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Issues involved: Appeal against order of CIT(A) sustaining addition of expenses, Disallowance of expenses by AO, Admissibility of self-supported vouchers as evidence.
The appeal before the Appellate Tribunal ITAT Pune was directed against the order of the CIT(A)-II, Pune for Assessment Year 2006-07, where the assessee challenged the addition of Rs. 7,25,645 out of the disallowance of Rs. 14,51,290 made by the AO on various expenses. Facts of the case: The assessee, engaged in executing Civil contracts, faced disallowance of expenses by the AO based on the auditor's mention in Form No. 3CD that certain expenses lacked external supporting evidence beyond self-supported vouchers. The AO disallowed 20% of the expenses, which was later restricted to 10% by the CIT(A), resulting in the sustained amount of Rs. 7,25,645. Arguments: The counsel for the assessee argued that due to the nature of work in remote areas, obtaining printed vouchers from laborers was impractical. Citing precedents, it was contended that no disallowance was warranted since the books of accounts were not rejected. The Department, however, supported the AO's decision and the relief granted by the CIT(A). Decision: After reviewing arguments and precedents, the Tribunal noted that complete vouchers for labor payments were challenging to maintain in remote areas where the assessee operated. Referring to similar cases, the Tribunal held that adhoc disallowance based on self-made vouchers was unjustified when full details were provided. As the AO did not dispute the details of labor charges recipients and considering the remote location of work, the Tribunal concluded that no disallowance was necessary. Consequently, the order of the CIT(A) was set aside, and the grounds raised by the assessee were allowed. The appeal was thus allowed by the Tribunal.
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