2015 (11) TMI 573 - AT - Income Tax

Disallowance made out of salary and wages - Held that - Considering the characteristics of contract works, we find some merit in the contentions of the learned authorised representative. Hence the disallowance of entire amount, in our view, is not justified. However, as pointed out by the Assessing Officer, there appears to be some deficiencies in the maintenance of vouchers, for example, the vouchers contain only the name of the labourer without any address. Hence it will be difficult for anybody to verify the genuineness of the payment. Hence, in order to put this issue at rest, we are of the view that a round sum disallowance of Rs. one lakh in order to cover up the deficiency, if any, in respect of claim relating to salary and wages expenditure may be made and the same, in our view, would meet the ends of justice. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to restrict the disallowance out of salary and wages expenditures to Rs. one lakh. - Decided in favour of assessee in part Disallowance of value added tax payable amount made under section 43B - Held that - The assessee had claimed input credit of ₹ 5,67,185, whereas the value added tax auditor determined that the input credit was available to the assessee only to the extent of ₹ 3,68,505. Further, there was difference with regard to value added tax amount paid by the assessee. Accordingly, the Assessing Officer has determined the value added tax amount payable at the year end at ₹ 1,92,087. It is not the case of the assessee that he has not accepted the value added tax audit report. Having accepted the value added tax audit report, in our view, the assessee was not justified in denying the value added tax liability shown in the audit report. Further, the assessee has not shown to us that the computations given in the value added tax audit report was not accepted by the Sales Tax Department. Under these set of facts, we are of the view that the learned Commissioner of Income-tax (Appeals) was justified in confirming the addition of balance amount of ₹ 98,689 by invoking the provisions of section 43B of the Act. - Decided in favour of revenue Addition of capital introduced by the assessee - Held that - Since the assessee has filed returns of income in the earlier years by computing income under section 44AD of the Act and since the assessee has shown that he has withdrawn the funds from his bank account in the month of March, 2007, we do not find any reason to disbelieve the explanations of the assessee. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to delete the addition made on this account.- Decided in favour of assessee

Summary

Issues Involved:
1. Disallowance of salary and wages expenditure.
2. Disallowance under section 43B of the Income-tax Act, 1961.
3. Addition of capital introduced by the assessee.

Issue 1: Disallowance of Salary and Wages Expenditure:
The appeal concerned the disallowance of Rs. 9,14,660 out of salary and wages expenditure by the Assessing Officer and confirmed by the Commissioner of Income-tax. The appellant argued that the disallowed amount was essential for executing contract work. The Departmental representative questioned the authenticity of the payment evidence. The Tribunal noted the necessity of labor force in civil contract works, finding some merit in the appellant's contentions. While acknowledging deficiencies in voucher maintenance, the Tribunal deemed disallowing the entire amount unjust. A round sum disallowance of Rs. 1 lakh was ordered to cover any deficiencies, setting aside the Commissioner's decision.

Issue 2: Disallowance under Section 43B:
The dispute involved disallowance of value-added tax payable under section 43B. The Assessing Officer disallowed the balance amount of Rs. 98,689 based on the value added tax audit report, which differed from the assessee's calculation. The appellant argued that discrepancies arose due to input credit adjustments by the auditor. The Departmental representative supported the Officer's decision based on the auditor's findings. The Tribunal found that the appellant accepted the audit report, thus upholding the disallowance of the balance amount as justified under section 43B.

Issue 3: Addition of Capital Introduced:
Regarding the addition of Rs. 51,000 as capital introduced by the assessee, the Assessing Officer treated it as income. The appellant explained the capital introduction from bank funds, which was rejected by the Officer and upheld by the Commissioner. The Tribunal, considering the appellant's consistent income computation under section 44AD and the explanation for capital introduction, directed the Officer to delete the addition of Rs. 51,000, disagreeing with the Commissioner's decision.

In conclusion, the Tribunal partly allowed the appeal, directing the Assessing Officer to restrict the disallowance of salary and wages expenditure to Rs. 1 lakh, confirming the disallowance under section 43B, and deleting the addition of Rs. 51,000 as capital introduced by the assessee.