2013 (2) TMI 97 - HC - Income Tax

Disallowance u/s 40A(2)(b) in respect of payment made to G.K. Engg. - ITAT deleted the addition - Held that - Tribunal confirmed this view observing that the AO had accepted the same payments in earlier years and no efforts were made in this regard in the present year to bring any comparable case of fair market value. Thus it is to viewed that the view of Tribunal is unassailable who placed reliance on decision Upper India Publishing House (P.) Ltd. v. CIT 1978 (12) TMI 2 - SUPREME COURT in which it is observed that question whether expenditure is excessive or unreasonable is essentially a question of fact. Such question is therefore, not required to be considered. Disallowance on account of site wise material consumption - ITAT deleted the addition - Held that - Issue is clearly factual besides involving relatively small amount. Disallowance made on account of vehicle/diesel oil-grease expenses - ITAT deleted the addition - Held that - Entire issue is based on facts & when the Tribunal and CIT(Appeals) correctly on appreciation of evidence opined that disallowance was not justified, no question of law arises Disallowance of machinery hire/repairs/spares expenses expenses - ITAT deleted the addition - Held that - Tribunal confirmed the same observing that the Assessing Officer had not pointed out any defects in the vouchers and had made ad-hoc addition - no reason to entertain the question. Disallowance of Site & Rasoda Expenses - ITAT deleted the addition - Held that - The expenses were supported by the evidence on record and the assessee had produced all the bills and vouchers which were verified by the Assessing Officer and no discrepancy was found. Addition of suppression of receipts - ITAT deleted the addition - Held that - ssessee and M/s. K.M. Patel & Co. agreed to make investment in such proportion for carrying out construction work jointly undertaken by them. If out of their relation and robust undertaking, the receipts were divided in a certain ratio which was not strictly in proportion of 60 40 percentage of investment made by them respectively, the same cannot be a ground for any addition in hands of the assessee that too without any additional material of the assessee actually having received additional payments not reflected in the books Addition of labour expenses - ITAT deleted the addition - Held that - All the contractors whose statements were recorded had admitted having done work for the assessee for which payments were made. Addition of transport contractors expenses - ITAT deleted the addition - Held that - The assessee had established genuineness of the payments. It was found that the parties receiving the payment had rendered services to the assessee which work was genuine Disallowance of claim of expenditure for rendering transportation services to Shri Manoj K. Agrawal - ITAT deleted the addition - Held that - the same party carried out work for the assessee in the preceding assessment year and payment made to him was found to be genuine. He is assessed to tax and all details have been noted with regard to the same party. Therefore, such party cannot be treated as non-genuine - appeal of revenue dismissed.

Summary

Issues:
1. Disallowance under section 40A(2)(b) in payment to G.K. Engg.
2. Disallowance on account of site wise material consumption.
3. Disallowance of vehicle/diesel oil-grease expenses.
4. Disallowance of machinery hire expenses.
5. Disallowance of machinery repairs/spares expenses.
6. Disallowance of Site & Rasoda Expenses.
7. Addition on account of suppression of receipts.
8. Addition on account of labour expenses.
9. Addition on account of transport contractors expenses.
10. Disallowance of claim of expenditure for rendering transportation services.

Analysis:

1. The issue of disallowance under section 40A(2)(b) in payment to G.K. Engg. was considered. The Tribunal upheld the deletion of disallowance by the Commissioner(Appeals) based on the explanation provided by the assessee regarding the payment made to a sister concern. The Tribunal relied on the decision in Upper India Publishing House (P.) Ltd. v. CIT [1979] 117 ITR 569, emphasizing that the reasonableness of expenditure is a factual question and upheld the deletion of disallowance.

2. The disallowance on account of site wise material consumption was addressed. Both the Commissioner(Appeals) and the Tribunal found that some pilferage and wastage were expected in dealing with cement, leading to a reasonable deduction. As this issue was factual and involved a relatively small amount, no legal question was considered.

3. The issue of disallowance of vehicle/diesel oil-grease expenses was discussed. The Commissioner(Appeals) and the Tribunal held that the Assessing Officer lacked justification for disallowing 10% of the expenses without specific material. The Tribunal confirmed that the disallowance was not warranted as all vouchers were maintained, and the disallowance was made without pointing out any defects in bills.

4. The disallowance of machinery hire expenses was reviewed. The Commissioner(Appeals) and the Tribunal both found that the Assessing Officer made ad-hoc additions without specifying any defects in the bills. It was noted that the machinery services were essential for completing the assigned work, making the issue purely factual without any legal question.

5. The disallowance on account of machinery repairs/spares expenses was examined. The Commissioner(Appeals) and the Tribunal agreed that the Assessing Officer did not identify any defects in the vouchers and made an ad-hoc addition. The amount involved was not substantial, leading to the dismissal of any legal question.

6. The issue of disallowance of Site & Rasoda Expenses was addressed. Both the Commissioner(Appeals) and the Tribunal found that the disallowance was unjustified as expenses were supported by evidence, bills, and vouchers without discrepancies. The nominal amount involved further supported the dismissal of any legal question.

7. The addition on account of suppression of receipts was discussed. The Tribunal upheld the deletion of the addition by the Commissioner(Appeals) based on the joint venture agreement between the assessee and another party, which clarified the division of work and receipts. The issue was considered factual, and the addition was deemed unjustified without any additional evidence.

8. The addition on account of labour expenses was reviewed. The Tribunal confirmed the deletion of the addition by the Commissioner(Appeals) as the payments were proven genuine for business purposes. Contractors admitted to work done for the assessee, and no legal question was identified due to the factual nature of the issue.

9. The addition of transport contractors' expenses was examined. Both the Commissioner(Appeals) and the Tribunal found the genuineness of payments established by the assessee, with services rendered by the parties receiving payments being genuine, leading to the dismissal of any legal question.

10. The disallowance of the claim of expenditure for rendering transportation services was addressed. The Tribunal confirmed the deletion of the addition by the Commissioner(Appeals) based on the genuineness of the payments and the party's previous assessment history. The issue was factual, and no legal question was identified.

In conclusion, the Tax Appeal was dismissed based on the detailed analysis of each issue involved in the judgment.