2018 (1) TMI 80 - AT - Income Tax

Addition made on account of expenditure incurred on Material & Operating Cost & Employee Cost - Held that - AO liberally allowed ₹ 1,51,03,590/- as deduction U/Sec. 36 & 37 of the Act as found from P/L account under the head administrative and other expenses, which, admittedly, is inclusive of salary and allowances and staff welfare. Regarding the other expenses as pointed out by the ld.AR ie. (b) to (i) of Sl. No. 3 of paper book, in our opinion, cannot be allowed as expenditure for the reason that the assessee failed to give any details of work executed by it and has also failed to produce supporting evidence in support of its claim of having incurred expenditure. Thereby the order of CIT-A is justified on this issue. - Decided against assessee.

Summary

Issues:
Confirmation of addition made on account of expenditure incurred on 'Material & Operating Cost & Employee Cost'.

Analysis:
The appeal concerned the justification of confirming the addition made on expenditure incurred by the assessee. The assessee, a joint venture, was involved in a highway road construction project in Bihar. The dispute arose when the Assessing Officer disallowed a sum of expenditure claimed by the assessee, amounting to ?54,38,704, on the grounds that the assessee failed to provide evidence of work executed and the nature of expenses incurred. The AO found discrepancies in the comparative statement provided by the assessee, indicating lack of actual work done by the JV. The AO raised concerns about the authenticity of the expenses claimed and the lack of substantiating evidence for the work done. Consequently, the AO disallowed the claimed expenses and added the amount to the total income of the assessee.

The CIT-A upheld the AO's decision, emphasizing the failure of the appellant to provide details and supporting documents regarding the work executed by the JV. The CIT-A noted the absence of evidence proving that the JV had the necessary tools and machinery to carry out the designated work. The CIT-A also rejected the argument of consistency in previous assessments and highlighted that the AO had not estimated profits but disallowed the claimed expenditure due to lack of substantiating documents. The CIT-A concluded that the AO was justified in making the disallowance of ?54,38,704.

During the appeal before ITAT Kolkata, the appellant argued against the confirmation of the disallowance, citing the principle of consistency and providing detailed documentation supporting the expenditure incurred. However, the Tribunal observed that while certain administrative expenses were allowed, the appellant failed to provide sufficient evidence for the disputed expenses related to material, operating costs, and employee costs. Consequently, the Tribunal upheld the decision of the CIT-A and dismissed the appeal, stating that the appellant's grounds failed to establish the legitimacy of the claimed expenses.

In conclusion, the ITAT Kolkata affirmed the disallowance of the expenditure claimed by the assessee on 'Material & Operating Cost & Employee Cost,' as the appellant could not substantiate the expenses with supporting evidence of work executed. The Tribunal found the decision of the CIT-A to be justified based on the lack of documentation and supporting details provided by the appellant, ultimately leading to the dismissal of the appeal.