2012 (2) TMI 69 - AT - Income Tax

Dis-allowance of expenditure on ground of made towards purchase or firewood from sundry parties on ground that majority of the invoices were self-made vouchers purchases treated as bogus dis-allowance of unloading wages - manufacturer of inorganic chemicals Held that - Assessing authority has listed a series of deficiencies in the documentation, but if the entire purchase made from the sundry parties has to be disallowed, the quantum of purchase of firewood available with the assessee would be quite insufficient to meet its operational requirements. Secondly, in the matter of purchase of firewood etc., there is every chance for making local purchase off and on, for which foolproof and formal documentary evidences in the form of bills may not be available. Therefore, disallowance of Rs. 24,69,070/- as a whole is not at all justified. Further, we find no ground to interfere with the order of the lower authorities in respect of addition towards unloading wages Decided partly in favor of assessee.

Summary

Issues involved:
1. Disallowance of expenditure on purchase of firewood
2. Addition of unloading wages

Analysis:

Issue 1: Disallowance of expenditure on purchase of firewood
The primary contention in this appeal pertains to the disallowance of Rs. 24,69,070/- against the claim of expenditure made by the assessee towards the purchase of firewood. The assessing authority disallowed this claim, citing discrepancies in the supporting documents and vouchers provided by the assessee. While purchases from specific parties were accepted as genuine, purchases from sundry parties were deemed bogus due to self-made vouchers and inconsistencies in vehicle details. The Commissioner of Income-tax (Appeals) upheld this disallowance. However, the Tribunal noted that the disallowance would significantly impact the operational requirements of the assessee, as the entire quantum of firewood purchases was being questioned. Considering the practicality of local purchases without formal documentation, the Tribunal found the complete disallowance unjustified. Consequently, the Tribunal directed the assessing authority to allow Rs. 15 lakhs as a deduction for firewood purchases from sundry parties, while disallowing the remaining Rs. 9,69,070/-.

Issue 2: Addition of unloading wages
Another issue raised in the appeal was the addition of Rs. 93,058/- towards unloading wages. Despite arguments from the counsel, the Tribunal found no grounds to interfere with the lower authorities' decision on this matter. Consequently, this ground was rejected. In conclusion, the Tribunal partly allowed the appeal filed by the assessee, directing the assessing authority to make specific adjustments in the disallowance of expenditure on firewood purchases and maintaining the addition of unloading wages. The judgment was pronounced in an open court session on January 3, 2012, in Chennai.