2021 (4) TMI 779 - AT - Income Tax

Disallowance of job work charges - case of the assessee was selected for examination on account of large other expenses claimed in P L account - substantial amount was paid in cash - HELD THAT - The genuineness of the quantum of payment was required to be verified by the A.O. and since the substantial amount was paid in cash. No any details of vouchers in support of cash payment was filed and only copy of ledger was filed which also reflects the details of cash payment made on a particular date but no supporting evidence to justify the payment was filed. Therefore in absence of complete supporting evidence verification of the expenses was not possible. Even before us no details of vouchers have been filed and only submission was made to the effect that complete ledger accounts alongwith supporting evidence has been filed before the A.O. for verification however we are of the view that in absence of complete supporting evidence confirmation of expenses were not possible by the A.O.. As substantial amount of 1, 96, 69, 519/- was made in cash the A.O. was justified in making disallowance @ 10% of the said amount which comes to 19, 66, 951/- and added to the total income of the assessee. Since the genuineness of quantum of payment so made by the assessee was to be verified and the facts in support of cash payments so made the same could not be verified for justifying the payments. No new facts or circumstances have been brought before us by the ld AR in order to controvert or rebut the factual findings recorded by the ld. CIT(A) therefore we see no reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) and we uphold the same. Appeal of the assessee is dismissed.

Summary

Issues:
Challenge to disallowance of job work charges

Analysis:
The appeal was filed against the order of the ld. CIT(A) for the A.Y. 2014-15. The AO disallowed job work charges paid in cash by the assessee, leading to an appeal. The ld. CIT(A) reduced the disallowance to 5% from 10% made by the AO. The assessee challenged this decision before the ITAT. The main contention was the disallowance of job work charges without specific reasons or evidence. The appellant argued that regular books of accounts were maintained, supported by vouchers, and duly audited. The AO disallowed 10% of job charges paid in cash without valid reasons, solely on suspicion. The appellant's business nature and need for unskilled labor were highlighted. The appellant cited precedents where similar disallowances were deleted due to lack of specific rejection of details. The High Court's view in a related case was also presented to support the appeal.

The ITAT considered both parties' contentions, examined the expenses claimed by the assessee, and noted the substantial cash payment for job work charges. The AO disallowed 10% of the cash payment due to insufficient supporting evidence beyond ledger accounts. The appellant argued that complete ledger accounts were submitted for verification. However, the ITAT found that without comprehensive supporting evidence, verification was not feasible. The appellant failed to provide additional vouchers to justify the cash payments. As the genuineness of the payments could not be verified, the ITAT upheld the AO's decision to disallow 10% of the cash payment. The ITAT concluded that the factual findings by the ld. CIT(A) were valid, and no new evidence was presented to challenge them. Therefore, the appeal was dismissed, affirming the disallowance of job work charges.

In conclusion, the ITAT upheld the decision to disallow 10% of job work charges paid in cash by the assessee due to insufficient supporting evidence. The appellant's arguments based on regular bookkeeping and precedents were not sufficient to overturn the factual findings. The appeal was dismissed, affirming the disallowance made by the AO and upheld by the ld. CIT(A).