2022 (4) TMI 1019 - AT - Income Tax

Disallowance of labour charges at 7.38% - HELD THAT - There is no appearance from the side of the assessee despite notice. As such we are proceeding to dispose of the appeal ex parte qua the assessee. It is seen that the disallowance out of Labour charges was sustained for the A.Y. 2008-09 at 7.38%. A categorical finding has been recorded that the assessee accepted such an order and did not agitate it in further appeal before the Tribunal. Admittedly, the expenses under the head Labour Charges, both - Others and Job work , were not properly supported by vouchers. Considering the entirety of the facts and circumstances of the instant case, we are satisfied that the disallowance sustained by the ld. CIT(A) at 7.38% is just and fair. We, therefore, uphold the impugned order on this score. Ad hoc disallowance of various expenses at 10% - AO observed that the assessee incurred certain expenses, like, Telephone, Travelling, Factory expenses, Machine maintenance, Petrol expenses, Vehicle repair etc., which were not properly supported by vouchers - HELD THAT - As the expenses incurred by the assessee under the respective heads, taken note of by the AO at last page of his order, were either not supported by proper vouchers or had personal element. Considering the fact that the disallowance has been sustained at 10% in the earlier years, we approve the view taken by the ld. CIT(A). Invocation of provisions of section 145(3) - HELD THAT - In view of the fact that the expenses were not properly vouched and were made on the basis of self-prepared vouchers, we are satisfied that the AO was justified in invoking the provisions of section 145(3) of the Act. This ground fails. Assessee appeal is dismissed.

Issues Involved:
1. Disallowance of labour charges at 7.38%.
2. Ad hoc disallowance of expenses.
3. Invocation of provisions of section 145(3) of the Act.

Issue 1: Disallowance of Labour Charges at 7.38%
The appeal concerned the disallowance of labour charges by the Assessing Officer (AO) at 10%, which was later reduced to 7.38% by the ld. CIT(A). The AO observed that the expenses were not adequately supported by vouchers, similar to the disallowance made for the A.Y. 2008-09. Despite the absence of the assessee during the proceedings, the Tribunal upheld the 7.38% disallowance, considering the previous acceptance of such disallowance by the assessee without further appeal. The Tribunal found the disallowance to be just and fair based on the circumstances and upheld the decision of the ld. CIT(A) on this issue.

Issue 2: Ad Hoc Disallowance of Expenses
The second issue revolved around the ad hoc disallowance of expenses totaling &8377; 2,67,160 by the AO, which was upheld by the ld. CIT(A). The AO disallowed expenses related to Telephone, Travelling, Factory expenses, Machine maintenance, Petrol expenses, and Vehicle repair, citing lack of proper voucher support. The Tribunal, after considering that the expenses lacked proper vouchers or contained a personal element, supported the decision of the ld. CIT(A) to sustain the 10% disallowance, aligning with similar disallowances in previous years.

Issue 3: Invocation of Section 145(3) of the Act
The final ground of appeal was against the invocation of provisions of section 145(3) of the Act due to expenses not being adequately vouched and based on self-prepared vouchers. The Tribunal found the AO's decision to invoke section 145(3) justified, given the lack of proper vouchers for the expenses. Consequently, this ground of appeal failed, leading to the dismissal of the appeal by the Tribunal.

In conclusion, the Tribunal dismissed the appeal concerning the disallowance of labour charges at 7.38%, the ad hoc disallowance of expenses, and the invocation of section 145(3) of the Act. The decisions were based on the lack of proper voucher support for expenses and previous disallowances in similar circumstances, ultimately upholding the orders of the ld. CIT(A) and the AO.

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