallowance.

Conclusion:
After considering the submissions and evidence, the Tribunal partially allowed the appeal. Grounds 2 and 3 regarding the disallowances on Labour Charges and Office Expenses were accepted, while ground 1 related to the delay in passing the order was rejected. The Tribunal deemed the disallowances made by the AO and upheld by the CIT(A) as unsustainable in law, leading to the partial allowance of the appellant's appeal.