2013 (3) TMI 862 - AT - Income Tax

Summary

Issues involved: Challenge to addition of labour expenses and other expenses in the assessment.

Labour Expenses:
The Assessing Officer (AO) disallowed 5% of the labour expenses amounting to Rs. 7,46,710 as some vouchers were found improper and unsupported by site names. The Appellate Tribunal found that the AO did not specify which expenses were not properly vouched, leading to adhoc additions. The Tribunal noted the overall improvement in the assessee's profit compared to the previous year, supported by complete details and better book results. The Tribunal concluded that the AO's disallowance of labour expenses on an adhoc basis was unjustified, as there was no evidence that the expenses were inadmissible or not incurred for business purposes. Therefore, the Tribunal set aside the addition of Rs. 7,46,710 on labour expenses.

Other Expenses:
Additionally, the AO disallowed Rs. 50,000 from various expenses, citing lack of proper vouchers and potential personal use of telephone. The Tribunal found that the AO's disallowance of these expenses was also adhoc, lacking specific findings on the nature of the expenses or their business relevance. Considering the overall performance and history of the assessee, the Tribunal concluded that there was no justification to uphold the disallowance of these expenses. Consequently, the Tribunal deleted the addition of Rs. 50,000 on other expenses.

Conclusion:
The Appellate Tribunal allowed the appeal of the assessee, setting aside the additions of Rs. 7,46,710 and Rs. 50,000 on account of labour and other expenses, respectively.